Politics of
Boom & Bust
1920-1932
Election of 1920
• Warren G. Harding (R)
defeats James M. Cox (D)
–Calvin Coolidge - VP
The 1920 Election
• Election marks a
return of the Republican
Old Guard
• Warren G. Harding
–The
President calls for
a return to “normalcy”
th
29
• Harding called the “best
liked man of his
generation”
• Great personality but a
mediocre mind
Harding’s
Presidency
The Poker Cabinet
• Harding pledged the “best
minds” of his generation
• Harding is surrounded by his
cronies the “Ohio Gang”
• Like Grant he is incapable of
detecting or controlling the
corruption in his office
The Ohio Gang
President Warren Harding (front row, third from right),
Vice-President Calvin Coolidge (front row, second from
right), and members of the cabinet.
The Best
• Sec. of State Charles
Evans Hughes
• Sec of Treasury Andrew
Mellon
• Sec of Commerce Herbert
Hoover
And the Rest
• Sec of Interior Albert Fall
• Attorney General Harry M.
Daugherty
Domestic Aftermath of
War
• Harding’s Cabinet sets the
stage for an adoption of a
new improved laissez-faire
with government aiding
business
• Government controls of
industry quickly dismantled
• Interstate Commerce
Commission is again
controlled by railroad
interests
• Railroads returned to
private control
• Esch-Cummins
Transportation Act passed
encouraging consolidation
& guaranteed profitability
• Railway Board imposed a
12% pay cut on rail workers
leading to a 2 month strike
–Railroad strike broken by
Attorney General Daugherty
–Sweeping injunctions led to
union membership drop of 30%
• In an act of reconciliation
Eugene V. Debs pardoned
& released from prison by
Harding
Race Riots in the North
• Black workers lured to the
north by factory jobs faced
increasing hostility
• Riots broke out in many
northern cities in the
summer of 1919 leaving
many dead
Needy Veterans
• Veterans Bureau created to
aid needy veterans in 1921
• American Legion founded
by Theodore Roosevelt Jr.
• Forced Congress to pass a
Bonus Bill in 1922
–Harding vetoed it
The 1924 Bonus Bill
• Congress passes the
Adjusted Compensation
Act giving every veteran a
paid-up insurance policy
payable in 20 years
Reactionary Court
• Harding will appoint 4 out
of the 9 supreme court
justices including William
Howard Taft as Chief
Justice
• Most of these judges are
increasingly conservative
• Courts begin to dismantle
progressive era laws
• Child labor restrictions
weakened, labor rights
stripped, & minimum wage
for women is invalidated in
Adkins v Children’s
Hospital
Higher Tariffs
• Fordney-McCumber Tariff
–Tariffs raised to 38.5% on
average from the 27% of the
Underwood Tariff of Wilson
• Tariff Commission gives the
president the power to raise
or lower individual tariffs
–Harding & Coolidge will
make 32 upward changes in
six years
–Tariff increases make
economic recovery in Europe
more difficult
The Harding Scandals
Teapot Dome Scandal
• 1921: Interior Sec Fall
illegally selling oil leases
without competitive
bidding
• 1929: Will be found guilty
of bribery
Harding and Coolidge
Veterans Bureau Scandal
• Senate investigates
scandals
• Assistant head of bureau
commits suicide
• Bureau chief Charles
Forbes forced to resign
• 1923: President Harding
dies of pneumonia &
thrombosis
–Calvin Coolidge becomes
president
• 1924: Attorney General
Daugherty investigated for
illegal sale of pardons &
liquor permits
• Forced to resign
Harding & Coolidge
Economic Agenda
• Role of gov’t in business:
–make business profitable (tax cuts
& tariffs = “trickle down”)
–less regulation (laissez faire &
facilitate consolidation)
–businessmen should run gov’t
–hostile to unions (conservative
Supreme Court)
Harding & Coolidge
Economic Agenda
• Reject gov’t help of ordinary
citizens
• Reduce National Debt by making
gov’t smaller
Foreign Policy
Under
Harding & Coolidge
War Declared Over
• War declared officially over
by Congress in 1921
• Isolationism firmly
entrenched but Congress
will send observers to the
League of Nations
Oceanic Arms Race
• Britain & Japan are locked
in contest to dominate the
oceans
• US navy is on the verge of
