Chapter 32: “The Politics of Boom and Bust”
1920-1932
Warren G. Harding vs. James Cox election 1920
*Harding was tall, handsome, and popular, very
Elect-able, another advantage was that he wasn’t a
democrat- people mad at Wilson
*First election to be announced on radio
1. Slogan: “ A Return to Normalcy”
2. Platform:
i. Isolationism
ii. Return to “good old days” – forget progressivism
iii. Didn’t address League of Nations
3. Drawbacks:
i. Not the sharpest knife in the drawer
ii. Ohio Gang – friends he appointed that often took
advantage of their power
1. Scandal rocked the Harding administration in
1923 when Charles R. Forbes was caught with
his hand in the till and resigned as the head of
the Veterans’ Bureau.
a. He and his accomplices looted the
government for over $200 million.
iii. Teapot Dome scandal: Albert B. Fall ( Sec. of
Interior) 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.
iv. Attorney General Harry M. Daugherty, accused of
selling pardons
v. His cabinet did have some good officials, though,
such as Secretary of State Charles Evans Hughes,
who was masterful, incisive, and brilliant, Secretary
of Commerce Herbert Hoover, and Secretary of the
Treasury Andrew W. Mellon.
How did Harding want to return to the “Good Old Days”?
vi. Return to ‘hands off’ approach to government and
business relationship
1. no more trust busting, anti-trust laws not
enforced
2. railroads were returned to private ownership (
taken over during WWI) – Esch-Cummins
Transportation Act of 1920
vii. Able to appoint 4 Supreme Court judges- all of
whom were conservative (Taft )
1. overturned progressive legislation dealing with
women in the workplace and child labor
a. overturned Muller v. Oregon (women
can’t work more than 10 hours), because
women now had the right to vote
viii. Labor lost much of its power, as strikes were
ruthlessly broken, and the Railway Labor Board
ordered a wage cut of 12% in 1922.
ix. Labor membership shrank by 30% from 1920 to
1930.
1. many associated labor with radical ‘foreign’
influences such as communism
4. In 1921, the Veterans’ Bureau was created to operate
hospitals and provide vocational rehabilitation for the
disabled veterans
i. The Adjusted Compensation Act gave every
former soldier a paid-up insurance policy, and was
passed by Congress twice (the second time to
override president Calvin Coolidge’s veto).
1. Coolidge was fiscally conservative, didn’t want
to spend $
II.
America tries to balance isolation with world power status
1. Since America had never ratified the Treaty of Versailles,
it was still technically at war with Germany, so in July of
1921 (under Harding), it passed a joint resolution ending
the war.
2. The U.S. did not cooperate much with the League of
Nations, but eventually, “unofficial observers” did
participate in conferences.
3. In the Middle East, Secretary Hughes secured for
American oil companies the right to share in the
exploitation of the oil riches there.
4. Disarmament was another problem for Harding, who had
to watch the actions of Japan and Britain for any possible
hostile activities.
i. Worried about Great Britain and control of the
Middle East
ii. Worried about Japan and it’s naval build up in the
Pacific
III. The Washington Conference
1. The Washington “Disarmament” Conference of 192122 resulted in a plan in which a 5:5:3 ratio of ships that
could be held by the U.S., Britain, and Japan (in that
order) was proposed by Hughes.
i. This was intended to curb the growing naval power
of Japan and reduce the overall number of naval
ships being built – trying to reduce arms to prevent
another World War
2. A Four-Power Treaty, which bound Britain, Japan,
France, and the U.S. to honor each other’s territories in the
pacific
3. The Nine-Power Treaty of 1922 kept the open door open
in China.
IV. Hiking the Tariff Higher
1. Businessmen 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%.
i. Presidents Harding and Coolidge were much more
prone to increasing tariffs than decreasing them.
2. 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.
V. The Coolidge Years
1. Became President in Aug 1923 when Harding died
2. Calvin Coolidge was serious and never spoke more than he
needed to.
3. A very morally clean person, he was not touched by the
Harding scandals
4. Very fiscally conservative, vetoed most bills that included
large government spending programs
VI. Problems on the Farm
i. World War I and new technologies encouraged
farmers to produce more, however after the war
demand decreased.
ii. As a result of this overproduction farmers
entered into their “Great Depression” in the
1920s.
iii. McNary-Haugen Bill - gov’t would buy excess
crops and hold them until prices increased
1. Coolidge vetoed the bill 2 times and it was
never made law- fiscally conservative
VII. Election of 1924
1. Coolidge was chosen by the Republicans again, while
Democrats nominated John W. Davis
i. The Democrats also voted by one vote NOT to
condemn the Ku Klux Klan- alienated voters
2. Senator Robert La Follette led Progressive Party as the
third party candidate.
i. Supported by labor and farmers
VIII. Calvin Coolidge easily won
1. Economy was good and Coolidge wasn’t associated with
scandal
2. Keep Cool with Coolidge
IX. Foreign-Policy under Coolidge
1. Frank B. Kellog, Calvin Coolidge’s Secretary of State,
won the Nobel Peace Prize for his role in the KellogBriand Pact (Pact of Paris),which basically outlawed war
2. Senate did not allow America to participate in the World
Court, the judicial part of the League of Nations.
