The Politics of Boom and Bust
Chapter 35
The Republican
“Old Guard” Returns
President Harding

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
Popular
Easy going
Kind
Mediocre mind
– Inept interior
Ohio Gang

Harding’s buddies and cronies whom he associated
with

Harding could not tell that many were using him for
dishonest activities
Best minds for the Republicans

Charles Evans Hughes
– Secretary of State
– Dominating
– Conservative

Andrew Mellon

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– Secretary of Treasury
– Wealthy

Herbert Hoover
– Secretary of Commerce
– Popular
– Does a good job
Albert Fall
– Secretary of Interior
– Anti Conservationist
Harry Daugherty
– Attorney General
– Crooked and dishonest
GOP Reaction at the Throttle


Many take advantage of Harding’s laid
back style
Old Guard back in power
– hoped to revive laissez faire business
doctrine
– Government helps business move to
profits
• set people on courts and bureaus that achieve this end
Supreme Court

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Harding appoints 4
justices in 3 years
very conservative
Taft given job of
Chief Justice
– A little more liberal
Supreme Court hurts
progressive reforms

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Killed federal child labor laws
Took labors gains away
Restricted government
interference in business
Adkins v. Children’s Hospital
– Reversed Muller v.
Oregon
– Women count not be
protected by special
legislation
• Gender
differences is
debated for
decades to come
Anti- Trust laws ignored
•Did not enforce laws
Government tries to reduce competition
•Set up trade associations
•Encouraged by Hoover
•Helps eliminate waste but hurts competition
The After Math of War
Wars Industries Board


Dismantled quickly at wars end
Ends progressive hopes of government
regulation
Railroads return to private
management


Some want
permanent
nationalization
Esch-Cummins
Transportation Act of
1920
– Encouraged Private
consolidation
– Want to save the RR
for the country
Merchant Marine Act

Dispose of the war
time fleet at
basement prices
Labor hurt during the Republican Era


Strikes crushed by
exploiting racial
divisions
AG Daugherty hurts
labor by issuing
injunctions against
RR strikers
– Labor shrinks to 30%
by 1913
Veterans Bureau

Helped veterans by
providing hospitals
and help for
disabled
American Legion formed in
1919

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
By TR Jr. in Paris
Military patriotism, conservatism and
antiradical
Lobbied for Veteran’s Bureau
– Bonus Bill in 1922 but Harding vetoes
– Adjusted Compensation Act of 192
• Paid up insurance policy due in 20 years
• Overrode Coolidge’s veto
American Seeks Benefits without
Burdens
America still at war

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Did not ratify the Versailles Treaty
Joint resolution ends war in 1921
Isolationism

Sent unofficial observers to the League
of Nations
America and Britain
competing for oil rights in the
Middle East

America secures share for oil rights in
Middle East
America builds up its navy after
war

Japan in Far East and Britain in West
were its chief rivals
Ship Scrapping at the Washington
Conference
Washington Disarmament
Conference
of 1921-22

Most naval powers invited (had
recognized Russia)

Talk about naval disarmament and
situation in Far East
Huges recommends 10 year holiday
on construction of battle ships and
scrapping dreadnoughts

US and Britain should share parity in
battleships and aircraft carriers with Japan
getting a ration of 5:5:3

Five Power Naval Treaty of 1922
– got the ratio
– Promised not to fortify Far Eastern possessions

Four Power Treaty
– Replace Anglo-Japanese alliance
– Bound US, Japan, Britain, France to preserve
status quo in far east

Nine Powers Treaty
– Powers agree to Open Door in China
Republicans call disarmament a
lasting achievement
But:
 No restrictions on small warships and
they were built by everyone but the US

Congress kills the Four Power Treaty by
not committing to joint action called for
in the treaty
Kellogg-Briand Pact

Coolidge’s
Secretary of State
Frank Kellogg gets 2
million signatures

1928- signs the pact
that outlaws war
– Ratified by 60
nations
War of defense still
permissible