surpassing Great Britain
• Washington Disarmament
Conference (1921-1922)
–Meets to plan world
disarmament
–Leads to Naval Treaties
limiting ship building
Five Power Treaty
• Sets ship ratio at 5-5-3 for
US, Great Britain, & Japan
• US & Great Britain agree
not to fortify Pacific
holdings
• Japan under no obligation
begins to fortify
Four Power Treaty
• Replaces the AngloJapanese Pact of 1902
• US, Great Britain, France, &
Japan agree to maintain
the status quo in the
Pacific
Nine Power Treaty
• All parties agree to the
Open Door policy in China
Loopholes
• No restrictions put on
building smaller ships
• Congress declared that the
US has no military
obligations effectively
killing the agreements
Limits Imposed by
Washington Conference
Latin America
• Nicaragua 1926: US
Marines land & stay until
1933 when Somoza placed
in power
• Mexico
–US & Mexico clash over
control of oil rights in
Mexico
–US regains pre-1917
holdings
–Mexican President is
assassinated
• Clark Memorandum (1928)
–Repudiates Roosevelt
Corollary at the
International Conference of
American States
–US would never intervene to
protect US property rights
The War Debts
• WWI changed America
from a debtor to lender
• European powers were
unable to pay back war
debts so they wanted the
US to write off the debts
European Debts to the US
• Committee meets to
discuss canceling war
debts
• Coolidge refused to
consider canceling the debt
Dawes Plan (1924)
• Sought to solve debt
problem
• US lent money to Germany
• Germany paid reparations
to France & Britain
• France & Britain repaid US
debts
• 1929: Young Plan replaces
the Dawes Plan & reduces
schedule of payments for
Germany
In God We Trust - all others pay cash
• By 1931, all
European powers
(except Finland)
had defaulted on
their loans
• We got nothing
back but bad
feelings from the
allies
For three
generations,
you’ll have to
slave away!
Kellogg-Briand Pact
• Outlawed offensive war but
allowed defensive action
• Treaties reflected the US
mood of isolationism &
wishful thinking
Coolidge’s
Presidency
Frustrated Farmers
• Boom or Bust cycle hits
farmers in the 1920’s
• War prices & mechanized
farming led to major
increase in crop
production
• Overproduction led to farm
surplus & prices dropped
quickly
• 1 out of 4 farms sold for
debts in the 1920s
Farm Bills
• Capper-Volstead Act:
–Exempted farming
cooperatives from anti-trust
laws
• McNary-Haugen Bill:
–Government would buy
surplus crops & sell them
abroad
• Coolidge twice vetoed the
bill & farm prices stayed
low
Election of 1924
• Republicans nominate
Coolidge
• Democrats turn to Wall St.
lawyer John Davis
• Progressive Party runs
Bob LaFollette
Coolidge Wins
•
•
•
•
Coolidge 382
Davis 136
LaFollette 13
Nation too prosperous to be
concerned with reform
• Coolidge continues to carry out
Harding’s conservative
programs
1928 Election
• Republicans nominate
Herbert Hoover
–Declares “we are nearer the
final triumph over poverty
than ever before”
• Democrats nominate Al
Smith from New York, a
“wet”, Catholic, urbanite
–Anti-Catholic bigotry figures
into election
• Hoover wins by 444 to 87
electoral votes carrying 5
former Confederate states
• Franklin Delano Roosevelt
elected Governor of New
York
1928
Election
Hoover’s
Presidency
Herbert Hoover
• “Great Engineer” &
“Wonder Boy”
• Prototypical businessman
• Humanitarian vs. rugged
individualist
The Great Crash of
1929
PYRAMID
2%
$50,000 or more
a year
3%
Limited
income of
most families
and could not
buy goods
70%
$2,500 or
less a year
25%
$10,000 or more
a year
$1,500 or less a year
1929-30
2.8 Million Households
Hoover Bull Market
• 1920s: Stock values
increased & the economy
prospers
• Many critics concerned
that economy has
overheated
• Worries about stock
market & banking system
abound
• Federal
Reserve
refuses to
make
loans for
margin
buying of
stocks
• Farmers desperate for
financial relief
• Agricultural Marketing Act
creates producers
cooperatives
• Tuesday, October 29, 1929:
–“Black Tuesday”
–Stock market crashes
–16,000,000 shares sold at
declining prices
• Bankers call brokers
wanting their money!
