Chapter 32 The Politics of Boom and Bust

Chapter 32 The Politics of Boom and Bust, 1920– 1932

I. The Republican “Old Guard” Returns • In 1921 Warren G. Harding, looked presidential – But depended on cabinet • Harding’s “best minds” – Charles Evans Hughes (Sec of State) – Andrew W. Mellon (Sec of Treasury) – Herbert Hoover (Sec of Commerce) • Harding’s “worst minds” – Senator Albert B. Fall (Sec of Interior) – Harry M. Daugherty (Attorney General)

II. GOP Reaction at the Throttle • Harding a “front” for enterprising industrialists – Crushed the reforms of the progressive era – Corporations expand power / influence • Antitrust laws were feebly enforced (less competition) – Condemned the waste from cutthroat competition – “Voluntary cooperation” • Businesses should regulate themselves, not big gov’t

III. The Aftermath of War • Wartime economy was swiftly dismantled – Federal Government control was surrendered • Labor loss power in postwar decade – Railway wages cut 12% (1922), unsuccessful strike – Union membership declined dramatically • Veterans reaped lasting gains from the war – Veterans Bureau created (hospitals & job rehab) – Veterans’ “bonus”-Adjusted Compensation Act-1924

IV. America Seeks Benefits Without Burdens • U. S. rejected the Treaty of Versailles • Mid-East oil secured for American companies • Disarmament was an issue for Harding – Washington “Disarmament Conference” 1921 -1922 • 10 year naval holiday – A Four-Power Treaty –Pacific status quo – The Nine-Power Treaty kept ‘Open Door’ in China – Kellogg-Briand Pact • Outlawed war as policy

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Limits Imposed by Washington Conference, 1921– 1922 Figure 32 -1 p 731

V. Hiking the Tariff Higher • Fordney-Mc. Cumber Tariff Law (1922) – Average tariff increased to 38. 5% • The U. S. high-tariffs set off a chain reaction – International trade is a two-way street – European producers felt the squeeze – Europe began erecting tariff walls • Economies / Governments Destabilized

VI. The Stench of Scandal • Harding scandals – Forbes (Veterans Bureau) = $200 million fraud – Teapot Dome scandal • Naval oil reserves land bribes – Scandal of Attorney General Daugherty • Illegal sale of pardons and liquor permits • Harding was spared theses events – Died on August 2, 1923 – Not involved in scandals (probably) – Worse scandals/disgrace since President Grant

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VII. “Silent Cal” Coolidge • VP Coolidge was sworn into office by his father • Coolidge was not touched by the scandals • True to Republican philosophy, (Pro-business) • Supported efforts to reduce taxes and debts

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VIII. Frustrated Farmers • Farmers in a post-war bust cycle – Peace brought lower demand & prices – Machines increased productivity, unemployment – The Mc. Nary-Haugen Bill (1924 -1928) • Authorizing the government to buy up surpluses

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IX. A Three-Way Race for the White House in 1924 • Republicans nominated “Silent Cal” • Democrats split had between “wets” and “drys” – 102 ballots, John W. Davis was nominated • Robert La Follette’s new Progressive party – Most liberal candidate/party • Election returns – “Cautious Cal” 15, 718, 211 to Davis 8, 385, 283 – The electoral college – 382=Coolidge, 136=Davis, and 13=La Follette

Map 32 -1 p 736

X. Foreign-Policy Flounderings • Isolation continued to reign in the Coolidge era – U. S. didn’t adhere to the World Court – American occupies Latin America • Dominican Republic, Haiti, Nicaragua • International debts a major concern – Private loans, allied war debts & German reparations • In 1914 - debtor nation to the sum of $4 billion • In 1922, a creditor nation to the sum of $16 billion

XI. Unraveling the Debt Knot • America insisted on getting its money back • Germany owed reparations to France & Britain – Coolidge said no debt cancellations • The Dawes Plan (1924) – It rescheduled German reparations payments – Further American private loans to Germany – The United States never did get its money • But it harvested a bumper crop of ill will.

Figure 32 -2 p 737

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XII. The Triumph of Herbert Hoover, 1928 • Coolidge decided not to run again • Herbert Hoover became the Republican candidate – “Prosperity and prohibition” platform • Democrats nominated Alfred C. Smith – “Abrasively urban” and Roman Catholic • Election returns: Hoover in a landslide – Hoover 21, 391, 993 votes, Smith 15, 016, 169 – Hoover wins electoral count of 444 to 87

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Map 32 -2 p 739

XIII. President Hoover’s First Moves • The Agricultural Marketing Act (June 1929) – Created Federal Farm Bureau fund ($½ billion) • The Hawley-Smoot Tariff (1930) – Highest peacetime protective tariff history (60%) – Seemed like ‘economic warfare’ to other nations • It plunged America/Europe deeper into terrible depression

XIV. The Great Crash Ends the Golden Twenties • Catastrophic crash came in October 1929 • The British raised interest rates • Investors/speculators began to sell their “insecurities” • Black Tuesday (October 29, 1929) – $40 billion in paper values losses – The stock-market collapse heralded a depression • Unemployment doubled in 2 years • 5000+ banks collapsed in three years • Countless lost their home and farms to foreclosure

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Figure 32 -3 p 741

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XV. Hooked on the Horn of Plenty • What caused the Great Depression? – Farm & Factory 0 verproduction – Wealth concentration – Stock Overexpansion (Buying on ‘margin’) – Defaults on loans owed to America (from WWI) – Drought in the Mississippi valley • America’s social and political structure trembled

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XVI. Rugged Times for Rugged Individualists • “Hoovervilles” became common • Hoover was against government handouts – Believed in “rugged individualism” – Didn’t want “soul-destroying” government dole • Decided to help railroads, banks, & rural credit – Goal to restore the top of the economic pyramid • Most of the criticism of Hoover was unfair – Hoover was concerned about unemployed, homeless – His efforts prevented a more serious collapse – His plan paved the path for the New Deal

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XVII. Hoover Battles the Great Depression • Immense sums for useful public works – EG: Hoover Dam on the Colorado River • Fought all “socialistic” schemes – Vetoed the Muscle Shoals Bill • Reconstruction Finance Corporation (1932) – $ to major industries, companies, state/local gov’ts • Norris-La Guardia Anti-Injunction Act (1932) – No anti-union (yellow dog) contracts – No feds used to restrain strikes, boycotts, picketing • Hoover’s political woes – Hostile Republican Congress, then Democratic (1930)

XVIII. Routing the Bonus Army in Washington • World War I vets hard-hit by the depression • 200, 000 vets go to Washington in protest • The “Bonus Army” demands early payments • Hoover orders army to evacuate vets • Makes Hoover even more unpopular

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XIX. Japanese Militarists Attack China • Japan invades Manchuria (Sept, 1931) • The U. S. fires “paper bullets” – Stimson doctrine (1932) • Japan bombs Shanghai, China (1932) – With shocking losses to civilians • Collective security dies • World War II strategies are born

XX. Hoover Pioneers the Good Neighbor Policy • U. S. relations with America’s southern neighbors – After the stock market crash of 1929 • Hoover became an advocate of international goodwill – Treaty with Haiti troops out in 1934 – In Nicaragua troops leave in 1933 (after 20 years) – Hoover engineered the foundation

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