Virtually useless document

Reflected American minds that moved
the US deeper into isolation
Hiking the Tariff Higher
Business wants to keep the
possibility of profits at home to
themselves

Want high tariff to keep out flood of
cheap after war goods
Fordney-McCumber Tariff Law
in 1922

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
Rates boosted to average of 38.5%
Want to equalize the cost of American
and foreign products
President could raise or reduce the tariff
by as much as 50%
Harding and Coolidge help
tariff go even higher

Vital commodities
go up in price and
tariff
Chain reaction of high tariff:
1. Europe needs to sell cheap
products to achieve economic
recovery
2. Europe needs to pay off war debts
to US
3. US needs to let Europe recover so
it could buy US products with profits
4. Europe not working the two way
street
5. Europe builds up its high tariff to
keep US goods out
6. All this helps Hitler come to power
The Stench of Scandal
Colonel Charles R. Forbes



Caught with stealing
money from
Veterans Bureau
Stole over $200
million
Spent 2 years in jail
Teapot Dome Scandal

Albert Fall- Sec. of
Interior- lease oil
reserves to oilmen
for a bribe
Story leaks out to press

Dohney and Sinclair
-oilmen- indicatedacquitted

Fall found guilty and
goes to jail for a
year
Secretary of Interior Albert Fall
Americans angry at
Washington

Sold US naval oil reserves

Undermined faith in courts with acquittal

“In America everyone is assumed
innocent until proven rich”
AG Daugherty


Guilty of selling
pardons and liquor
permits
Resigns and
released
Harding sparred scandal

Died August 2, 1923

Harding was not
strong enough for
the presidency
Calvin Coolidge
A Yankee in the White House

Coolidge sworn in
by father, former
justice of peace

Embodied New
England virtues of
honesty, morality,
industry, and
frugality
Calvin Coolidge
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Average leadership
skills
Dry wit
“Man who builds a
factory builds a
temple, and the man
who works there
worships there”
Supporter of big
business
Silent Cal
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Cautious Cal- hands off approach to
business
Supported Mellon’s tax cuts and debt
reduction
Ends scandal by chastising Republicans
for their tole in scandals and what
followed
Frustrated Farmers
Farmers making great profits
during war

Peace brings to
government
guaranteed high
prices and foreign
purchases
Machines threaten farmers



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Tractors plowing up
fields and making it
cheap and quick
grow more crops on
larger areas using fewer
horses and men
Creates prices slashing
surpluses
Depression in
agricultural districts in
the 1920s
Schemes abound to bring
relief

Farm bloc help pass needed laws
– Capper-Volstead Act- exempted farmers
coops from anti trust prosecution
– McNary-Haugen Bill- authorizes
government to buy surpluses and sell
abroad
• Coolidge vetoed twice
• Farm prices stay low
A Three Way Race for the White
House in 1924
Republicans satisfied and
nominate Coolidge in 1924

Democrats split
– Wets vs dry
– urbanites vs farmers
– Fundamentalists vs Modernists
– northern liberals vs southern standpatters
– immigrants and old stock Americans

Nominate John W. Davis
Progressives bring in La
Follette
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Support from Socialists, AFL
Only shadow of former party
Only presidential candidate
–
–
–
–
–
Government ownership of RR
Relief for farmers
Against monopolies
for labor
Limits Supreme Courts rights to judicial review
Cal Coolidge wins
15 million to 8 million to 5 million
Foreign Policy Floundering
Isolation rules during Coolidge
time


Senate unwilling to adhere to World
Court
Pursued naval disarmament
Troops withdrawn from Dominican
Republic but left in Haiti

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Removed but sent back troops to
Nicaragua
Stopped intervention in Mexico over oil
fields
International debt the major US
foreign problem

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America becomes a creditor nation after
WWI
Nations owe us over $16 billion
Americans did not lend money to
Europeans but invested in America
US owed $10 billion by Allies
and wants its money

Britain and France had paid in blood
– Want America to write off its war debt
– Their money fueled the war time economic
boom of America
– American Tariff walls made in it impossible
to sell products to America
Unraveling the Debt Knot
America’s tightfisted policies
force Germany to repay debts


