Economic Boom & Bust

Warren G. Harding 1865 – 1923 29th President (1921-3) Elected on a campaign of a “Return to Normalcy” – a return to isolationism, less social reform, and increased economic growth Harding was an honest man, but put too much trust in his friends and political allies, giving them positions in his cabinet Died in office from a massive heart attack, possibly brought on by the stress of scandals

The Ohio Gang Harding’s corrupt friends from back home came to be called the “Ohio Gang” They abused their positions by accepting bribes, illegally selling government property Harding was deeply embarrassed by the actions of his friends Most notorious member was Secretary of the Interior Albert B. Fall

Teapot Dome Scandal Sec. Fall had secretly leased federal lands to private oil companies in return for $300,000 in bribes When the scandal broke, Fall became the first cabinet member to go to prison and Harding’s reputation was ruined

Calvin Coolidge 1872 – 1933 30th President (1923-9) Became President upon Harding’s death Known as “Silent Cal” for his terse, serious manner “The business of the American people is business”: Coolidge supported businesses and a laissez-faire economy

Andrew Mellon & the Mellon Program 1855 – 1937 Sec. of Treasury to 3 Presidents His program included applying business principles to managing the federal budget Believed that economic growth required balancing the budget, reducing the federal deficit, and cutting taxes

Economic Boom Rise in the standard of living during the 1920s led to increased sales of consumer goods which in turn created more jobs Mechanization of factories led to greater efficiency and a drop in prices for manufactured goods, further encouraging consumerism

Consumer Credit For the first time, individuals began to regularly borrow money and go into debt to purchase consumer goods (cars, appliances, radios, etc.) because credit became easy to come by and carried no social stigma Consumers began to use “installment plans” to buy expensive items

Growth of the Middle Class As corporations began to expand and have specialized departments such as sales, marketing, accounting, engineering, and management, the number of people living at the middle-class level grew tremendously

Welfare Capitalism Companies began allowing workers to buy shares of stock, participate in profit sharing, and receive benefits such as medical care and pensions This led to increased spending among the working class and less reliance on unions, since they no longer seemed necessary

Farmers in Crisis Technological advances such as pesticides and tractors led to both higher crop yields and increased debt for farmers Increased crop yields led to a drop in crop prices Government efforts to help farmers were repeatedly vetoed by Pres. Coolidge, who believed in laissez-faire

Election of 1928 Coolidge decided to not run for re-election, instead supporting his Sec. of Commerce Herbert Hoover as the Republican nominee Democrats ran NY Gov. Alfred E. Smith, the first Catholic to run for President Hoover won in a landslide

Herbert Hoover 1874 – 1964 31st President (1929-33) Took office at a time of unparalleled prosperity and optimism, but by the end of his presidency, the US was at the bottom of its deepest economic depression in history

Stock Speculation A long period of growth in the stock market convinced millions of Americans to take a risk and invest in stocks Investors began “buying on margin” – borrowing the money to buy stocks, believing those stocks would grow in value and allow them to easily repay the loans; but, if prices dropped, they panicked and sold quickly to avoid taking large losses

“Black Tuesday” In late October, 1929 stock prices began to slip, triggering a mass sell-off as investors panicked On Tuesday, Oct. 29 the bottom fell out – the market lost $15 billion in a single day The market continued to plunge for the next 3 years and didn’t recover until after WWII – a period known as the “Great Depression”

Banking Collapse Banks had made numerous loans to stock speculators and had also invested heavily themselves in the stock market When the market collapsed, banks lost big and had to stop lending With credit restricted, the economy went into a recession Many banks could not absorb their losses and closed; people who had deposited their money in these banks lost everything – this caused further panic and people began to withdraw their money from banks

Hawley-Smoot Tariff Tariff Act of 1930 Government passed the 2nd highest tariff in US history in an attempt to protect US industry, but the tariff badly hurt the sale of US goods overseas as foreign nations raised their tariffs against the US This worsened the US economic situation

