Chapter 33 The Politics of Boom and Bust
- Republicans sought to serve public good through less laissez faire and cooperation w/ big business.
o Corruption
o Continued traditional foreign policy of military unpreparedness and political isolationism.
The Republican “Old Guard” Returns
- Harding, like Grant, unable to detect moral defects in associates.
o Charles Evan Hughs secretary of state
o Secretary of Trasurey Andrew W. Mellon
o Herbert Hoover secretary of commerce, feeder of Belgians and wartime food administration. Now increased foreign trade for US manufacturers.
- Worst minds on Cabinet included Senator Albert B. Fall of New Mexico.
o Anticonservationist and secretary of interior.
o Wolf hired to protect sheep of environment.
o Harry M. Daughery big time crook in “Ohio Gang” but was attorney general.
- Conclusion: HORRIBLE, SCANDALOUS administration.
GOP Reaction at the Throttle
- Taken advantage for enterprising industrialists.
o Harding hoped to improve on laissez-faire.
o Industrialists wanted gov to help business to get profits, and achieved ends through Harding.
- Harding appointed 4 of 9 justices.
o Taft was one of them.
o Supreme Court these years killed progressive legislation.
§ Destroyed child labor law, many of labor’s hard-won gains such as through Adkins v. Hospital which no longer declared women to be deserving of special protection in workplace.
§ INVALIDATED minimum-wage law for women
· A reverse of Muller v. Oregon (not during time).
§ Brought question of whether or not 19th amendment mean tthat women were equal and therefore did not require protectionunder the law.
- Corporations relaxed under Harding.
o Antitrust legislation ignored or not enforced. Interstate Commerce Commission corrupt.
- Big industrialists est. agencies to agree upon standardization of product, publicity campaigns and untied front in dealing w/ railroads and labor.
Aftermath of the War
- Wartime gov control on economy dismantled.
o War Industries Board disappeared.
o Progressive hopes of less laissez faire passed with it.
- Railroads returned to private management
o Previously hoped would be nationalized
o Esch Cummins Transportation Act encourated private consolidation of railroads and pledged Interstate Commerce Commission to guarantee profitability.
o Save railroads for the country.
- Tried to get out of shipping business
o Merchant Marine Act authorized Shipping Board (controlled many vessels) to dispose of wartime fleet at low prices. b/c under La follette Seaman’s Act, Amer shipping handicapped.
- Labor suffered in 1920s.
o US Steel Strike – abused racial differences and branded strikers as “reds”
o Railway Labor Board successor to wartime labor boards ordered a wage cut of 12% in 1922.
o Attorney General Daughtery passes on of harshest laws ever à Union membership down 30%.
- Veterans had lasting gains from war.
o 1921 Veterans Bureau to operate hospitals and provide rehab for disabled.
o Veterans to pressure groups. American Legion = military patriotism conservatism and antiradicalism.
§ Lobbied for veterans’ benefits.
§ Had some power, made Congress pass a bonus bill which Harding vetoed.
§ But with Adjusted Compensation Act (paid up insurance policy due in 20 years), Calvin Coolidge vetoed measure, but Congress overload.
America Seeks Benefits Without Burdens
- Prev. America rejected Treaty of Versailles.
o 1921 joint resolution that declared war officially ended.
- Cont to not like League of Nations.
o Harding = no support for League’s world health program.
- Conflict in Middle East w/ US v. Britain oil-drilling concessions.
o Saw importance of “black gold”
o Hughs secured for US oil companies right to share in the region.
- Disarmament
o Businesses didn’t want to further fund naval building program during war.
o Other nations didn’t like big navy either.
o Sent for “Disarmament” Conference where major naval powers (except Bolshevik Russia which US refuses to recognize yet)
§ Included naval disarmament in Far East.
o Hughs proposed that Amer:Britain:Japan have 5:5:3 ratio.
o Five Power Naval Treaty = Hugh’s ideas on ship ratios but only after compensation offered to Japanese.
