SSUSH16B & 17A-C

America from War to Recession

America from War to Recession

1920 Presidential Campaign

• The 1920 election reflected a couple growing trends in post-war America:

Rejection of the Progressive Ideologies of the Wilson presidency.

Desire to return to the Laissez Faire approach of the McKinley era.

• Republican candidate Warren G. Harding’s promised a “Return to Normalcy”

after World War I, reflecting:

Renewed Isolationism

Resurgence of Nativism

A Reduction of Government Activism

• His Campaign also made use of America’s newest fads:

Widespread Newsreel Coverage in Movie Theaters

Support from the Nation’s well known Hollywood Actors & Performers

America from War to Recession

The New Administration

• The 29th President of the United States, Warren G. Harding, made several

key appointments to his cabinet:

Charles Evans Hughes as

Secretary of State

Herbert Hoover as

Secretary of Commerce

Andrew W. Mellon as

Secretary of the Treasury

Supreme Court Justice Food Administrator Business Tycoon

America from War to Recession

The New Administration

• In addition, Warren G. Harding also appointed many of his old poker-playing

buddies to other cabinet positions and political offices.

• Unfortunately, the President received criticism because

some of his “Ohio Gang” accepted bribes for:

Government Jobs & Contracts

Political Pardons for Criminals

Protection from Prosecution

• 1921 - 1923: Charles R. Forbes served as the first director.

• During this period he ignored the needs of wounded veterans.

• He embezzled $225 million through fraud and kickbacks.

• He resigned in 1923 and was tried and convicted of conspiracy.

The Veterans Bureau Scandal

America from War to Recession

• 1921 – 1923: Albert B. Fall served as Secretary of the Interior.

• He allowed an oil company lease government lands in Wyoming.

• He accepted bribes totaling more than $300,000 from them.

• He became the first cabinet officer in history to go to prison.

The Teapot Dome Scandal

A Change in President

• June 1923: President Warren G. Harding died while on

vacation in California (probably from a heart attack).

• Vice-President Calvin C. Coolidge became the 30th

President of the United States.

Amid the scandals, he fired several Harding staff.

He chose to keep Hughes, Hoover, and Mellon.

He worked to restore the integrity of his office.

America from War to Recession

Promoting Prosperity

Andrew W. Mellon as Secretary of the

Treasury

• Believed the government should apply business principles

to trim its spending and improve operations.

Convinced Congress to create a General Accounting

Office to prepare the Federal Budget.

1921: President Warren G. Harding signed the

Budget Accounting Act creating a new bureau.

• He also believed that high taxes reduced business expansion and investment

He urged Congress to reduce the tax rate to improve the economy.

The Mellon Tax Bill also recommended a U.S. Board of Tax Appeals.

1924: President Calvin C. Coolidge signed the Revenue Act of 1924.

America from War to Recession

Promoting Prosperity

Herbert Hoover as the Secretary

of Commerce

• Sought to promote Economic Growth in business and

industry through a philosophy of Cooperative Individualism.

Encouraged Businesses to form their own Trade

Associations willing to share info with the government.

Promoting Peace

Charles Evans Hughes as Secretary of State

• Supported President Harding’s

decision avoid involvement in

European affairs (Isolationism).

• 1921: Proposed a 10 year moratorium (pause) on the

building of new battleships at the Washington

Naval Conference.

• 1922: The Washington Naval Treaty (also known

as the Five-Power Treaty) was the result.

America from War to Recession Promoting Peace

Charles G. Dawes: 1st Director of the

Bureau of the Budget

• Believed it was vital for European Economies to remain

healthy so the U.S. could recover their wartime debts.

1924: The Dawes Plan was an agreement to aid

Germany in paying its War Reparations.

Relied on American Loans to help Germany.

Europeans agreeing on reduce reparations

1925: He Received the Nobel Peace Prize.

1929: They Received Nobel Peace Prize.

• 1928: 14 Nations signed Kellogg-Briand Pact.

International agreement to avoid war as

a way to resolve disputes.

Foundation of International Law Today.

U.S. Senator Frank Kellogg

French Minister Aristide Briand

America from War to Recession

A Growing Economy

Henry Ford Industrialist and Founder of Ford Motor Company

• Believed that mass production could be accomplished

more efficiently:

1913: Installed the first moving assembly line at his

plant at Highland Park, Michigan.

1914: Automobiles that use to take 12 hours to make

were now made within 93 minutes.

• By 1925: A Model-T Ford was leaving the assembly line every 10 seconds.

Cost of a “Tin Lizzie” went from $850 (in 1908) to $295 (in 1924).

Worker’s wages were increased to $5 a day for an 8-hour workday.

Ford managed to increased employee loyalty and prevent unionizing.

• General Motors and Chrysler also adopted assembly lines to compete w/Ford.

America from War to Recession

A Growing Economy

• Automobiles revolutionized American Society:

Autos now affordable for Middle Class

Easier travel between city & country

New jobs and businesses grew (Garages)

• Mass Production and Assembly Lines made

other home goods more affordable:

New home appliances saved labor & time

New products improved fashion & hygiene

• Improved wages and shorter workdays created new

Middle-Class consumers who had more time & money:

“Buy now and pay in easy installments” sales pitch.

