THE POLITICS OF BOOM AND BUST

Chapter 32

CHAPTER THEMES

Theme: The Republican administrations of the prosperous 1920s pursued conservative, pro-business policies at home and economic unilateralism abroad.

Theme: The great crash of 1929 led to a severe, prolonged depression that devastated the American economy and spirit, and resisted Hoover’s limited efforts to correct it.

REPUBLICAN “OLD GUARD” RETURNS

Warren Harding was one of the best-liked men of his generation.

But, weak, inept and only a mediocre mind.

The country wasn’t looking for more. Why?.

Harding surrounded by scoundrels. “Ohio Gang”

GOP REACTION AT THE THROTTLE

Harding = Laissez Faire Progressivism was dead. Goal was Laissez-faire plus; help guide business

toward profits. Put many like-minded people into administration

and the courts. In Harding’s three years as President, he appoints

four S. Ct. judges. Taft as Chief Justice

ROLLING BACK PROGRESSIVISM In 1920s the Supreme Court supported business.

minimum wage law. federal Child Labor law, Adkins v. Children’s Hospital overturned a law that

gave women special protections in the work place. Progressive legislation regulating business was

ignored and unenforced. trade associations.

THE AFTERMATH OF WAR After war, Government got out

of the governmental control of business

Merchant Marine Act of 1920

Labor saw major setbacks. A violent steel strike crushed in

1919 Membership in unions declined by

nearly 30 percent between 1920 and 1930.

Strikes were ruthlessly crushed. RR strike injunction.

VETERANS Veterans were one of the few

groups to achieve lasting gains through the war.

1921 Veterans Bureau American Legion.. Adjusted Compensation Act

Bonus bill in 1922. Harding vetoes.

1924, Congress repasses the bill.. Terms Cost 3.5 billion.

Coolidge vetoes, but Congress over-rides.

BENEFITS WITHOUT BURDENS

Harding was intent on isolationism, but U.S. couldn’t be completely isolationist.

US still technically at war with Axis 1921 Congress passed a joint resolution that

declared the war officially ended. Republicans continued to despise the League

of Nations Eventually forced to send unofficial observers

Mid-East: GB and America were competing for oil-drilling rights of oil-rich Arab nations

Business wants disarmament. Why? Hard to draw down the navy. Why?

FIVE-POWER NAVAL TREATY

Washington “Disarmament” Conference in 1921-22.

Two main issues: Naval disarmament and the situation in the Far East.

What does the US propose?. Becomes the Five-Power naval Treaty of 1922:

US England and Japan agree to ratio of 5:5:3 Brits and Americans agreed not to fortify their Far East

possessions, including the Philippines. Japan has no such restrictions.

Anglo-Japanese alliance replaced by the Four-Power Treaty. Brit, Japan, France and US agree to preserve the status quo in Pacific.

China boosted by Nine-Power Treaty of 1922 which guarantees a full open-door policy in China.

What is the flaw in the treaty?

LIMITS IMPOSED BY WASHINGTON CONFERENCE, 1921–1922

KELLOGG-BRIAND PACT (1928) Idealistic Americans urged nations to

foreswear war as an instrument of national policy.

US Sec. of State Kellogg reluctantly supports after nearly 2 Million US signatures

Signed by 62 nations pledging not to use war as an instrument of national policy.

Americans believed that this would prevent war.

Huge loop-hole.

HIKING THE TARIFF HIGHER Isolationism reflected in economic policy. Business wanted to keep American

markets for American business. Fordney-McCumber Tariff Law. 1922

Hiked tariff from 27 percent to 35%. President given the power to raise or lower

tariffs by 50%. Mostly used to adjust rates higher. (32 up, 5 down)

Tariffs hurt European countries trying to recover from the war and pay war debts.

Leads to international tariff war and to feeling of economic oppression in countries such as Germany.

THE STENCH OF SCANDAL

Harding Administration was beset with scandals.

Charles Forbes, Attorney General

Daugherty Teapot Dome

HARDING DIES

Harding dies in August, 1923, before the full scope of these scandals has come to light.

His administration is the most scandal-ridden since Grant.

Coolidge President.

CALVIN COOLIDGE Coolidge embodies

Yankee Puritanism. Is not a dynamic leader. His policies compared to

Harding? His five years are

relatively uneventful and isn’t forced to grapple with any serious crisis.

Coolidge helps to save the Republican Party. How?

FRUSTRATED FARMERS

Farmers hit hard after the war. Prices plummet. Why?

In 1920s one-in-four farms goes bankrupt. Great depression starts in farm economy long

before it hits the rest of the economy. Capper-Volstead Act. McNary-Haugen Bill. What would it do?

Coolidge twice vetoes this measure. Political ire of farmers stays high as a result.

ELECTION OF 1924 Rep. nominate Coolidge to be elected in his own

right, and he campaigns on the basis of the status quo.

Democrats are hopelessly divided Nominate John W. Davis, a wealthy corporation

lawyer who didn’t excite anyone. 102 ballots La Follette runs as third-party Progressive

candidate. Coolidge wins nearly 2-1 over Davis.

THE DEBT PROBLEM Biggest foreign policy issue in second

Coolidge term was foreign debt owed US. America had gone from a debtor nation

before the war to a creditor nation after the war.