§ US and Britain to no longer fortify Far East possessions
§ Japnese not subject to restrains.
§ And Four-Power Treaty replaced Anglo-Japanese alliance (before) which bound Britain, Japan, France, US to preserve status quo in Pacific.
- Washington Conference (same as above) also with the Nine-Power Treaty, agreed to nail wide open the Open Door in China?
- Peace was illusory
o No restrictions on warships and other nations built while US far behind.
o US also not willing to use force to enforce Four Power Treaty. Wanted to rely on words and not realism.
- American sentiment reflected in Kellog-Brian Pact ultimately ratified by many
o Only allowed self-defense wars, but ineffective b/c was too delusory.
Hiking the Tariff Higher
- Businesspeople with fears
o Fordney-McCumber Tariff Law
§ 27 to 38.5% from Underwood Tariff.
§ Almost as high as Taft’s Payne Aldrich Tariff.
o Duties on farm produce and general rates designed to equalize cost of American and foreign production.
- Flexible degree introduced where president authorized w/ advice of Tariff Commission to reduce/increase duties by <>
o Harding and Coolidge tended to increase tariffs.
o European producers felt the squeeze b/c it needed to sell manufactured goods to US particularly if it hoped to recovery economically.
§ Led to greater European barriers
§ More international distress.
The stench of Scandal
- Scandal where Charles F. Forbes looted about $200 mil from government.
- Teapot Dome scandal where secretary of interior Albert B. Fall wanted secretary of navy to transfer oil reserves to Interior Department.
o Harding signed the order and gave lands to Fall. Fall then gave lands to oilmen, but had received bribe of approx half a mil.
- Case went through courts until 1929 when Fall finally found guilty.
- Teapot Dome Scandal reduced prestige of gov as resources reserved for navy shouldn’t be given to be sold by public officials. Acquittal of oilmen undermined faith in courts. “You can’t put a million dollars in jail” and “Everyone is assumed guilty until proven rich”.
- Harding died at just the right time to not be told upon.
“Silent Cal” Coolidge
- Silent Cal because he is often silent.
o Sympathized w/ Treasury Mellon’s efforts to reduce taxes and debts.
o No foe of industrial bigness.
- Gave Harding regime badly needed moral cleaning, but soon US moral sensibility dulled by prosperity.
Frustrated Farmers
- Spring of 1920 price of wheat to $3 a bushel.
o Peace = end to gov-guaranteed high prices and massive production by other nations.
o Machines a revolution over farms incl. gasoline0engine tractor and McCormick reaper.
o Bigger crops, larger areas.
o Wartime boom = vast new tracts under cultivation esp in “wheat belt” of upper Midwest.
- Led to price-lowering surpluses. Depression in agriculture in 1920s, where 25% farms sold for debt or taxes.
- Capper-Volstead Act which exempted farmers’ marketing cooperatives from antitrust prosecution.
- McNary-Haugen Bill = keeping agriculture prices high by authorizing gov to buy up surpluses and sell them.
o Gov losses made up by special tax on farmers.
o COOLIDGE vetoed, so NEVER WAS PASSED.
A Three-Way Race for the White House in 1924
- Republicans = Coolidge
- Democrats split between wets and drys, urbanites and farmers, Fundamentalists and Modernists, northern liberals and southern conservationists, immigrants and nativists.
o Deadlocked, turned to John W. Davis.
- “Fighting Bob” La Follette lead new Progressive grouping.
o Endorsement from AF of L and Socialist Party but major support from farmers.
§ Was only a shadow
- Coolidge back into office.
Foreign-Policy Flounderings
- More isolation during Coolidge.
- Senate did not want to adhere to World Court (judicial arm of LoN)
o Coolidge halfheartedly pursued further naval disarmament after Washington Conference.
- But continued intervention in Caribbean.
o 8 year stay in Dominican Republic
o Stayed in Haiti for 20 years since 1914.
- Coolidge removed troops from Nicaragua then sent them back which stayed for 7 years.
