1 The Politics of Boom and Bust, 1920–1932Chapter 32 The Politics of Boom and Bust, 1920–1932

2 The Republican “Old Guard” ReturnsNewly elected President Warren G. Harding was tall, handsome, and popular, but he had a mediocre mind and he did not like to hurt people’s feelings. Nor could he detect the corruption within his adminstration. His cabinet did have some competent officials, though, such as Secretary of State Charles Evans Hughes, who was masterful, imperious, incisive, and brilliant, and Secretary of Commerce Herbert Hoover who was diligent and honest. However, people like Senator Albert B. Fall of New Mexico, a scheming anti-conservationist, became secretary of the interior, and Harry M. Daugherty took over the reigns as attorney general. These two became the worst of the scandalous cabinet members.

3 Charles Evans Hughes Hughes served as Secretary of State under Harding. He helped America transition to a more docile isolationism and negotiated several treaties such as the Nine-Power Treaty (regarding the Pacific) and the Washington Conference Agreements. Later he served as Chief Justice in the Supreme Court, and worked assiduously to move the court in a more Progressive direction. He is considered to be one of the most intelligent justices to serve on the bench, and unlike many, had virtually no ego.

4 “I Sympathize Deeply with You, Madam, but I CannotAssociate with You,” 1923 President Harding’s secretary of state, Charles Evans Hughes, broke the news to a desperate, war-tattered Europe that America was going, and staying, home. p731

5 GOP Reaction at the ThrottleA good man but a weak one, Harding was the perfect front for old-fashioned politicians to set up for the nation a McKinley-style old order. It hoped to further laissez-faire capitalism, and one of the examples of this was the Supreme Court, where Harding appointed four of the nine justices, including William H. Taft, former president of the United States. In the early 1920s, the Supreme Court killed a federal child-labor law. In the case of Adkins v. Children’s Hospital, the court reversed its ruling in the Muller v. Oregon case by invalidating a minimum wage law for women. Under Harding, corporations could expand again, and anti-trust laws were not as enforced or downright ignored. Men sympathetic to railroads headed the Interstate Commerce Commission.

6 Government for Sale This 1924 cartoonsatirizing the corruption of the Harding administration shows the sale of the Capitol, the White House, and even the Washington Monument. p729

7 The Aftermath of War Wartime government controls disappeared (i.e. the dismantling of and Washington returned control of railroads to private hands by the Esch-Cummins Transportation Act of 1920. The Merchant Marine Act of 1920 authorized the Shipping Board, which controlled about 1,500 vessels, to get rid of a lot of ships at bargain prices, thus reducing the size of the navy. Labor lost much of its power, as a strike was ruthlessly broken in 1919, and the Railway Labor Board ordered a wage cut of 12% in 1922. Labor membership shrank by 30% from 1920 to 1930.

8 The Aftermath of War In 1921, the Veterans’ Bureau was created to operate hospitals and provide vocational rehabilitation for the disabled. Many veterans wanted the monetary compensation promised to them for their services in the war. The Adjusted Compensation Act gave every former soldier a paid-up insurance policy due in twenty years. It was passed by Congress twice (the second time to override president Calvin Coolidge’s veto).

9 America Seeks Benefits Without BurdensSince America had never ratified the Treaty of Versailles, it was still technically at war with Germany, so in July of 1921, it passed a simple joint resolution ending the war. The U.S. did not cooperate much with the League of Nations, but eventually, “unofficial observers” did participate in conferences. The lack of real participation though from the U.S. proved to doom the League. In the Middle East, Secretary Hughes secured for American oil companies the right to share in the exploitation of the oil riches there. Frank B. Kellogg, Calvin Coolidge’s Secretary of State, won the Nobel Peace Prize for his role in the Kellogg-Briand Pact (Pact of Paris), which said that all nations that signed would no longer use war as offensive means.

10 The Washington Naval ConferenceAmerica also went on a “ship-scrapping” bonanza. The Washington “Disarmament” Conference of resulted in a plan that kept a 5:5:3 ratio of ships that could be held by the U.S., Britain, and Japan (in that order). This surprised many delegates at the conference (notably, the Soviet Union, which was not recognized by the U.S., was not invited and did not attend). Also, a moratorium on battleship construction was decided. Japan was very disappointed by the decisions made at the conference, and later would break the agreement at every opportunity. The danger in agreements such as this were that America was trying to legislate peace, and by assuming other countries would abide by their statements, the US allowed itself to become dangerously unprepared to fight another war.

