Chapter 21

Politics and Prosperity

A Republican Decade

Election of 1920– Republican Warren G. Harding v.James

Cox– Hardings’s campaign pledge appealed to

Americans– He called for a “return to normalcy”– Americans were tired of European problems

and feared their spread to the USA– Harding was elected

Demobilization

Transition from wartime to peace time unemployment rose; women and blacks

fired, anti-immigrant sentiment wages fell prices remain inflated due to the war people continue to buy, using credit

Demobilization recession of 1920-21; prices and

production fell

farm crises caused by overproduction, credit, lack of conservation

situation in Russia worsens; fear of communism grips the nation

Types of Economic Systems Capitalism - Private ownership of property

- Profit motive Socialism - Collective ownership of

property - Peaceful means to achieveobjective - Motive is “to each as needed”

Communism- Collective ownership through violence if necessary - Motive is “to each as needed”

Russian Revolution

Russia’s revolution in March, 1917 began as an attempt to bring democracy to Russia

Czar Nicholas II was overthrow Instead, chaos erupted

Civil War broke out Lenin and his

communist followers led the Red Army

The White Army battled for 2 1/2 yrs but was defeated

(1924) The Bolsheviks “majority” took power

Russian Revolution

Communism Under Lenin

1. The government owned all land and property

2. A single political party controlled the government

3. The needs of the country always took priority over the rights of individualsIMPORTANT! Creates a classless society

Lenin changed the name of the country from Russia to the Union of Soviet Socialist Republics (USSR)

The Soviet Union was the largest country in the world in terms of land

It was near the largest in terms of population

The USA refused to recognize the country because of communism

US FEARS EMERGE

Joseph Stalin took over the country when Lenin died

He consolidated his power by killing his opponents He brutally oppressed all opposition

US FEARS STALIN

The Red Scare

Americans feared a communist takeover

Feared immigrants could be radicals and communists

Began a campaign to label and neutralize all communist threats

Schenck v. US

Schenck mailed letters to people telling them to avoid the draft

Said it was his 1st Amendment right

US jailed him because it went against Espionage Act

Caused “clear and present danger”

Like yelling “FIRE” Started faulty

accusations

Gitlow v. New York

Gitlow was a socialist he called for people to

overthrow the government

went against 1st Amendment rights

New York accused him of criminal anarchy

An anarchist is someone who opposes all government

The Palmer Raids

1919 – Bombs found in post office addressed to prominent Americans, including Oliver Wendal Holmes, John D. Rockefeller.

A Bomb was detonated at Mitchell Palmer’s house.

Bombs blamed on anarchists and communists.

The Palmer Raids

•Attorney General A. Mitchell Palmer

• Nov, 1919 to May 1920 was a Socialist holiday

•Interrogated and arrested thousands of poor people, mostly immigrants

•Deported over 500 without evidence.

•After months of raids, they netted 3 pistols•By summer 1920 hysteria died down and most Americans failed to support the witch-hunts there were no results!

Sacco & Vanzetti

Italian immigrants arrested for murder/burglary of a shoe factory near Boston

Sacco a shoemaker Venzetti a fish peddler Railroaded by Judge Thayer who allowed their trial

to be about their political views and lack of service in WWI

Convicted not from evidence but for political views, in clear violation of the Constitution

Executed August 23, 1927 in spite of protests in many major cities here and abroad

WHY STRIKE?

Real cause of strikes was the doubling of cost of living

people worked harder and longer high rent high food unemployment

Labor Strikes

Seattle General Strike (1919)

called by shipyard workers for increased salary and shorter hours

joined by 110 local unions representing 60,000 workers

peaceful

industrialists use propaganda and scare tactics – communist threat – to weaken support for the unions

strike ends after only 5 days with no gains by the unions and anti-union sentiment high

Labor Strikes

The Boston Police Strike (1919)

police commissioner fired 19 officers for joining the union

75% of the police force walked out in protest state militia was called in by Governor

Coolidge after 2 nights of violence police force was replaced by unemployed

veterans Coolidge “There is no right to strike against

public safety by anarchy”

Labor StrikesThe Steel Strike (1919)

