The Politics of Boom and Bust Period 7.5

After WWI, Americans wanted to separate from the problems in Europe and sink back into isolationism . However, U.S. isolationism was selective because the USA did play a role in world affairs The U.S. hosted a naval conference aimed to reduce the military strength of all nations The USA loaned European nations billions of dollars to help rebuild after WWI The USA joined other world powers in a commitment to world peace by signing the Kellogg-Briand Pact, which “oulawed” war as an offensive means

Unraveling the Debt Knot Britain and France Demand rapid reparation payments from Germany as outlined in the War Guilt Clause in the Treaty of Versailles Germany prints money to try to pay the war debt, but Britain and France then demand repayment in gold.

Repaying Reparations 1924 - Charles Dawes engineered the Dawes Plan It softened the burdens of war reparations in order to stabilize the German currency (somewhat) brought increased foreign investments and loans (particularly from the U.S.) to the German market BUT, it made Germany dependent on America’s economy (not good once the Great Depression started

The Republican “Old Guard” Returns Warren G. Harding (Republican) was elected president in 1920, and promise Americans “A return to normalcy” Americans voted for conservative Republican presidents in the 1920s because: They had grown tired of all the Progressive reforms of the early 1900s Many believed Woodrow Wilson had been dishonest about getting the U.S. involved in WWI, and had over stepped his presidential powers during the war.

Politics in the 1920s The Republican Presidents of the 1920s were pro business and supported a more laissez-faire approach to economics, which meant the government would not interfere with business. In the 1920s, businesses had been stifled under the progressive administrations of Roosevelt, Taft and Wilson, but now they could begin expand and grow again Anti-trust laws were not as enforced as they had been under the Wilson Administration

Hiking the Tariff Higher Fordney-McCumber Tariff Law raised the tariff from 27% to 35% Kept cheap European products from flooding American markets Protected American manufacturers, but raised the prices of goods for the consumers

Scandals in the Harding Administration Teapot Dome Scandal (Teapot Dome, Wyoming) Albert B. Fall - Secretary of the Interior (appointed by Harding) What he was supposed to do: Lease government owned oil land to the highest bidding oil company What he did do: Did not allow open bidding for the land Sold the land at a lower cost than the bidding would have brought Received monetary compensation (bribes) from the oil companies to do so

Harding Dies President Harding Died 2½ years into his presidency, before news of the Teapot Dome Scandal came to light VP Calvin Coolidge becomes President after the death of Harding, and continues with the pro-business policies of his predecessor. “The chief business of the American people is business.” -Calvin Coolidge

Problems in the Economy On the surface of the 1920s, the economy seemed to be booming, but there were some severe problems developing. Problem 1 – Distribution of Wealth in the 1920s An income of $2,500 per year was considered the minimum amount needed for a decent standard of living

Frustrated Farmers Problem 2 – A crisis in the farming sector During World War I, demand for American grown food was high, and farmers profited by producing more food. After the war, demand for the crops dropped, but many farmers continued producing crops at the same rate. Too many crops on the market (high supply + low demand = falling prices) Many American farmers fell into poverty and went bankrupt

Bailing out the Farmers… Sort of McNary-Haugen Bill Attempted to raise the price of agricultural goods by authorizing the government to buy up surpluses and sell them on the world market at a loss Essentially this was a taxpayer funded bailout of the farmers because the government used taxpayer money to purchase the goods at an artificially high price knowing that they were going to lose money when they resold the crops. This was a short-term solution to a long-term problem

Problem 3 – Over speculation of the stock-market Stock speculating – investing in a stock and hoping it will go up in price without actually do due diligence Buying on margin – people would buy stock from a broker with a small down payment, putting the rest on a line of credit. People in the 1920s were using the stock market as a way to try and get rich quick. People aimlessly threw their money into the stock market, and the increase demand for stocks inflated the price of stocks well over what they were actually worth, creating an economic bubble.

Buying On Margin

The Triumph of Herbert Hoover, 1928 In 1928, Calvin Coolidge chooses not to re-run for President, and the Republicans nominated Herbert Hoover Hoover had risen to American political prominence as head of the massively successful Food Administration during WWI Hoover wins in a landslide (444 electoral votes to 87).

President Hoover’s First Moves Hawley-Smoot Tariff of 1930 raised the tariff to an unbelievable 60%! This was a big plus for American manufacturing, but raised consumer prices dramatically, and gave incentive to other countries to not trade with the U.S. The decline in foreign trade hurt the economy even worse.

The Great Depression led to a global depression in Europe, Asia, and Latin America World trade fell by 40% To encourage citizens to buy from U.S. companies (not foreign competitors) the government passed new high tariffs… …European nations responded with their own tariffs which made it difficult for U.S. companies to sell their goods overseas

The Great Crash Ends the Golden Twenties October 29, 1929 (Black Tuesday) a devastating stock market crash

Great Depression Comes Fast By the end of the 1930 4 million Americans were jobless two years later, that number shot up to 12 million (25% unemployment as an average across the entire country) Over 5,000 banks collapsed across the U.S. Homeless and hungry people began to form lines at soup kitchens and at homeless shelters

Hoovervilles and Shantytowns Villages of shanties, or homemade shacks spring up in all major American cities. Central Park in NYC was home to the biggest “Hooverville”

Rugged Times for Rugged Individualists President Hoover unfairly received the brunt of the blame for the Great Depression even though he had only been president for 6 months at the time of the stock market crash. Hoover also didn’t act aggressively to combat the depression like he should have Instead of government intervention to ease the pain of depression Hoover advocated charity from the wealthy and “rugged individualism” (Rugged Individualism was Hoover’s belief that the people needed to help themselves and not look to the government for economic relief)

Hoover private charities to help (“volunteerism”) When the Great Depression began, Republican President Herbert Hoover tried to solve America’s economic problems President Hoover believed that America could overcome the depression through “rugged individualism” (using hard work and perseverance) Hoover private charities to help (“volunteerism”) He encouraged business growth, wanted to keep taxes low, and avoided direct gov’t intervention Woody Guthrie

Under Hoover, the gov’t issued relief checks to help the unemployed As the depression worsened, Hoover called for more direct government action to ease peoples’ suffering Under Hoover, the gov’t issued relief checks to help the unemployed Congress created the Reconstruction Finance Corps (RFC) to loan money to save failing businesses

Congress approved new building projects to put Americans to work like the Hoover Dam

These efforts did not end the depression and many citizens lost faith in President Hoover

Americans who lost their homes, lived in shantytowns nicknamed “Hoovervilles” “Hoover Hotels” “Hoover Blankets” “Hooverville”

Routing the Bonus Army in Washington After WWI, Veterans had been promised a Government pension from the U.S. government that would be paid to them starting in 1945. “Bonus Army” In 1933, thousands of WWI Veterans marched on Washington D.C. to demand that the government pay them the war bonus 12 years before it was owed to them Riots followed after Congress failed to pass a bill that would agree to pay them their Bonus pay early

Routing the Bonus Army President Hoover falsely charged that the force was led by communists anarchists, and called in General Douglas MacArthur and his military forces to disband the “Bonus Army” Their camp was burned Tear gas was used to disperse the Bonus Army After Hoover’s handling of the Bonus Army became public, American opinion turned against him even more and made his reelection in 1932 nearly impossible.

By the election of 1932, Americans were looking for new leadership and a president who could save them from the Great Depression