$32 billion
Allies hope to pay off America with
German war re-payments
– French want to force Germany to pay and
send troops to Ruhr valley
• German currency inflates
Americans not willing to
forgive debts to Allies

“They hired the money didn’t they?”
Dawes Plan of 1924

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Rescheduled German reparations
payments and opened way for American
investments
Americans loan money to Germany
Germany paid reparations to France
and Britain
Dawes Plan cont.
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Allies pay US back with German money
Hoover calls for a debt moratorium
Most nations fault on debt under Hoover
– Only Finland paid off its debt
US never does get repaid

US gets ill will because of its policies
The Triumph of Herbert
Hoover
Hoover gets nomination in
1928

Popular with masses but not with
bosses
Democrats nominate
Alfred E. Smith
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Governor of New York
Wisecracking
Political liabilities
– Wet
– Abrasively urban
– Roman Catholic

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Given a dry running mate
Campaign hurt from start
Smith could not project his
image over radio

Hoover preaching over radio came out
better
– “Rugged individualism”
Orphan boy worked way
through Stanford
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Industry, thrift, and self-reliance
Successful business man and engineer
Small town boy from Iowa and Oregon
Traveled extensively
Faith in individualism, free enterprise
and small government
Not a colorful personality

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Standoffish, shy
Never held elected office, always
appointed
Humanitarianism - Great administrator Inspires loyalty
Great Candidate
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Self made millionaire
Did not like planned economy
Endorsed labor unions
Supports federal regulation of radio
industry
Campaign is dirty by lower
level campaigners of both
sides

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Smith’s religion is attacked
Vote for the Pope
South shied away from Smith
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Too liberal, wet, Catholic
21 million to 15 million
Republican majority returns to the
House
5 former Confederate states vote
Republican
President Hoover’s First
Moves
Prosperity booming when
Hoover takes office

2 groups not getting their share
– Unorganized labor and disorganized
farmers
Agricultural Marketing Act


Help farmers help themselves
Set up Federal Farm Board with
revolving fund of 1/2 billion dollars
– Lent to farmers organizations seeking to
buy, sell and store surpluses
Farm Board creations

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Creates Stabilization Corporation
Creates Cotton Stabilization
Corporation
Bolster sagging prices by buying up
surpluses
Suffocated by avalanche of farm
produce as prices drop
Hoover campaigned on
changes in tariff and
agricultural relief

Hawley-Smoot Tariff of 1930
– Started out to help the farmers
– Acquired about a thousand amendments
– Highest peacetime tariff in history (60%)
Foreigners were angry
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Declaration of economic warfare
Widened trade gaps
Plunges America and others deeper into
depression
Forces America into deeper economic
isolation
Played into the hands of Hitler
The Great Crash Ends the
Golden Twenties
Few suspected a crash when
Hoover takes office

Economy spurring along
Speculation creating a fool’s
paradise on the stock market

Warnings drowned out by profits being
made
October 1929
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Britain raises interest rates to get back
capital lost to Americans
Foreigners dump their securities
Black Tuesday of October 29, 1929
16 million shares sold to save yourself
Losses kept mounting

$40 billion lost in 2 months
Business depression started
from stock market collapse

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Deepest and longest lasting in American
history
6 million workers will be out of a job
Wages slashed, homeless abound
5,000 banks collapse in 3
years
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Took life savings of depositors with
them
Lost homes and foreclosures
Fathers who could not provide for
families feel guilty or leave to find work
Birth rates drop
“Brother Can You Spare a Dime”
– Anthem of depression
Hooked on the Horn of Plenty
What caused the
Great Depression?