365,000 steel workers in western PA & Midwest walked out

lasted from Sept. 1919 to Jan. 1920 owners hired private police – governor supported

owners 18 strikers were killed, many beaten, jailed

thought it was communism recruited African Americans & immigrants for

replacement workers (scabs) returned to work with no gains

Labor StrikesThe United Mine Workers Strike (1919)

Wages set by government in 1917; could not strike during war

John L. Lewis is newly elected, called for strike

President Wilson demanded they return to work; Lewis officially ended the strike but unofficially encouraged workers not to return to work

After about a month, Wilson compromised and arbitrated a 14% increase in wages

The United Mine Workers Strike (1919)

Coal miners were evicted from company housing during the strike

*After 1920 labor strikes sharply declined

* Unions did not have the support of the public

*Higher wages after the recession led to less desire for strikes

Republican Leadership

All three branches were dominated by Republicans (1920-1932)

Presidents Harding, Coolidge & Hoover

Majority in Congress

Supreme Court Chief Justice - Former Republican President, W.H. Taft

All 3 branches were considered conservative, meaning that they denounced progressive changes.– Little or no government interference for

social ills (poverty, epidemics, etc.)– Promotion of business interests– Smallest government in terms of people,

finances, and scopes of interests possible

Republican Leadership

The Harding Presidency Appointments varied from friends and

family Foreign policy was centered on isolationism

and disarmament Domestic policy centered on social stability,

which included a strict immigration policy Teapot Dome Scandal prominent business

leaders to some people that were inexperienced, incompetent, or dishonest

overshadows his legacy

Foreign Policy

Isolationism - no involvement in European, Asian, or African conflicts (does not apply to Latin America)

Washington Conference - 1921– USA, Great Britain, France, and Japan

agree to destroy some of their navy force and limit the amounts and types of new ships

DISARMAMENT

A program which nations of the world would voluntarily give up their weapons

policy for peace and stability

NATIVISM

Movement to favor native born citizens because of isolationism Why did it flare up again?

– Patriotism- Americans believed foreigners could not be loyal– religion- most nativists were Protestant and mistrusted all other

religions– urban conditions- Americans blamed problems in cities on

immigrants– jobs- workers feared immigrants would take their job– red scare- most immigrants came from Europe and afraid of

communism

Foreign Policy

Fordney-McCumber Tariff - 1922– High duties on many products to

discourage imports

Dawes Plan - 1924– Restructured Germany’s reparation

payments and gave them loans

Domestic Policy

“Less government in business and more business in government.”

Appointed businessmen to cabinet posts and encouraged pro-business policies

– tariffs

– few safety or labor regulations

– lower taxes for upper income brackets and corporations

Domestic Policy

Immigration Policy– 1921 – Quota system established.

• 3% of population in USA in 1910 census would be admitted from each country.

– 1924 - National Origins Act• Quotas adjusted to 2% of 1890 census

• does not apply to Asians - they are still subject to the Chinese Exclusion Act

• does not apply to Mexicans - they are encouraged to work on southwestern farms

Teapot Dome Scandal

As investigations of various members of the Harding Administration begins, the president dies naturally on Aug. 2, 1923

The scandals that erupt after his death taint his time in office, although he was not directly involved

Teapot Dome Scandal

Secretary of the Interior illegally granted drilling rights to private industries in Elk Hills, CA and Teapot Dome, WY. He then accepted $300,000 in kickbacks

Director of Veterans Bureau – Charles Forbes pocketed millions

Attorney General Harry Daugherty was convicted of accepting bribes

Coolidge Presidency

VP Coolidge became president when Pres. Harding died. He was elected in 1924.

“The chief business of the American people is business.”

