Ch. 14: Politics and Prosperity
(1920-1929)
Section 1: A Republican Decade

The Republican Party dominated all three branches of government
throughout the entire 1920s, including the Presidency. Presidents
were Warren Harding, Calvin Coolidge, and Herbert Hoover.
Russian Revolution
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1917 Bolshevik Revolution
Vladimir Lenin: Red Army
Resistors: White Army
The U.S. backed the Whites
because the Bolsheviks
threatened their business
investments in Russia.
Russian Revolution/Communism

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The Reds retained control and in 1922, the new nation
became known as the Union of Soviet Socialist Republics
(USSR) or Soviet Union.
Communism became the official ideology of the USSR,
which meant…
– Government ownership of all land and property
– Single political party controlled government
Red Scare

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Americans feared
Communism would spread
throughout the world.
The intense fear of the
spreading of communism
is referred to as a Red
Scare.
Schenck v. U.S.

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During WWI, Charles Schenck
urged draftees not to report for
duty and was convicted for
breaking the espionage and
sedition acts.
He appealed on the premise of
free speech.
Supreme Court ruled that the
government is justified in
silencing free speech in the face
of “clear and present danger”.
The Palmer Raids
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U.S. Attorney General, A. Mitchell Palmer, set up a special force to
conduct raids and arrest suspected “subversives”.
Targets included suspected Communists, Socialists, and anarchists.
Federal agents arrested thousands of suspected radicals without
evidence.
Most of the suspects were born overseas.
500+ were deported.
Sacco and Vanzetti
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Nicola Sacco and Bartolomeo
Vanzetti, two Italian, anarchist
immigrants, were arrested,
convicted, and sentenced to
death for a murder case in
Massachusetts.
Many Americans believed the
men to be innocent, that the
men were targeted and
sentenced due to their
immigrant status and radical
political beliefs.
Labor Strikes
A wave of labor strikes preceded the Red Scare
of the 1920s.
 Many believed that Communist “agitators” were
behind the labor unrest.
 Hindsight shows differently: inflation caused the
cost of living to double after WWI, while wages
had stayed the same.

Boston Police Strike
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Boston police officers
hadn’t received a raise
since the start of WWI.
Tried to unionize- 19
officers were fired.
The entire police force
went on strike.
Rioting broke out
immediately and there
were not police to
intervene.
Steel and Coal Strikes
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In 1919, steelworkers launched a
strike against the U.S. Steel
Corp.
350,000 workers walked off the
job.
Calling it the work of
communists, U.S. Steel fought
hard against the strike.
Thousands of African Americans
were brought up from the South
to fill the place of the strikers,
the strike failed and the workers
went back.
Strikes Decline
After 1920, the spike in union membership
and strikes began to decline with the
booming economy of the 20s.
 Public and governmental opposition
played a role in reducing strikes, as well
as the upturn of the economy.

Harding Presidency
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Warren G. Harding became
president in 1921,
succeeding Woodrow
Wilson.
“return to normalcy”
Americans were weary from
WWI and the labor strikes
that immediately followed,
wanted “normalcy”.
Foreign Policy
Harding was an isolationist, he avoided
political or economic alliances with foreign
countries.
 He had opposed the League of Nations.
 Also called for disarmament, nations of
the world to voluntarily give up weapons
to “disarm” the world.

Domestic Issues

Increased nativism (anti-immigrant sentiment)
– Religion: opposed to Catholics, Orthodox Christians or
Jews.
– Jobs: feared immigrants would take their jobs.
– Urban conditions: blamed slums and corruption on
immigrants.

Harding placed a quota on immigration, greatly
reduced the number of immigrants after 1922.
Teapot Dome Scandal

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Harding’s Secretary of the Interior, Albert B. Fall, secretly
gave oil-drilling rights on government oil fields in Elk
Hills, California and Teapot Dome, Wyoming to private oil
companies.
Fall received more than $300,000 in illegal payments.
Teapot Dome is considered one of the greatest scandals
in American politics.
Coolidge Becomes President
Harding died in 1923,
possibly from heart
problems and stress
related to Teapot
Dome and other
scandals.
 Vice President, Calvin
Coolidge, became
President.

Coolidge and Laissez Faire
“The chief business of
the American people is
business.”
 Coolidge believed in
Laissez Faire business
philosophy, no
government involvement.
 Cut business taxes and
deregulated industry.

Kellogg-Briand Pact
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Frank B. Kellogg, Coolidge’s Secretary of State, made an
agreement with French Foreign Minister Aristide Briand
that the U.S. and France would not go to war.
Over 60 countries eventually joined the pact, which
proved to mean very little due to a lack of enforcement.
1928 Election
Coolidge decided
not to run for
reelection in 1928,
despite eligibility.
 Republicans
nominated Herbert
Hoover, who won
the election.