Overproduction by farms and factory
– Problem was abundance not want
Ability to produce outran
ability to consume

Not enough into wages to purchase
goods
Over expansion of credit
stimulated production

Normal technology added normal
unemployment
World economic problems

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Europe never really recovered from War
Drying up of international trade
Drought in Mississippi Valley in 1930

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Intimidate Sellers and give back to
owner
Mostly through tenancy on rise
1930 Depression all over
nation


Many lost everything
Effect on national spirit
– America no longer seemed unique
– Depression baffling and could not grasp
– Hoover blankets, Hoover flags,
Hoovervilles
– American social and political structure
trembled
Rugged Times
for
Rugged Individuals
Hoover seemed to be the right
man for the job

Task beyond his talents

Hoover dilemma
1. Humanitarian hated the suffering
2. Republican counted on rugged
individualism to pull America out of
Depression and not to count on
government
Hoover had faith in industrial
machine which built America


Issued positive statements
Depression just got worse
– Prosperity is just around the
corner
– Market just needs slight
adjustment
– Some experts refused to
acknowledge the depression at
all
Hoover tries the middle of the
road approach
•No direct dole and no hands off policy
•Assist railroads, banks, and rural credit
•Hope to restore health at top and it would
trickle down
Critics sneered that Hoover could
feed Belgian people but not
Americans at home
•Willing to lend big business money and they
plunged country into dept
•Money to feed pigs but not people
Hoover’s program did not help
but may have saved it from being
worse

Expenditures for relief paved way for
New Deal
Herbert Hoover
Pioneer for the New Deal

Hoover recommends
government spending
for useful public works
– $2.25 Billion
– Government going in
debt
– Prosperity cannot be
restored by raids on
the public treasury
Hoover Dam

Began in 1930

Successful in:
– large lake
– electric power
– flood control
Hoover fought against bills he
thought were socialistic

Muscle Shoals Bill
– Dam the Tennessee
River (TVA)
– Opposed to
government selling
electricity
Reconstruction Finance
Corporation (RFC)



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$1/2 Billion
Provide indirect relief by assisting insurance
companies, banks, agricultural organizations,
railroads, and local government
No loans to individuals
Loaned the author of the bill (Dawes) his
bank $90 million
Did stop some bankruptcies
“Pump-primping” loans
Too
late to be of value
Government actually profited
Giant corporations did benefit
Norris-LaGuardia
AntiInjunction Act of 1932

Outlawed yellow dog contracts

stopped courts from issuing injunctions
to stop strikes

Hoover policies put government
assistance for the needy that became
the New Deal

Hoover hurt by hostile Republicans and
then a Democratic takes over of House
and nearly the Senate in 1920
Routing the Bonus Army in
Washington
Veterans hurt by depression

Many looked to government for their
bonus for saving democracy in WWI

Went to Washington to ask for their
bonus
– Became the Bonus Army or Bonus
Expeditionary Force (BEF)
– 20,000
– Set up camp in Anacostia across the
Potomac River

Two die in freak riot
– Hoover orders them removed
– Order carried out by steel eyed McArthur
– Also carried out by Patton
– Baby dies and Bonus Army Routed
Hoover now the most hated
man in America


Democrats get smear artists to hurt
Hoover more
Depression blamed on Hoover
Japanese Militarist Attack China
Japan invades China in 1931

Says they were provoked
Shut the Open Door in China

World Shocked by Attack

– Expected League to act or lose its support
Americans sit at League
meeting to discuss
Manchurian crisis

Hoped to Lure America in

League says Japanese were wrong
– Japan leaves League of Nations

Hoover reflects American isolationism
and refuses to get America involved
– nobody really cared
Henry Stimson- Sec. Of State


More internationalist than Hoover
Us would not interfere with League
embargo
Stimson Doctrine


US would not recognize any territory
seized by force
Preach and run policy
Japan bombs China

US still isolationists and don't want to
get involved
Collective Security dies and
WWII was born in 1931

League had power but not the courage
to stop Japan
– could not count on American support
Hoover Pioneers the Good
Neighbor Policy
Hoover had taken good will tour of Latin
America after becoming President
Depression and Loss of
investments

Americans not supportive of imperialism

Hoover withdraws military from Haiti
and Nicaragua
– Foundation of Good Neighbor Policy