THE NEW ERA: 1921 TO 1933
• Harding and “Normalcy”
– Harding gained Republican nomination largely
because of genial nature and lack of convictions
– hard working and politically astute, Harding
was also indecisive and unwilling to offend
– Harding appointed able and reputable men to
the major cabinet posts, including Charles
Evans Hughes, Herbert Hoover, Andrew
Mellon, and Henry C. Wallace
– however, many lesser offices, and a few major
ones, went to his Ohio cronies
• The Business of the United States is
Business
– Secretary of the Treasury Andrew Mellon
dominated domestic policy
– Mellon sought to lower taxes on the rich,
reverse the low-tariff policies of the Wilson
period, and reduce the national debt by cutting
expenses
– his policies had considerable merit, but Mellon
carried his policies to an extreme
– even with large Republican majorities,
Congress refused to grant unqualified approval
– moreover, the farm bloc, a coalition of midwestern Republicans and southern Democrats,
offset the Republican majority
– Mellon nevertheless balanced the budget and
reduced the national debt by an average of over
$500 million a year
– the business community heartily approved of
the policies of the Harding and Coolidge
administrations
– both Harding and Coolidge used appointments
to convert regulatory bodies, such as the
Interstate Commerce Commission and the
Federal Reserve Board, into pro-business
agencies that ceased almost entirely to restrict
the activities of the industries over which they
had control
• The Harding Scandals
– although personally honest, Harding appointed
cronies known as the “Ohio Gang” who
demonstrated a propensity for corruption
– scandals rocked the Veterans Bureau and the
office of the alien property custodian
– the greatest scandal involved Harding's
secretary of the interior, Albert B. Fall
– Fall leased naval petroleum reserves to private
oil companies
– a Senate investigation into the Teapot Dome
Scandal revealed that Fall had received over
$300,000 in loans from these oil companies
– the American people, who had not yet learned
the extent of the scandals, genuinely mourned
Harding’s death
• Coolidge Prosperity
– Vice-President Coolidge had no connection
with the Harding scandals and cleaned house on
taking office
– his pro-business philosophy endeared him to
conservatives
– in 1924, Coolidge easily won the Republican
nomination
– the badly divided Democrats finally chose a
compromise candidate after 103 ballots
– in the general election, Coolidge easily defeated
the Democratic challenger, John W. Davies
– Robert M. La Follette, running on the
Progressive party ticket, finished a distant third
• Peace Without a Sword
– Disillusion with the results of World War I led
Americans to withdraw from foreign
involvements, but American economic interests
made complete withdrawal impossible
– while the United States avoided formal
alliances, diplomatic efforts included the
Washington Conference (1921), at which
leading nations agreed to maintain the Open
Door in China and to limit the costly naval
arms race
– three far-reaching treaties were drafted
– the Five-Power Treaty limited the number of
battleships of its signatories
– countries signing the Four-Power Treaty agreed
to respect each other’s interests in the Pacific
– the Nine-Power Treaty pledged to maintain
China’s sovereignty and the Open Door
– by initiating the Conference, the United States
regained some of the moral influence lost when
it refused to join the League
– however, the treaties were essentially toothless
• The Peace Movement
– while sincerely desiring peace, Americans
refused to surrender any sovereignty or to build
an adequate defense
– so great was the nation’s desire to avoid foreign
entanglements that the United States refused to
join the World Court
– peace societies flourished
– the Carnegie Endowment for International
Peace and the Woodrow Wilson Foundation
worked for world peace
– many Americans urged pacifism in the conduct
of foreign policy
– the desire for peace culminated in the KelloggBriand Pact of 1928
– signed by over fifteen nations, the pact
renounced “war as an instrument of national
policy”
• The Good Neighbor Policy
– during the 1920s the continued presence of
marines and the economic power of the
“Colossus of the North” fueled anti-Yankee
sentiment in Latin America
– under Herbert Hoover, American policy began
to treat Latin American nations as equals
– the Clark Memorandum (1930) disassociated
the right of intervention in Latin America from
the Roosevelt Corollary
– according to Clark, the United States’ right to
intervene depended on “the doctrine of selfpreservation”
– Franklin Delano Roosevelt continued the Good
Neighbor Policy
– by 1934 the Marines had withdrawn from
Nicaragua, Haiti, and the Dominican Republic;
and the United States abrogated the right to
intervene in Cuba
• The Totalitarian Challenge
– the limitations of isolationism became evident
in 1931 when Japan occupied Manchuria in
violation of both the Nine-Power and the
Kellogg-Briand pacts
– China appealed to United States and League of
Nations for aid, but neither would intervene
– the United States announced the Stimson