Coolidge is known more for what he did not do than for what he did

Coolidge Presidency

Laissez-Faire economics

– reduced inheritance and income taxes

– refused to regulate the stock market

– refused to give flood assistance to Mississippi River victims

Coolidge Presidency

Foreign Policy

– Kellogg - Briand Treaty (1927)

– 15 countries agreed not to declare war on each other

Election of 1928

Coolidge declined to run Republican candidate, Herbert Hoover,

won over the Democrat, Alfred Smith Campaign revolved around religion and

prohibition– Smith is Catholic, anti-prohibition– Hoover is Protestant, pro-prohibition

A Business Boom

Recession from early part of the decade gradually declines

Industry successfully changed to a consumer economy

People bought consumer goods, creating demand

Factories fulfilled that demand by hiring employees

Manufacturers introduced installment plans to consumers to keep demand high

People were naïve about the so-called prosperity

By 1929, 60% of cars and 70-90% of household goods were bought on credit

Interest rates varied from 11-40%

A Business Boom

Electric Power– during 1920s General Electric supplied

many new household appliances– demand for electricity increased

dramatically Advertising

– new methods and mass media contributed to a huge impact by advertisements

Gross National Product rose by 6% annually

A Business Boom

Ford & The Automobile

Automobiles invented in 1880s Henry Ford used innovative techniques

to increase production and profit Between 1896-1908 Ford developed his

first original cars. He sold 30,000 Model T’s

In 1908 he built his 1st modern factory

Ford & The Automobile Principles of Mass Production

– assembly line means people stay stationary and the car moves to them

– specialization means faster performances by workers

– also means boredom – also begins new management class– limited choices in color and options – Model T’s were churned out every 24

seconds

Ford & The Automobile Increased production leads to economies

of scale (it’s cheaper per car to produce 10,000 than 50)

Ford dropped prices on Model T to $390, making it affordable to middle class America

Vertical Consolidation - Ford owned glass companies, iron mines, steel mills and coal mines

Ford & The Automobile

Ford raised wages for his workers but strictly enforced his rules

Hired immigrants but insisted on their going to school to learn English and he had investigators inspect their homes

By 1936 he declined to 3rd place in the auto industry partly due to resistance to change

Industrial Growth

Automobile related industries led the boom

Other industries, like movie theaters, oil refineries, airplane manufacturers, grew by leaps and bounds

The top 200 American companies total worth grew from 43 billion to 81 billion (1919-1929)

Bypassed by the Boom

African Americans and Immigrants did not fare as well in the job market

Farmers continued to struggle with low prices, overproduction, and high debt

These groups will be among the most vulnerable when the ‘boom times’ end

The Economy in the Late 1920s

The economy in the 1920s appeared to be in good shape on the surface

Underneath, there were warning signs of impending disaster

Economy Appears Healthy The stock market was taken as an

indicator of the general economy

If stock prices went up, the whole economy must be alright

Stock value increased from $25 billion in 1927 to $87 billion in 1929

Average Americans invested in the stock market

Economy Appears Healthy

Stock prices are subject to supply and demand

The more people that invest in the market, the higher the demand, and consequently the price of stocks

Two ways to make money from the stock market - earnings and capital gains

Economy Appears Healthy Welfare capitalism

– employers gave workers better wages and benefits

– organized labor membership declined in the 1920s

The Wildcat and other attractions were added

to Hershey Park

Economy Appears Healthy

Booming

Stock

Market

Labor Stability

ConsumerConfidence

Available

Credit

Economic Danger Signs

Rich were getting richer

1929 - wealthiest families controlled 34% of the savings

Average families earned $2500 a year and had no savings

Many families had accumulated large consumer debt

Economic Danger Signs

Stock market was being pushed by speculation

Speculation - high risk investments in hopes of making quick profits

Buying on margin - Paying only a fraction of the cost and borrowing the rest

Economic Danger Signs

“Too many goods, too little demand”

Assembly lines were producing more products than people were able to buy

Auto industry and housing starts had already slumped before 1929

Economic Danger Signs Trouble for Farmers & Workers

– Many could not meet their mortgages, forcing 6000 rural banks to fail in the 1920s

– Congress passed relief bills in 1927 & 1928 but President Coolidge vetoed them

– Many industry workers continued to work in dangerous jobs for small wages

– Textile workers in Tennessee - 56 hour week for $10 a week

Summary

Clear signals of trouble in the economy

Uneven wealth

Rising debt

Stock speculation

Over-production

Hardships of farmers

and workers

The End!