60-75% of major purchases were made by credit.

America from War to Recession

A Growing Economy

• Working-Class Americans also prospered:

Industries introduced Welfare Capitalism

Worker profit sharing & stocks

Medicare and Pensions Benefits

Technological Advances changed America

• WWI introduced Airplanes to transportation:

1918-19: Postal Air Service Established

1927: Charles Lindbergh fly’s Transatlantic

1932: Amelia Earhart crosses the Atlantic

• New Farm Technology Increase Crop Yields:

1918-26: Light Farm Tractors & Combines

1920’s: Fertilizers and Pesticides Increase

America from War to Recession

A Growing Crisis

• World War I and the 1920’s created a Wave of Optimism in America:

Agriculture Industry

Technological Advances created Increased Crop Yields

Technological Advances produced More Goods at Cheaper Prices

Farmers Borrowed Heavily to Purchase more Land & Machinery

Americans Purchased more Goods on Credit than ever before

Federal Reserve kept Rates on Loans Low giving Americans false security.

Post-WWI: Foreign Competition created World Food Surplus

Post-WWI: America Manufactured Half of all the World’s Goods

1922: Congress passed the Fordney-McCumber Tariff Act to Protect Industry and Agriculture – Ultimately causing Increased Foreign Tariffs.

Foreign and Domestic Crop Sales began to Decline Rapidly

Increased Production drove Stock Prices Up for Industries

America from War to Recession

A Growing Crisis

5% of Population (Upper & Middle Class) Controlled 33% of Nation’s Wealth.

33% of Population (Working & Lower Class) Became Too Poor to Buy Goods.

Agriculture Industry

Farmers experience significant Drop in Profits.

Industries begin Reducing Production due to Cut Backs on Orders

• Americans Experience Uneven Distribution of Wealth:

Farmers are Unable to Pay Back Farm Loans.

Laid Off Workers are Unable to Buy Goods or Pay Back Debts

Americans Withdraw Savings from Bank Accounts to Pay Off Debts.

Banks Foreclose on Farms, Homes, and Businesses due to Failure to Pay Debts.

ECONOMIC SITUATION SET

THE STAGE FOR DISASTER

America from War to Recession

Risky Bank Loans were being made due to Low Rates by the Federal Reserve.

Banking & Investment Issues

Giving Business Leaders False Security that the Economy was still Expanding.

America Experienced a Long Period of High Stock Prices (Bull Market).

At Least 10% of All Americans were Investing in Stocks.

Many Investors were Buying Stocks on Margin (Paying only 10% Down)

Some Investors Engaged in Speculation hoping to make an Overnight Fortune.

Some Bankers Invested Depositors Money on the Stock Market.

Sep 1929 – Professional Investors Sensed Danger and Began Selling Stocks

Slipping Stock Prices caused Margin Calls by Brokers wanting their Money

Investors Lost Money, Speculators Defaulted, Banks Closed, & People Panic

America from War to Recession

24 Oct 1929 = Black Thursday (Initial Drop)

The Stock Market Crash

29 Oct 1929 = Black Tuesday (Steepest Drop)

America from War to Recession

The President Responds

• March 1929: Herbert Hoover had become the 31st President.

He stated: “I have no fears for the future of our country.”

• Oct 1929: He assured Americans that the Nation’s Industry was still sound.

He stated: “The worst effects of the crash,” will pass in the next 60 days.

• He preferred a policy of “Volunteerism” instead of Government Coercion to

solver the Nation’s Problems.

Although Industrial Leaders pledged to keep factories open and stop

cutting wages – they failed to keep their promises.

He tried to increase government financing of Public Works, but this only

provided a small fraction of the needed jobs.

He tried to avoid any major government spending that would raise taxes.

America from War to Recession

The President Responds

• 1929 – 1931: He endorsed the Mexican Repatriation Program.

Forced mass-migration of Mexicans out of the United States

• Jan 1931: Hunger Marches occurred. “Feed the Hungry; Tax the Rich!”

• Jun 1930: He signed the Smoot-Hawley Tariff Act, passed by Congress.

Raised Tariffs on Foreign Goods to highest level in 100 years

• 1931 - 1935: Construction of Boulder Dam

Created Employment for 3,000+ men

Provided Water for Farm Irrigation

Produced Hydroelectric Power

Allowed for growth in the Southwest

• 1928: Approved by President Coolidge

• 1947: Official named Hoover Dam

America from War to Recession

The President Responds

• Oct 1931: He encouraged Bankers to help each other

by establishing the National Credit Corporation:

But they were reluctant to make loans

• Jan 1932: He approved the Reconstruction Finance Corporation to make

loans backed by the U.S. Treasury: The Loan Process was too restrictive.

• Summer 1932: The Farmer’s Revolt occurred over debt and low crop prices.

Farmers burned their crops and slaughtered their animals

• June 1932: Congress passed the Revenue Act of 1932.

Tax rates on the rich went from 25% to 63%.

• July 1932: Emergency Relief & Reconstruction Act passed

Too Late to reverse the Economic Collapse