Politics and Prosperity

Politics and Prosperity Chapter 25, Section 1 What scandals hurt Republicans in the 1920s? How did Coolidge’s policies increase prosperity? What role did the United States play in world affairs?

When Republican Warren Harding took office in 1921, he had to fight a sharp recession, or economic slump. After the war, more than 2 million soldiers came home and began to look for jobs. At the same time, factories stopped making war materials, so they needed fewer workers. Ushered in a new ere of Republican, pro-business policies “Return to normalcy”

For top Cabinet posts, Harding chose able men who followed pro-business policies. For other Cabinet posts, however, Harding brought in old friends. Harding was honest and hard-working, but his friends saw government service as a way to enrich themselves. They became known as “The Ohio Gang”

A series of scandals followed A series of scandals followed. For example, one of Harding’s appointees, Charles Forbes, head of the Veterans Bureau, was convicted of stealing millions of dollars from the bureau. After Harding died of a heart attack in 1923, more scandals came to light. The most serious was the Teapot Dome Scandal. Two oil executives had bribed Secretary of the Interior Albert Fall in order to get secret leases of government land in California and at Teapot Dome in Wyoming.

When Calvin Coolidge became President, he set out to repair the damage the scandals caused the Republican party. Like Harding, Coolidge believed that prosperity for all Americans depended on business prosperity. He cut regulations on business and named business leaders to government agencies. His policies contributed to a time of economic growth.

Coolidge prosperity As factories switched to consumer goods, the postwar recession ended. Production increased, incomes rose, and consumers bought the new consumer products that were being made, such as refrigerators, radios, and phonographs. Advertising increased. To attract even more buyers, businesses begin to allow installment buying, or buying on credit. Buyers made a small down payment, then paid an installment each month until they had paid the full price plus interest. This new policy increased the demand for goods. At the same time, consumer debt rose.

Soaring stock market The economic boom gave the stock market a boost. Corporations sold stocks, or shares of ownership, to investors. Investors made or lost money depending upon whether the price of the shares went up or down. Many people began investing in stock. Stock prices rose so fast that some people made fortunes overnight. That encouraged more people to buy stock. Such a period of increased stock trading and rising stock prices is known as a bull market.

Many people bought stocks on margin Many people bought stocks on margin. With this method, an investor bought a stock for as little as a 10 percent down payment. The buyer held the stock until the price rose, and then sold it at a profit Margin buying worked as long as stock prices rose. By 1928 and 1929, a few experts were warning that the bull market could not last forever.