The dollar was beginning to supplant the Pound Sterling.

America had loaned 10 Bill. to Allies during and after the War, and American investors had loaned an equal amount to Europe in the 1920s.

US wants this money back, but Allies are having a hard time repaying.

EUROPE ASKS FOR A BREAK

Allies argue that US should write off as war expense.

What is their argument? Allies had sacrificed millions of lives while sat on the

sidelines. Allies can’t get repaid for lost lives and manpower.

US tariffs making it very hard to earn the money necessary to repay the debt.

Money Allies had borrowed had been spent in US, helping to refuel the US economy.

UNRAVELING THE DEBT KNOT American government intransigent on

debt. Allies response? Effect on Germany. German reaction? Many urged that debts and reparations be

drastically scaled down or canceled. Coolidge response Contribution to isolationism. 1924. Dawes plan.

Why is it fatally flawed.

ELECTION OF 1928 Coolidge decides not to

run.Herbert Hoover. Hoover platform. Democrats, still quite

divided, nominate liberal New York Governor Al Smith. Seemingly and odd choice. Why?

Many dry, rural, fundamentalist democrats choked on his candidacy.

HOOVER Hoover is American success

story. Against foreign

entanglements. Believed in isolationism.

Had never run for or held office before. He was used to the business model. Uncomfortable asking for votes.

Shy and standoffish personally. Integrity and personal honor;

great humanitarian administering US foreign aid.

Very efficient and very bright.President Herbert Hoover

poses with his dog, King Tut.

HOOVER LANDSLIDE

Hoover runs as a business candidate. Did have some progressive instinct. Hoover and Smith try to keep the

campaign clean, but minions take it into the sewer.

“Rum, Romanism and Ruin.” Hoover wins in a landslide, and Smith can’t

even hold all of the solid democratic South. Also a very solid Republican majority in

Congress.

PRESIDENTIAL ELECTION OF 1928

PRESIDENT HOOVER’S FIRST MOVES Economy was roaring, but Farmers and non-union wage

earners were not getting their share of the prosperity:. Hoover did not believe in direct aid. Wanted

private sector response. Agricultural Marketing Act. Sets up Federal Farm

Board. What does it do? Why doesn’t it work? Farmers then turn to the tariff to cure their ills. Leads to the Hawley-Smoot Tariff of 1930. Probably

one of the worst pieces of legislation in US history. Why? Biggest tariff in US peacetime history. Raised tariff from 38.5 to nearly 60%. Foreign nations outraged. Seemed to be a declaration of economic warfare. Helped push the world toward depression. layed into the hands

of rising Nazism in Germany.

STOCK MARKET CRASH Economy was near the

bursting point. Prices on the stock

market were vastly over-valued.

Many had bought on the margin. Problem with this.

Black Tuesday. October 29, 1929. Causes In two months, investors

lost 40 Bill, in paper value. More than total cost of WWI.

GREAT DEPRESSION Opening bell of the worst and

longest depression in US and World history.

By the end of 1930, more than 4 Million unemployed. By 1932, 12 Mill.

Wages and hours slashed. People weren’t buying, so factories weren’t producing, so there were no jobs.

Many lost their life’s savings in the Market.

Was a huge hit to the America Psyche. Where was Manifest Destiny? Where was the American Dream?

CAUSES OF THE GREAT DEPRESSION Over-production of both farm and factory. Too little being paid in wages. Over-expansion of credit through installment

buying helped over-stimulate production and over-extend the buying power of consumers.

Technology pushed people out of jobs. Economic anemia overseas caused by the debt

burden (and Hawley-Smoot). Dried up purchasing from Europe.

Terrible drought in the Mississippi Valley caused a number of farm foreclosures, putting farmers out of business.

Antiquated economic theory Lack of deposit insurance

RUGGED TIMES FOR RUGGED INDIVIDUALISTS

Hoover trapped by traditional economic theory

Had great sympathy for those suffering.

Wedded to the idea of Laissez faire, saw governmental handout as sacrilege.

Why did he fear governmental handouts?

Hoover believed that recovery was just around the corner.

HOOVER PROPS UP BUSINESS As the depression

drags on private relief organizations run out of money.

Hoover agrees to provide aid to RR, banks and credit corps.

What is the intent.What do critics

claim?Why doesn’t it work?

HERBERT HOOVER: PIONEER OF THE NEW DEAL

Hoover eventually recommends that Congress vote 2.25 Bill. for useful public works.

1932—Reconstruction Finance Corporation (RFC).

Norris-La Guardia Anti-Injunction Act. Compared to his predecessors Hoover did

a great deal. Republican Congress was often very hostile

to Hoover’s plans.

THE BONUS ARMY IN WASHINGTON Vets of WWI were hard

hit. Bonus Expeditionary

Force. Congress, riots ensue and two are killed.

Hoover orders the army to force the marchers to leave.

Gen. Douglas MacArthur. Battle of Anacostia Flats.

Brings down more abuse on Hoover.

STUDENTS ON THEIR OWN

JAPANESE MILITARISTS ATTACK CHINA HOOVER PIONEERS THE GOOD

NEIGHBOR POLICY