11 Figure 32.1 Limits Imposed by WashingtonConference, 1921–1922 The pledge of the British and Americans to refrain from fortifying their Far Eastern possessions, while Japan was allowed to fortify its possessions, was the key to the naval limitation treaty. The United States and Great Britain thus won a temporary victory but later paid a horrendous price when they had to dislodge the well-entrenched Japanese from the Pacific in World War II. Figure 32-1 p731

12 Hiking the Tariff HigherBusinessmen did not want Europe flooding American markets with cheap goods after the war, so Congress passed the Fordney-McCumber Tariff Law, which raised the tariff from 27% to 35%. Presidents Harding and Coolidge, granted with authority to reduce or increase duties, and always sympathetic towards big industry, were much more prone to increasing tariffs than decreasing them. However, this presented a problem: Europe needed to sell goods to the U.S. in order to get the money to pay back its debts, and when it could not sell, it could not repay.

13 The Stench of Scandal However, scandal rocked the Harding administration in 1923 when Charles R. Forbes was caught stealing money and resigned as the head of the Veterans’ Bureau. He and his accomplices looted the government for over $200 million. The Teapot Dome Scandal was the most shocking of all. Albert B. Fall leased land in Teapot Dome, Wyoming, and Elk Hills, California, to oilmen Harry F. Sinclair and Edward L. Doheny, but not until Fall had received a “loan” (actually a bribe) of $100,000 from Doheny and about three times that amount from Sinclair. There were reports as to the underhanded doings of Attorney General Harry Daugherty, in which he was accused of the illegal sale of pardons and liquor permits. President Harding, however, died in San Francisco on August 2, 1923, of pneumonia and thrombosis, and he didn’t have to live through much of the uproar of the scandal.

14 Washington Officials Trying to Outpace the TeapotDome Scandal, ca. 1922 p733

15 “Silent Cal” Coolidge New president Calvin Coolidge was serious, calm, and never spoke more than he needed to. A very morally clean person, he was not touched by the Harding scandals, and he proved to be a popular figure in the Republican Party. It was ironic that in the Twenties, the “Age of Ballyhoo” or the “Jazz Age,” the U.S. had a very traditional, old-timey, and some would say boring president. Significantly, he threw the Ohio Gang out of power and cleaned up the scandals of Harding’s administration. This helped bring honesty back to the White House. However, his deep conservatism and entrenched reactionary opinions inflicted long term damage onto the economy and to American society.

16 Calvin Coolidge, GentlemanAngler Coolidge “was a real conservative, a fundamentalist in religion, in the economic and social order, and in fishing,” said his successor, Herbert Hoover, who had a fly fisherman’s disdain for Coolidge’s bait-fishing tactics—and for his predecessor’s laissez-faire politics as well. p734

17 Frustrated Farmers World War I had given the farmers prosperity, as they’d produced much food for the soldiers. New technology in farming, such as the gasoline-engine tractor, had increased farm production dramatically. However, after the war, these products weren’t needed, and the farmers fell into poverty. Farmers looked for relief, and the Capper-Volstead Act promised to deliver a bit of help, which exempted farmers’ marketing cooperatives from antitrust prosecution. However, Coolidge vetoed the second bill, twice.

18 The McNary-Haugen BillThe McNary-Haugen Bill sought to keep agricultural prices high by authorizing the government to buy up surpluses and sell them abroad. Farmers weren’t able to market their own crops overseas so they needed help from the government. Coolidge was unsympathetic to the plight of farmers and vetoed the bill not once, but twice. He told Congress the bill would make farmers dependent on the government and would encourage overproduction, which would depress crop prices even further. The failure of this simple legislation (part of which was enacted by FDR in the late 1930’s) meant that farmers entered the Great Depression much earlier than the rest of the country.

19 Mechanizing Agriculture Just asthe automobile replaced the horse on city streets, so did the gas engine tractor replace horses and mules on the nation’s farms in the 1920s. American farmers owned ten times more tractors in 1930 than they did in The smoke belching tractors bolstered productivity but also increased the farmers’ debt burden, as the Great Depression made tragically clear. p735

20 A Three-Way Race for the White House in 1924Coolidge was chosen by the Republicans again in 1924, while Democrats nominated John W. Davis after 102 ballots in Madison Square Garden. The Democrats also voted by one vote NOT to condemn the Ku Klux Klan. Senator Robert LaFollette led the Progressive Party as the third party candidate. He gained the endorsement of the American Federation of Labor and the shrinking Socialist Party, and he actually received 5 million votes. However, Calvin Coolidge easily won the election.

21 Map 32.1 Presidential E lection of 1924 (showing popular vote by county) Note theconcentration of La Follette’s votes in the old Populist strongholds of the Midwest and the mountain states. His ticket did especially well in the grain-growing districts battered by the postwar slump in agricultural prices. Map 32-1 p736

22 Foreign-Policy FlounderingsIsolationism continued to reign in the Coolidge era, as the Senate did not allow America to adhere to the World Court, the judicial wing of the League of Nations. In the Caribbean and Latin America, U.S. troops were withdrawn from the Dominican Republic in 1924, but remained in Haiti from 1914 to 1934. Coolidge took out troops from Nicaragua in 1925, and then sent them back the next year, and in 1926, he defused a situation with Mexico where the Mexicans were claiming sovereignty over oil resources. However, Latin Americans began to resent the American dominance of them. The European debt to America also proved tricky.