Section 2: A Business Boom

The 1920s was marked by an economic boom,
deregulation, and prosperity, until the stock
market crash in 1929.
A Consumer Economy
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Average wages rose 28 percent between 1914-1926.
During the same time period, the number of millionaires
in the U.S. doubled.
With more income, Americans purchased more goods
and services, which in turn strengthened the economy
and their own wages.
Buying on Credit
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Prior to the 20s, Americans paid cash for most items.
Manufacturers began offering installment plans.
Customers paid some money up front, and the rest at
intervals over a period of time.
Electric Power
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New home appliances
demanded unprecedented
amounts of electricity.
From 1913-1917, the
number of electric
customers more than
quadrupled.
Increased the demand for
new goods in the home.
Advertising
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New forms of advertising
sought to popularize new
goods.
Earlier advertising had listed
information about the product;
fabric, design, price, etc.
New advertising spoke less
about the product and more
about the consumer, how the
product would improve the
consumer’s image.
Rise in Productivity
Electric power, new advertising, and installment
plans all launched a buying spree in the 1920s.
 To meet demands, productivity increased.
 Gross National Product (GNP), the total measure
of goods and services produced annually, grew
by 6% each year during the 1920s.
 GNP had grown by less than 1% a year from
1910-1920.

Henry Ford and the Automobile
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The first automobiles were
invented in Germany in the
1880s, but were inaccessible
to the public.
From 1892-1920, 8 million
cars were produced and
sold.
During the 20s alone, 15
million cars were sold, many
from the innovative business
model of Henry Ford.
Henry Ford
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Originally an engineer of a lighting company, Ford spent
his spare time inventing a “horseless carriage”.
By 1903 he had started his own automobile company and
started selling his version of the automobile, the Model T.
Ford and Assembly Line
Henry Ford perfected the
assembly line and mass
production.
 He did not invent the concept
of an assembly line, but
greatly enhanced its
efficiency.
 At Ford Plant in Detroit,
Michigan, they produced a
Model T every 24 seconds.
 Ford built half of all the
automobiles in the world from
1908-1927, 15 million total.
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Business Model/Fordism
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Henry Ford offered an
unprecedented business
model.
In 1914, he announced he
would pay workers $5/day
and limit work weeks to 40
hours (5, 8 hour days)
This was more than double
what he had been paying
($2.34/day), or what a
laborer could earn anywhere
else.
Business Model/Fordism
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Jobs at Ford became very
competitive so Ford was able to
demand hard work from
employees.
Ford was also able to greatly
reduce the cost of an
automobile.
The combination of increasing
wages while reducing costs of a
finished car allowed the workers
themselves to purchase Ford
automobiles, causing a fullcircle economy.
– This economic philosophy is
sometimes called Fordism.
Ford was able to reduce the cost of
a Model T every year. From $825 in
1908 to $360 in 1916
Industrial Growth
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Automobile production
became the largest
manufacturing industry
during the 20s.
Cars became a symbol of
American identity.
Created new industries.
– Garages, car dealerships, gas
stations, motels, restaurants,
road construction.
– Cars also boosted the housing
market by enabling an
expansion of suburbia.
Bypassed by the Boom
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The new prosperity bypassed a
significant portion of the country.
Unskilled laborers, immigrants, and
African Americans remained poor.
Farmers struggled during the
1920s.
– After WWI, food prices dropped
and farmers struggled to
remain in business.
– Many new conveniences, such
as electricity, did not extend to
rural areas.
Section 3: Late 1920s Economy

Overwhelming optimism lead many Americans into risky
investments, leading to the collapse of the stock market
and the Great Depression.
“Wonderful Prosperity”
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Stock prices soared in the late
1920s.
– In 1925, the value of all stocks was
$27 billion.
– 1929: $87 billion.
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Workers wages rose more than
40 percent during the decade.
In 1928, the New York Times
described the year as one “of
unprecedented advance, of
wonderful prosperity.”
“Everybody Ought to Be Rich”
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Americans believed wealth was
available even to ordinary
people.
John J. Raskob: stated an
income of $15/week over 20
years could bring a
$400/month income from
investments.
– “Anyone not only can be rich, but
ought to be rich.”
Welfare Capitalism
To combat unsatisfied labor unions, many larger
companies became proactive in meeting their
employees’ demands.
 By raising wages, offering new benefits like paid
vacation, health plans, and recreation programs,
employers were able to strengthen company
loyalty and morale.
 Became known as welfare capitalism.

Uneven Prosperity
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It was mainly the rich who benefited from this success.
In 1929, 0.1% of the families had incomes of over
$100,000 and 34% of all national savings.
71% of families earned less than $2,500 a year and had
little or no savings.
Personal Debt
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Credit spending led to
increased levels of personal
debt.
The new credit option gave
Americans the illusion that
they could have it all.
Traditionally, Americans
feared debt, but with talk of
abundant prosperity, they
counted on future income to
pay for their purchases.
Playing the Stock Market
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“get-rich-quick” success stories prompted small investors to enter the
stock market.
Prior to WWI, only the wealthiest Americans were invested in the
stock market.
The new wealth of the 20s beckoned ordinary people to play the
market, sometimes investing their life savings.
Buying on Margin
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Stockbrokers encouraged buying on the margin.
Investors paid a fraction of the stocks price and
borrowed the rest.
Brokers charged high interest rates on the amount
borrowed.
Oversupply
Rising productivity brought prosperity, but
eventually created a problem: oversupply.
 Goods became produced more rapidly
than consumers demanded them.
 Although the stock market continued to
rise, some industries, including the
automobile industry, began to slump in
the late 20s.

Trouble for Farmers and Workers
Falling crop prices after WWI.
 Many farmers lost their farms.
 Many rural banks failed when loans were not repaid.
 Life also remained difficult for most factory workers who
worked long hours for low pay.
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This all leads to…