THE POLITICS OF BOOM AND
BUST
Chapter 32
CHAPTER THEMES
Theme: The Republican administrations of the
prosperous 1920s pursued conservative, probusiness 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 192122.
 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 scandalridden 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.


Integrity and personal honor;
great humanitarian
administering US foreign aid.
 Very efficient and very bright.

President Herbert Hoover
poses with his dog, King Tut.
Uncomfortable asking for votes.
Shy and standoffish personally.
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