23 Unraveling the Debt KnotBecause America demanded that Britain and France pay their debts, those two nations placed huge reparation payments on Germany, which then, to pay them, printed out loads of paper money that caused inflation to soar. At one point in October of 1923, a loaf of bread cost 480 million German marks. Finally, in 1924, Charles Dawes engineered the Dawes Plan, which rescheduled German reparations payments and paved the way for further American private loans to Germany. Essentially, the payments were a huge circle from the U.S. to Germany to Britain/France and back to the U.S.. All told, the Americans never really gained any money or got repaid in full. Also, the U.S. gained bitter enemies in France and Britain who were angry over America’s apparent greed and careless nature for others.

24 Figure 32.2 Aspects of the FinancialMerry-go-round, 1921–1933 Great Britain, with a debt of over $4 billion owed to the U.S. Treasury, had a huge stake in proposals for inter-Allied debt cancellation, but France’s stake was even larger. Less prosperous than Britain in the 1920s and more battered by the war, which had been fought on its soil, France owed nearly $3.5 billion to the United States and additional billions to Britain. Figure 32-2 p737

25 A German Woman Burns Near-worthless PaperCurrency for Cooking Fuel, 1923 The memory of the hyper-inflation of the 1920s haunted Germans well into the twenty-first century. p738

26 The Triumph of Herbert Hoover, 1928In 1928, Calvin Coolidge said, “I do not choose to run,” and his logical successor immediately became economics genius Herbert Hoover. Hoover spoke of “Rugged Individualism” which was his view that America was made great by self-sufficient individuals, like the pioneers of old days trekking across the prairies. Radio turned out to be an important factor in the campaign, and Hoover’s personality sparkled on this new medium. Hoover had never been elected to public office before, but he had made his way up from poverty to prosperity, and believed that other people could do so as well. There was, once again, below-the-belt hitting on both sides, as the campaign took an ugly turn, but Hoover triumphed in a landslide, with 444 electoral votes to Smith’s 87.

27 Herbert Hoover on the Road ”Whistle-stop” campaigns,with candidates speaking from the rear platforms of trains, were a standard feature of American politics before the advent of television. Herbert Hoover here greets a crowd in Newark, New Jersey, during the 1928 campaign. p739

28 Alfred “Al” Smith Hoover was opposed by New York Governor Alfred E. Smith, a man who was crushed by discrimination and prejudice. He was hindered politically by being a Roman Catholic, the first ever to be nominated by a major political party for the presidency. Smith advocated a repeal to prohibition, which cost him dearly in the rural Democrat strongholds. Smith was vigorously opposed by the Klan, which made death threats and burned crosses at his campaign stops. Smith’s landslide defeat meant a death knell to even a mild form of progressivism and signalled the deep prejudice and hatred of some Americans toward urban, liberal children of immigrants.

29 Map 32.2 Presidential E lection of 1928 (with electoralvote by state) Smith, despite his defeat, managed to poll almost as many votes as the victorious Coolidge had in 1924. By attracting to the party an immense urban or “sidewalk” vote, the breezy New Yorker foreshadowed Roosevelt’s New Deal victory in 1932, when the Democrats patched together the solid South and the urban North. A cruel joke had the Catholic Smith cabling the Pope a single word after the election: “Unpack.” Map 32-2 p739

30 President Hoover’s First MovesHoover’s Agricultural Marketing Act, passed in June of 1929, was designed to help the farmers help themselves, and it set up a Federal Farm Board to help the farmers. In 1930, the Farm Board created the Grain Stabilization Corporation and the Cotton Stabilization Corporation to bolster sagging prices by buying surpluses. The Hawley-Smoot Tariff of 1930 raised the tariff to an unbelievable 60%! Foreigners hated this tariff that reversed a promising worldwide trend toward reasonable tariffs and widened the yawning trade gaps.

31 The Great Crash Ends the Golden TwentiesHoover confidently predicted an end to poverty very soon, but on October 29, 1929, a devastating stock market crash caused by over-speculation and overly high stock prices built only upon non-existent credit struck the nation. Losses, even blue-chip securities, were unbelievable as by the end of 1929, stockholders had lost over $40 million in paper values (more than the cost of World War I)! By the end of 1930, 4 million Americans were jobless, and two years later, that number shot up to 12 million. Over 5,000 banks collapsed in the first three years of the Great Depression. Lines formed at soup kitchens and at homeless shelters.