- Coolidge managed to defuse conflict w/ Mex gov taking sovereignty over oil resources w/ diplomatic negotiation.
- International debts.
o WWI 1914 -> America from debtor nation to creditor nation.
o Amer investors loaned some $10 mil to foreigners in 1920s
- French and British thought (somewhat rightly) that payments for debts unfair b/c British and France fought most.
o Debtors caomplained borrowed dollars = help Amer economy.
o Final straw = US postwar tariffs = impossible for them to sell goods to pay debts.
Unraveling the Debt Knot
- America’s demands for debt = French and British focusing on Germans.
o French = troops to Ruhr Valley to speed things up = Berlin responded via permitting currency to inflate.
- Then had Dawes Plan which rescheduled German reparation payments, opened way for further Amer. Loans to Germany.
- Germany paid to France and Britain which paid to US.
o Source of circle of debt paying was American credit.
o International trade would later crash w/ Great Depression.
§ Finland only one to pay, discharged 1976.
- US never got its money.
o Led only to anti-American sentiment in France and others.
The Triumph of Herbert Hoover 1928
- Coolidge just chose not to run.
- Republicans nominated Herbert Hoover and Democrats nominated Alfred E. Smith.
o Was Roman Catholic in very Protestant land. Had wet Smith with a dry running mate and a dry platform.
- Radio prominently used in campaign for first time.
o Helped Hoover more as Hoover could project spirit through radio.
- Hoover never elected to public office, but power lay in integrity, humanitarianism, efficiency, talents for admin, “the Chief”.
- Self-made, attracted businesspeople.
o Against “planned economy”.
o Some progressive instincts
§ Endorsed labor unions, supported fed regulation of radio industry.
- A lot of anti-Roman Catholicism during the race
o Solid South and stronghold of KKK did not vote for Al Smith.
o Was Catholic and wet, and Irish, and urbanite.
§ But Alfred Smith was all of them.
- Hoover = landslide.
o Huge Republican majority in House of rep.
o Swept 5 of former Confederacy, despite being Repub.
President Hoover’s first Moves
- Prosperity in late 1920s.
o Soaring stocks in bull market.
o But wage earners and disorganized farmers not getting their share of riches.
- Hoover promoted self-help and only relieved this.
o Agricultural Marketing Act help farmers help themselves through producers’ cooperatives.
o Federal Farm Board lending money to farm organizations seeking to buy, sell, store agricultural supplies.
§ Board created Grain Stabilization Corporation and Cotton Stabilization Corporation.
§ Increase low prices by buying surpluses.
§ But soon too many farm produce and prices cont lowered.
- Hoover, inexperienced, had pledged to call Congress to consider agricultural relief and to bring “limited changes” in tariff.
o Gave hope to farmers.
- Hawley Smoot Tariff designed to assist farmers but lobbyists = highest protective tariff in nation’s peacetime history.
- Reversed worldwide trend toward reasonable tariffs and widened trade gaps.
o GREATER depression = more econ isolationism.
The Great Crash Ends the Golden Twenties
- Previously dizzy economy growth.
o Prices on stock exchange up, and many paper profits.
- Hoover earlier attempted to curb speculation through Federal Reserve Board but didn’t work.
o Crash in October1929.
§ British raised interest rates to bring back capital lured abroad by Amer investments.
o Many began to sell, and soon “Black Tuesday” bank did hnot have the money.
o Lost #40 billion in paper values.
- End of 1930, 4 million workers in US jobless.
o 2 years later tripled the figure.
o 5000 banks collapsed in first three years.
§ Removed w/ them many life savings of citizens.
Hooked on the Horn of Plenty
- Great Depression causes
o Overproduction of farm and factory.
o Nation’s production outran its ability to consume or pay for them.
§ Too much money in few, who invested in factories.
§ Not enough money going into wages.
o Overexpansion of credit.
§ Bought on easy terms = consumers went beyond what they could afford.
o Labor-saving machines = more unemployment.
o Allies never recovered from WWI.
o Depression increased by Hawley Smoot Tariff
o European uncertainties over reparations, war debts, defaults on loans.