3. In the Caribbean and Latin America
i. U.S. troops were withdrawn from the Dominican
Republic in 1924
ii. However, Latin Americans continued to resent the
American dominance of them.
X.
Dawes plan: WWI debt
1. Germany couldn’t pay off reparations, which made it hard
for Great Britain and France to pay off debt to US.
US loans Germany $ to
build up manufacturing,
taxes would be used to
Germany uses US
loans to pay France
and Great Britain
pay off reparations
France and Great
Britain use $ from
Germany to pay back
US
- Young plan: spread debt payment out over 58 ½ years
XI. Election of 1928
1. In 1928, Calvin Coolidge said, “I do not choose to run,”
and his logical successor immediately became economics
genius Herbert Hoover.
i. “ A chicken in every pot and 2 cars in every garage”
ii. Hoover was opposed by New York governor Alfred
E. Smith, a man who was considered too ‘wet’ and
Catholic to ever become president
1. Smith had the support of urbanites, Catholics,
and immigrants
2. Hoover was part of a prosperous party and was
much respected for his aid work
2. Radio important- Smith too NY
3. Hoover triumphed in a landslide, with 444 Electoral votes
to Smith’s 87.
XII. Domestic and Foreign relations under Hoover
1. Hoover’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.
i. In 1930, the Farm Board created the Grain
Stabilization Corporation and the Cotton
Stabilization Corporation to bolster sagging prices
by buying surpluses.
2. The Hawley-Smoot Tariff of 1930 raised the tariff to an
unbelievable 60%!!!
XIII.
The Great Crash Ends the Golden Twenties
1. Herbert confidently predicted an end to poverty very soon,
but on October 29, 1929, a devastating crash caused by
overspeculation and overly high stock prices occurred.
i. By the end of 1929, stockholders had lost over
$40 billion (more than the cost of World War I)!!!
ii. By the end of 1930, 4 million Americans were
jobless, and two years later, that number shot up to
12 million.
iii. Over 5000 banks collapsed in the first three years
of the Great Depression.
iv. Lines formed at soup kitchens and at homeless
shelters.
v. Hoover was slow to act because he believed in
“Rugged Individualism” – the idea that if you
work hard you can achieve wealth and success.
XIV.
Causes of the Great Depression
1. Over extension of credit- banks and businesses loaned $ to
people they shouldn’t have!
a. This created artificial demand for products which
people could not ordinarily afford
b. people had to use so much of their wages to pay back
past purchases that they couldn’t afford new ones
2. Uneven balance between agriculture and industryindustry was growing while agriculture was faltering, if
industry slowed down there was nothing to fall back on!
3. Wealth concentrated in automobile and radio industry- if
these industries failed they took the economy with them
because many wealthy Americans were invested in these
areas. People could only buy so many cars and radios and
demand stopped.
4. Imbalance of worldwide wealth and trade – Europe was
struggling to rebuild after the war
a. U.S. lent allies $7 billion during war and another 3.3
billion by 1920…
b. The nations lent money could not afford to pay back
debts
c. Tariffs further hurt European economy
d. when our economy was struggling they couldn’t help
us!
5. Over-speculation of stocks –
a. People began to buy stocks on margin (basically they
bought stocks they couldn’t afford).
i. You could pay 10% of the value of the stock and
pay off the rest later.
b. This caused stocks to have an artificial value –
companies could never really pay shareholders if they
came to collect.
c. When people began selling in Oct 1929 other panicked
and sold too, this resulted in the stock market crash
on Oct 29, 1929 (Black Tuesday).
d. Many banks had invested in the market wiping out
their consumers savings!
1. By 1930 many people were affected by the economic
crisis and they were looking to Hoover.
i. Hoovervilles popped up all around the country.
ii. Critics noted that he could feed millions in Belgium
(after World War I) but not millions at home in
America.
2. He did not believe in government tampering of the
economic machine.
3. He was also worried too much government spending
would cause gov’t debt and make the problem worse.
i. However, by the end of his term, he had started to
take steps for the government to help the people,
many thought it was too little too late
1. Hoover Dam – gave help to thousands by
providing jobs, but millions were
unemployed!
2. Reconstruction Finance Corporation – gave
loans to big business hoping they could then
create more jobs, people upset that they
weren’t being directly helped.
XV. Foreign Problems
1. Japan invades Manchuria and leaves the League of
Nations – prelude to Japan’s alliance with Germany
and Italy.
i. No one does anything about it, too concerned
about staring another war…
XVI.
FDR v. Hoover
1. FDR is able to win the election of 1932 because of
Hoover’s slow reaction to the economic crisis.
i. FDR 472 electoral votes
ii. Hoover 59
2. FDR’s first priority was creating jobs for Americans!
3. FDR has no real plan, but promises immediate action,
this was a message the people wanted to hear!
Current economic crisis
 Spark: crash of housing bubble
o Underlying factors
Over-extension of credit
Inability to get credit
Unemployment