• Banks close---people lost
their savings
• Brokers go to investors to
collect their money to pay
the bank loans borrowed by
broker for investor
• Businesses close---could not
pay back loans to banks.
• Orders to sell any price…
swamped the market-nobody would buy
• Workers loose their jobs
• Brokers go under--stocks
are worthless--investors
loose their savings!
• No money to buy consumer
products
• Run on the Banks: People
begin to panic and go to
banks---try to withdraw their
money…Banks don’t have
any money to give back
• Sales fall---more businesses
shut down
• More workers lose their
jobs
Great
Great
Crash
Crash
World
WorldPayments
Payments
Investors
Investors
Investors
Investors
Investors lose
lose
lose
millions.
millions.
millions.
Businesses
Businesses
Businesses
lose
lose
lose profits.
profits.
profits.
Businesses
Businesses
and
and Workers
Workers
Consumer
Consumer
Consumer
Consumer
spending
spending
spending
spending drops.
drops.
drops.
drops.
Overall
OverallU.S.
U.S.
production
production
plummets.
plummets.
Banks
Banks
Businesses
Businesses
Businesses
and
workers
and workers
workers
cannot
cannot repay
repay
cannot
repay
bank
bank
loans.
bank loans.
loans.
Businesses
Businesses
Businesses
Businesses cut
cut
cut
cut Savings
Savings
Savings
investment
investment
investment
investmentand
and
and
and accounts
accounts
accounts
production
production
production
Some are
Workers
Workers
Workers
Workers production.
are wiped
wiped
wiped
Some
Some
Some
fail.
fail.
fail.
fail.
are
are
are laid
laid
laid
out.
out.
off.
off.
off.
off.
Bank
Bank
runs
runs
runs
occur.
occur.
occur.
U.S. U.S.
investors
have
little or no
investors
money
have
littletoor
invest. to
no money
invest.
Allies
Alliescannot
cannot
pay
pay debts
debtstoto
United
UnitedStates.
States.
Banks
Banks
run
Banksrun
run
out
out
of
outof
of
money
money
and
money
and
fail.
fail.
and
fail.
Europeans
Europeans
cannot afford
cannot
afford
American
American
goods.
goods.
U.S.
U.S.
investments
in
investments
Germany
in
Germany
decline.
decline.
German
Germanwar
war
payments
paymentstoto
Allies
Alliesfall
falloff.
off.
Effects of the
Stock Market
Crash
Great Depression
• Nov. 13: $30,000,000,000 in
stock value wiped out
• Dec. 3: Hoover declares
that confidence in the
economy has been
reestablished
• January 1930:
–Unemployment at 4,000,000
–President meets with
Congressional leaders to
discuss public works
program
–Charles Evans Hughes
succeeds William Howard
Taft as Chief Justice
• Congress passes Public
Buildings Act $230,000,000
in public building
• Congress appropriates
$300 million for road
construction
Hawley-Smoot Tariff
(1930)
• Highest protective tariff in
peacetime history
• 1028 prominent economists
sign protest claiming it will
worsen the depression
It Does!
• Exacerbates feelings of
international tension &
trade war
You’re on
your own.