- Exacerbated by Mississippi Valley drought.
o Many farms auctioned.
- “ragged individualism” slept under “Hoover blankets” (old newspapers” and went into paper shantytowns named Hoovervilles.
Rugged Times for Rugged Individualists
- Hoover’s ideals: government interference would weaken national fiber, weaken industry, thrift, self-reliance that made US great.
- Depression = local gov agencies died, so began to assist RR, banks, rural credit corps
o Aimed to have financial health at top and relief would trickle down.
- But “Great Humanitarian” at Belgium didn’t use federal funds to feed needy Americans.
o Instead lent money to big bankers who were partly responsible?
- But actions were a precedent to New Deal of FDR.
Herbert Hoover Battles the Great Depression
- Instead of his “trickle-down philosophy” at last = sums for public works.
- Hoover Dam (vetoed by Congress in Coolidge)
o Completed in 1936, man-made lake for irrigation, flood control, electric power.
- Hoover went against all things “socialistic”
o Muscle Shoals Bill which dammed TN River and embraced by FDR’s Tennesse Valley Authority.
o VETOED by Hoover b/c opposed gov selling electricity in competition w/ own citizens in private companies.
- Congress passes Reconstruction Finance Corporation (RFC)
o Became gov’s leading bank.
o To provide indirect relief by helping insurance companies, banks, agricultural organizations, RR.
o But still no loans to individual.
o Was also too late.
§ Ironic that individualistic Hoover sponsored project b/c was primarily New Dealish.
- Indirect benefits for labor.
o Congress passes Norris-La Guardia Anti-Injunction Act.
o Outlawed “yellow dog” (anti-union) contracts and forbade federal courts to issue injunctions to restrain strikes, boycotts, peaceful picketing.
- Herbert Hoover did have significant new policy.
o But was slow to abandon 19th century bias, but near end of term started toward gov assistance for needy citizens.
- Had a hostile Congress.
o Despite Republican majority, was uncooperative.
o After depression had a Democratic majority in House and almost Senate
§ Remaining Republicans also opposed Hoover.
Routing the Bonus Army in Washington
- Many veterans of WWI among victims of depression
o Industry secured “bonus” through Hawley Smoot Tariff to be paid in 1945.
- After depression wanted immediate payment of entire bonus.
- “Bonus Expeditionary Force” (BEF) went to Washington, 1932.
o Set up a gigantic Hooverville.
o Menace to public health while attempting to intimidate Congress in numbers.
- Hoover ordered army to evacuate unwanted guests.
o Hoover charged that “Bonus Army” led by reds when only few were former convicts, communist agitators.
o Evacuation carried out by General Douglas MacArthur w/ far more severity than Hoover planned.
- Led to more abuse on once-popular Hoover.
o The “Hoover Depression”
Japanese Militarists Attack China
- When Japan saw that West was in a bad depression, went to Manchuria and proceeded to make sure Open Door did not apply.
o Americans (not a majority) = strong measures from boycotts to blockades.
- But League handicapped in nonmembership of US.
o First attempts at economic pressure failed.
- Stimson doctrine declared that US would not recognize any territorial acquisitions achieved by force.
o Only paper bullets.
- More Japanese militarists who went on to bomb Shanghai.
o Americans = informal boycotts of Japanese goods
o No sentiment for armed intervention due to Depression.
o As a result collective security died and WWII began in 1931 largely on Manchuria.
- League had the power but not the courage to act.
o One reason b/c America not in it.
Hoover Pioneers the Good Neighbor Policy
- New president took a goodwill tour of Latin America.
- Depression softened Amer attitude toward Latin neighbors.
o Less money to invest abroad.
o Millions of investments went sour and felt they were preyed stead.
o Economic imperialism much less popular.
- Strove to abandon Roosevelt Corollary by withdrawing troops from Haiti.
o Also withdrew troops from Nicaragua after stay of 20 yars.
o Was the foundation of “Good Neighbor” policy.
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