Doctrine, which stated that the United States
would never recognize the legality of territory
seized in violation of American treaty rights
– Stimson Doctrine served only to irritate the
Japanese
– in January 1932, Japan attacked Shanghai
– the League condemned the aggression, and, in
response, Japan withdrew from the League
• War Debts and Reparations
– quarrels over war debts hindered efforts by the
former Allies to deal with Japan’s aggression
– the United States demanded repayment of loans
made to its allies during World War I
– the Allies could not repay the loans, and the
American protective tariff made it nearly
impossible for them to gain the dollars
necessary to pay the debts
– the Allies added the cost of their debts to
German reparation payments
– Germany could not pay the huge sums assessed
for reparations and was reluctant even to try
– despite the restructuring of reparations under
the Dawes (1924) and Young (1929) plans,
Germany defaulted on its payments; in turn,
France and Britain defaulted on their loans
• The Election of 1928
– a successful businessman, a technocrat, and a
skilled bureaucrat, Herbert Hoover easily won
the Republican nomination
– he believed that capital and labor could
cooperate to achieve mutually beneficial goals
– his opponent, Alfred E. Smith, a New York
Democrat, was in many ways Hoover’s
antithesis
– a Catholic antiprohibitionist, Smith represented
the urban, immigrant, machine-style politics of
the nation’s cities
– Hoover won a smashing victory
• Economic Problems
– the prosperity of the 1920s masked serious
flaws in the economy
– not all sectors of the economy shared in the
prosperity; the coal and cotton industries lagged
behind the general economy
– the trend toward consolidation of industries
continued throughout the period
– voluntary trade associations, with government
backing, now practiced self-regulation
– the weakest sector of economy was agriculture
– while most economic indicators reflected an
unprecedented prosperity, the boom rested on
unstable foundations
– maldistribution of resources posed the greatest
problem
– productive capacity raced ahead of purchasing
power
– large sums of money were invested in
speculative ventures rather than in productive
enterprises
• The Stock Market Crash of 1929
– stock market raced ahead beginning early 1928
– prices climbed still higher during the first half
of 1929
– the market wavered in September, but few saw
cause for serious concern
– on October 29, 1929, the stock market
collapsed, and the boom ended
• Hoover and the Depression
– stock market collapse was more a symptom of
economic woe than the cause of the depression
– the Great Depression was a worldwide
phenomenon caused primarily by economic
imbalances resulting from World War I
– in the United States, concentration of wealth,
speculative investment, and underconsumption
contributed to the severity of the depression
– Hoover relied upon voluntarism and mutual
self-interest to cure the economic ills
– he rejected classical economics and proposed a
number of measures to combat the depression
– however, he overestimated the willingness of
citizens to act in the public interest without
legal compulsion and relied too much on
voluntary cooperation
– private charities soon ran out of money
– as the depression deepened, Hoover placed
more emphasis on balancing the budget, which
further decreased the supply of money
– the Hawley-Smoot Tariff (1930) imposed high
rates on manufactured goods, which contracted
trade
• The Economy Hits Bottom
– in the spring of 1932, thousands of Americans
faced starvation
– people unable to pay rent established
shantytowns they called “Hoovervilles”
– people begged for food while agricultural prices
dropped so low that farmers organized Farm
Holiday movements
– in the summer of 1932, twenty thousand World
War I veterans marched on Washington to seek
immediate payment of their war bonuses
– when Congress rejected their appeal, some
refused to leave and established a camp on the
Anacostia Flats
– federal troops dispersed the Bonus Army
– the unprecedented severity of the depression led
some to propose radical economic and political
changes
• The Depression and Its Victims
– the depression had a profound psychological
impact on the American people
– there were simply no jobs to be found
– people who lost jobs at first searched for new
ones; after a few months, however, they became
apathetic
– economic stress brought personal stress
– power shifted within families; family size
decreased
– hopelessness and malnutrition contributed to
the lack of political radicalism during the
depression
• The Election of 1932
– Democrats chose Franklin Delano Roosevelt of
New York to challenge Hoover in 1932
– Roosevelt campaigned on optimism and grand,
but unspecified, solutions to the nation’s
economic woes
– desperate for a change in style and substance,
Americans rallied to Roosevelt's promises of a
New Deal
– he proposed that the government take whatever
steps were necessary to protect individual and
public interests
– Roosevelt won with an electoral margin of 472
to 59
– the last days of the Hoover administration and a
“lame duck” Congress witnessed the nadir of
the depression