Ch. 32 Notes:The Politics of Boom and Bust

Warren G. Harding1. In the presidential election of 1920, the Republicans ran Warren G. Harding as the “anti-Wilson” – he was personable and approachable.

2. He was also a poor choice for president – he wasn’t a good administrator, he didn’t see the corruption in those around him, he hated to say no to people and he wasn’t exceptionally bright.

3. These problems are going to lead to an administration filled with corruption.

The Semi Return of Laissez Faire1. The Republican Party (under Harding, Coolidge and Hoover) hoped to use

government activity to assist the development of businesses during the 1920’s – “Less government in business and more business in government”.

2. They are going to cut government spending and also lower personal income taxes on the upper classes – to encourage more business investment.

3. To protect U.S. industries Congress passed the Fordney-McCumber and Hawley-Smoot Tariffs – both will lead to a decline in foreign trade and make it difficult for European nations to pay off their war loans.

4. They will also relax the enforcement of prior legislation, such as the Interstate Commerce Act and the Sherman and Clayton Anti-Trust Acts – this will of course have negative effects on the lower classes of society, especially farmers and laborers.

5. The U.S. Supreme Court will also aid in the support of business by ruling against progressive legislation – in the case of Adkins v. Children’s Hospital they will declare that women were no longer entitled to special protection in the workplace because of the now had the right to vote.

Harding and Foreign Affairs

1. The Republican Party had opposed the Treaty of Versailles and after his election Congress will pass a resolution declaring the war over – the U.S. was set on isolating itself from foreign affairs.

2. However, Harding did work towards disarmament in regard to navies – mainly because the Republicans and business leaders didn’t want to spend more money on the U.S. navy.

The Washington Conference

1. The U.S., Great Britain and Japan were becoming rivals on the seas in regard to the size of their navies.

2. In the Four Power Pact (U.S., G.B., France and Japan) the parties agreed to respect each others holdings in the Pacific.

3. In the Five Power Pact (U.S., G.B., France, Japan and Italy) the parties agreed to limit the sizes of their navies.

4. In the Nine Power Pact the parties agreed to keep the Open Door Policy going in China.

5. None of these pacts have any real enforcement provisions though, so they don’t do much good.

Scandal

1. Because of his lack of oversight over those around him, Harding’s presidency will deal with numerous scandals.

2. The head of the new Veteran’s Bureau, Charles Forbes, will skim around $200 million from the bureau (gets two years in jail).

3. Attorney General Harry Daugherty was arrested for selling pardon’s and liquor permits – and for not prosecuting cases – but his two trials ended with hung juries.

Teapot Dome1. The worst scandal was

the Teapot Dome Scandal.

2. Secretary of the Interior Albert Fall took control of two oil fields in Teapot Dome, Wyoming, and Elk Hills, California.

3. He then leased the land to two oil companies for bribes.

4. He was convicted and sentenced to one year in jail.

Calvin Coolidge1. Harding died of pneumonia on August 2, 1923 and Calvin Coolidge assumed the presidency.

2. Once again the government’s policy was to protect the business community of America – at the expense of other sectors of the American economy – especially farmers.

3. He will be reelected in 1924 – mainly because of the prosperity the country is enjoying (Progressive Party dying out).

The Plight of Farmers

1. Farmers had been struggling since after WWI.2. Even as the number of farmers decreased, production

increased – largely to support the war effort – but after the war overproduction becomes a huge problem.

3. Farm workers were also “tractored out” – replaced by new machinery.

4. To try to help farmers, Congress passed the McNary-Haugen Bill, which provided for the purchase of surplus crops to sell them abroad – but there was still no market for them.

5. Farmers end up suffering the effects of the Great Depression well before the rest of the country.

Coolidge and Foreign Affairs

1. The main issue facing Coolidge in regard to foreign affairs is trade – our high tariffs are shrinking international trade.

2. This is especially a problem for our Allies, who are struggling to pay off their war loans – and Germany who is struggling to pay off reparations.

3. The Allies want us to cancel the debt – they paid in blood, we can pay in money – we refuse.

4. In 1924 Congress passes the Dawes Act to help Germany – we loan money to Germany to help them stimulate their economy and the money the make can be used to pay off reparations, which can then be used to pay off us.

The Dawes Act

Herbert Hoover 1. In 1928, Herbert Hoover (Rep.) will be elected president – largely on the prosperity the Republicans have gained for the U.S.

2. However, that prosperity is about to come to a screeching halt – and Hoover will take the blame.

Hoover’s Foreign Policy

1. In 1932, Japan invaded Manchuria – the U.S. is in an isolationist phase and doesn’t want to get involved even though this is a violation of the Four Power Pact.

2. Instead, Secretary of State Henry Stimson issues the Stimson Doctrine – we refuse to recognize Japan’s control over any Chinese territory.

Black Tuesday

1. During the 1920’s, the wealthiest 1% of the U.S. saw their income rise 75% - the rest of the population only saw about a 9% increase, so they made their purchases on credit (70% of families made around $2500 a year).

2. People were also heavily invested in the stock market – often speculating and buying on margin in order to reap larger profits.

3. On October 29, 1929, the stock market crashed and the Great Depression has arrived.

The Great Depression

1. From 1929 – 1940, the Great Depression will be the worst financial crisis the U.S. has ever faced – by 1933, around 11,000 banks have failed, GDP falls nearly 50%, around 90,000 businesses go bankrupts and unemployment will skyrocket to 25%.

2. Even the birthrate drops because people can’t afford to have children.

3. Causes: 1. Our tariffs and war debt policies.2. U.S. overproduction and buying on credit.3. The economic problems of farmers.4. The unequal distribution of wealth.

Hoovervilles

Hoover and the Depression

1. Hoover has no real response – he doesn’t believe it’s the governments job to provide direct aid to individuals.

2. His approach is to appeal to the country to voluntarily aid people – wealthy individuals and charitable organizations will step in to create soup kitchens and bread lines to aid those out out work.

Too Little to Late

1. As the Depression worsens, Hoover finally tried to do some things – but he never gives direct aid to the American people!

2. The Hawley-Smoot Tariff is passed to protect U.S. industries – it makes things worse by basically stopping foreign trade.

3. The Agricultural Marketing Act tries to help farmers market their crops better – not what they need.

4. The Reconstruction Finance Corporation gives money to businesses and industries and to states to use as they see fit – not going to help much but does keep the depression from getting even worse.

The Bonus Army1. During Harding’s administration, WWI veterans were promised a bonus by

Congress to make up for wages they lost while at war.2. The payment is due in 1945, but in 1932 a group of vets (around 20,000)

march on Washington to demand an early payment.3. Congress refuses and Hoover orders the Bonus Army to leave Washington,

D.C. – most comply.4. When a group stays (and begins having conflict with Washington police),

Hoover orders Douglas McArthur (with help from Dwight Eisenhower) to get them out of Washington

5. McArthur uses 1000 troops, tanks and tear gas to drive them out of their Hooverville – in the process the Hoovervile will catch on fire – two vets were shot, many more suffered injuries and an 11 month old baby died in the process.

6. This ended any chance Hoover might have had at being reelected – he will be defeated easily by FDR in the next election.

The Bonus Army