Rugged Individualism or Direct Relief? US had long believed in “rugged individualism” – the idea that it was up to the individual to take care of himself As the economy collapsed and unemployment soared, people began to support the idea of “direct relief” – the government should act to help those who could no longer help themselves

Herbert Hoover

The Dust Bowl From 1930 – 36, a terrible drought, coupled with decades of damage to the topsoil from plowing, led to wind erosion and huge dust clouds Thousands of farmers lost everything and were forced to move west and work as migrant farmers

Dorothea Lange 1895 – 1965 Photojournalist Lange's photographs humanized the tragic consequences of the Great Depression and profoundly influenced the development of documentary photography

Lange’s Photos

John Steinbeck 1902 – 1968 Author of The Grapes of Wrath, a Pulitzer Prize winning novel about the tragedies which befell his fictional family of Oklahoma farmers during the Dust Bowl Also wrote Of Mice and Men, a story about the tragic relationship between two poor migrant farmers

Hoover’s Public Response After “Black Tuesday,” Hoover worked hard to assure Americans that the economy would recover quickly Hoover stepped up a propaganda campaign aimed at boosting consumer confidence

Hoover’s Private Response Hoover, however, knew that the economy was extremely unstable He held multiple meetings with business leaders trying to win pledges that factories would remain open, but to no avail

National Credit Corporation Hoover tried to ease the nation’s credit crisis with the creation of the NCC The NCC held a pool of private money that it could lend to banks so that banks could continue to offer loans; the NCC, however, never had enough cash to meet the demand and so was a failure

Reconstruction Finance Corporation When the NCC failed, Hoover resorted to government lending The RFC was created to make direct loans to banks & railroads Even the RFC could not meet the demands for loans, and the economy continued to fail

Emergency Relief & Construction Act In desperation, the government approved $1.5 billion in spending on public works projects and an additional $300 million to provide “direct relief” – money provided directly to families in need

Hunger Marches Crowds of the unemployed and hungry began to hold large-scale demonstrations across the US The largest was organized by the American Communist Party in Washington DC; protesters chanting “Feed the hungry, tax the rich” were blocked from marching by the police

Farmers Revolt Meanwhile, desperate farmers began to destroy their crops and produce in an effort to increase prices Some even resorted to burning their crops for heat in their home Anger continued to grow as more and more farmers had their land foreclosed on by banks

Breadlines & Soup Kitchens As unemployment approached 30%, many people began to rely heavily on soup kitchens and breadlines run by churches, charitable organizations, & some city governments in order to survive

Hoovervilles In large cities, as people could no longer afford to pay rent, they were forced into homelessness Many began to live in homemade shacks that they built in any open space available – whole villages of such shacks began to appear, mockingly referred to as “Hoovervilles”

Hobos Hundreds of thousands of homeless, jobless men began to live a nomadic lifestyle, moving from place to place usually by illegally hiding on freight trains Often lived in temporary Hoovervilles called “hobo jungles” along the railroad tracks

The Bonus Army In 1924, Congress had promised to pay every WWI veteran a $1000 bonus in 1945 May 1932 – over 15,000 vets arrived in DC to lobby Congress to move the bonuses up – Congress voted against the idea

Hoover Responds to the Bonus Army After the vote, much of the Bonus Army remained in Washington, living in Hoovervilles and vacant buildings Pres. Hoover ordered them dispersed; after the DC police failed, Hoover sent in US Army, who used tear gas and bayonets to clear the Bonus Army out

Election of 1932 Republicans nominated Hoover, while Democrats ran NY Gov. Franklin Delano Roosevelt Hoover continued his mantra that recovery was just around the corner, while Roosevelt pledged himself to a “new deal” for the American people Roosevelt won easily

Franklin Delano Roosevelt 1882 – 1945 32nd President (1933-45) President throughout most of the Great Depression and WWII Roosevelt had been paralyzed from the waist down from polio since 1921, making him our only physically disabled president, however, he carefully controlled his public appearances so that the public wasn’t constantly reminded of his disability