Great Depression Events
DEBTS
US INVESTORS
WALL
STREET
BANKERS
PRIVATE
LOANS
GERMANY
•US became
“economic
isolationist”
WAR DEBT
PAYMENTS
“REPARATIONS”
US TREASURY
ALLIED
WAR DEBT
PAYMENTS
•US high tariffs
(Hawley-Smoot
Tariff) caused
Great Britain and
France to not trade
with US
GREAT
BRITAIN
FRANCE
•Because of this,
Great Britain and
France did not pay
back war debts to
the US
•GB and France
defaulted on their
debt because they
had paid in blood
• October 1930:
–Unemployment reaches 4.5
million
–Hoover establishes
Committee for
Unemployment Relief
–Seeks aid at local level
“Hoovervilles”
• Nov. 1930: Democrats gain
control of House & gain 8
seats in the Senate
• December 1930:
–Congress appropriates
$116,000,000 for public
works
–Bank of the US (private New
York Bank) fails - 400,000
depositors lose savings
–1300 banks have closed
since the crash
Bank Runs
1931
BUSTED
• January 1931:
–Presidential report claims
5,000,000 unemployed
–Hoover reports to Congress
he is against repeal of
prohibition
25% to
40% of
workers
out of
work
Was able
to lower it
to 14%
• Congress passes Bonus
Loan Bill allowing vets to
borrow on Bonus
• Hoover vetoes the Muscle
Shoals Bill calling for
federal control of
hydroelectric production
on the Tennessee River
• “The Star Spangled
Banner” becomes the
National Anthem
Scottsboro Boys
• 9 young black men in
Scottsboro, Alabama are
charged with raping a white
woman
• Found guilty of this capital
offense
• Supreme Court will ultimately
overturn their convictions.
• Case becomes a cause
célèbre for black civil rights
activists
• Empire State
Building is
formally
dedicated & is
tallest building
in the world
until 1970’s
• Moratorium on
international debts (1931)
–Major Austrian bank fails
–Hoover proposes 1-year
freeze on international debts
to help Europe recover
• Great Britain goes off the
gold standard
–US citizens fear US will do the
same & rush banks to remove
savings in gold
–827 more banks close
• Al Capone found guilty of tax
evasion, sentenced to 11
years in federal prison
• Reconstruction Finance
Corporation (1932)
–Created to lend money to
banks, insurance
companies, & other financial
institutions as well as to
railroads & local
governments
• Seen by many as a dole for
the rich, the RFC paved the
way for the New Deal of
FDR
• Charles Lindbergh’s baby
is kidnapped & although a
ransom is paid the child is
found dead
• Bruno Hauptmann found
guilty & sentenced to the
electric chair
• Norris-LaGuardia AntiInjunction Act (1932)
–Prohibits the use of
injunctions in labor
disputes except within
certain restrictions
–Outlaws “yellow dog”
contracts
The Bonus Army
• Bonus
Expeditionary
Force marches
on Washington
seeking
redemption of
the Bonus at
full face value
• Hoover, fearing communist
revolt, sends the US Army
under Douglas MacArthur
(with Dwight D. Eisenhower
and George Patton) to
break up the Bonus
“Hoovervilles”
“The Dust Bowl”
Dust Bowl
Long-Term Causes of GD
• Weak industries
• Overproduction of goods
• Uneven income distribution
• Unstable banking system
• Weak international economy
Effects of the GD
•
•
•
•
•
•
•
•
22% of banks fail
30,000 business failures
25-33% unemployment
Total wages drop ($12B - $7B)
25% farms lost
Loss of self-worth
GNP drop ($104B - $56B)
Int’l reparations & trade collapse
Foreign Policy
Under Hoover
• Japan marches into
Manchuria in September
1931 violating the KelloggBriand Pact initiating war
with China
• US sends representative to
the League of Nations &
denounces Japanese
aggression in Manchuria
• Lytton Commission of the
League of Nations
condemns Japanese
aggression in China
• Japan quits the League of
Nations
Hoover-Stimson Doctrine
• US will not recognize any
gains of foreign territory
taken by force
• Japanese are not deterred bomb Shanghai
Election of 1932
• Republicans re-nominate
Hoover on the first ballot
• Democrats nominate
Franklin Delano Roosevelt
on the fourth ballot
–John Nance Garner of Texas
throws his delegates to
Roosevelt for vice-presidency
• Roosevelt pledges
“A New Deal” for
the American
people
• Roosevelt wins
election in a
landslide: 472 to
59 electoral votes
• Post-election “lame duck”
period worsened the
depression & the economy
grinds to a halt
• Roosevelt refuses to make
any commitments until he
is president in March 1933