32 Pride Goes Before a Fall The great crash of 1929 humbled many a high-flyinginvestor. The desperate curbside seller of this brand-new Chrysler Model 75 paid $1,550 for it just months before. p741

33 Figure 32.3 Index of Common Stock Prices(1926 = 100) Figure p741

34 The Unemployed, by John Langley Howard, 1937 In this painting Howard soberly evokes the dispirited state of millions of unemployed Americans during the depression. p742

35 Causes of the Great DepressionThe Great Depression might have been caused by an overabundance of farm products and factory products. The nation’s capacity to produce goods had clearly outrun its capacity to consume or pay for them. Also, an over-expansion of credit created unsound faith in money, which is never good for business. Britain and France’s situations, which had never fully recovered from World War I, worsened. High tariffs contributed to stagnation in world trade. In 1930, a terrible drought scorched the Mississippi Valley and thousands of farms were sold to pay for debts. An uneven distribution of wealth was also hampering economic growth. By 1930, the depression was a national crisis, and thus, people turned bitter and also turned on Hoover.

36 “Hooverville” in Seattle, 1934In the early years of the depression, desperate, homeless people constructed shacks out of scavenged materials. These shantytowns sprang up in cities across the country. p743

37 Rugged Times for Rugged IndividualistsHoover unfairly received the brunt of the blame for the Great Depression, but he also did not pass measures that could have made the depression less severe than it was. Critics noted that he could feed millions in Belgium (after World War I) but not millions at home in America. He did not believe in government tampering with the economic machine and thus was an advocate of laissez faire, and he felt that depressions like this were simply parts of the natural economic process, known as the business cycle. However, by the end of his term, he had started to take steps for the government to help the people.

38 Home Relief Station, by LouisRibak, 1935–1936 Destitute and despairing, millions of hard-working Americans like these had to endure the degradation and humiliation of going on relief as the pall of depression descended over the land. p744

39 Hoover Battles the Great DepressionFinally, Hoover voted to withdraw $2.25 billion to start projects to alleviate the suffering of the depression. The Hoover Dam of the Colorado River was one such project. The Muscle Shoals Bill, which was designed to dam the Tennessee River and was ultimately embraced by the Tennessee Valley Authority, was vetoed by Hoover. Early in 1932, Congress, responding to Hoover’s appeal, established the Reconstruction Finance Corporation (RFC), which became a government lending bank. This was a large step for Hoover away from laissez faire policies and toward policies the Democrats (FDR) would later employ. However, giant corporations were the ones that benefited most from this, and the RFC was another one of the targets of Hoover’s critics.

40 Hoover Battles the Great DepressionIn 1932, Congress passed the Norris-La Guardia Anti-Injection Act, which outlawed anti-union contracts and forbade the federal courts to issue injunctions to restrain strikes, boycotts, and peaceful picketing (this was good for unions). Remember, that in past depressions, the American public was often forced to “sweat it out,” and not wait for government help. The trend was changing at this point, forced to do so by the Depression.

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42 Routing the Bonus Army in WashingtonMany veterans, whom had not been paid their compensation for WWI, marched to Washington, D.C. to demand their entire bonus. The “Bonus Expeditionary Force” erected unsanitary camps and shacks in vacant lots, creating health hazards and annoyance. Congress tried to pass a bonus bill but failed, and many bonus army marchers stayed in the city and kept protesting. Hoover falsely charged that the force was led by riffraff and reds (communists), and called upon the US Army to disperse the protestors. Several were killed, scores were injured, and American opinion turned even more against him. This may have caused Hoover to lose the 1932 election.

43 The Bonus Army in Washington, D. CThe Bonus Army in Washington, D.C., 1932 World War I veterans from Muncie, Indiana, were among many contingents to set up camp in the capital during the summer of 1932, determined to remain there until they received full payment of their promised bonuses. p747

44 Japanese Militarists Attack ChinaIn September 1931, Japan, alleging provocation, invaded Manchuria and shut the Open Door. Peaceful peoples were stunned, as this was a flagrant violation of the League of Nations covenant, and a meeting in Geneva, Switzerland, was arranged. An American actually attended, but instead of driving Japan out of China, the meeting drove Japan out of the League, thus weakening it further. Secretary of State Henry Stimson did indicate that the U.S. probably would not interfere with a League of Nations embargo, but in the end the League did nothing. The U.S.’s lackluster actions support the notion that America’s isolationist policy was well entrenched.

45 Japanese Aggression in Manchuria This American cartoon lambastes Japan fordisregarding international treaty agreements when it seized Manchuria in The next year the Japanese would set up the puppet state of Manchukuo. p748

46 Hoover Pioneers the Good Neighbor PolicyHoover was deeply interested in relations south of the border, and during his term, U.S. relations with Latin America and the Caribbean improved greatly. Since the U.S. had less money to spend, it was unable to dominate Latin America as much, and later, Franklin D. Roosevelt would build upon these policies.

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