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Chapter 32 The Politics of Boom and Bust, 1920–1932.

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1 Chapter 32 The Politics of Boom and Bust, 1920–1932

2 I. The Republican “Old Guard” Returns Warren G. Harding, inaugurated in 1921, looked presidential but proved to be pretty weak. – He never wanted anyone to be mad and he was a horrible judge of character. – He also found himself in over his head much of the time. – His plan was to gather some of the best minds of the time to be in his cabinet, but in doing so he also hired some pretty shady characters.

3 II. GOP Reaction at the Throttle This new Old Guard wanted to improve the doctrine of laissez-faire, and their goal was not simply for government to keep its hands off business, but for government to help guide business to profits. The Supreme Court was an example. Harding appointed 4 of the 9 justices that led to the axe of progressive legislation such as: – Stripping away past labor gains – Overturning special protections for women (Adkins v. Children’s Hospital – Ignoring, circumventing, or not enforcing antitrust laws.

4 III. The Aftermath of War Wartime government controls went away almost immediately. Needy veterans were some of the beneficiaries after the war. – Congress created the Veterans Bureau, which was authorized to operate hospitals and vocational rehabilitation for the disabled. – They also fought and finally received the Adjusted Compensation Act (1924). Gave every former soldier a paid-up insurance policy due in twenty years.

5 IV. America Seeks Benefits Without Burdens Having rejected the Treaty of Versailles, the U.S. was technically still at war with Germany, Austria, and Hungary. – It wasn’t until 1921 when Congress passed a joint resolution that declared the war officially ended. Isolationism was on the minds of many in Washington. Oil and armament questions led to the Five and Nine-Power Treaties of 1922.

6 – These treaties agreed on a 5:5:3 ratio of battleships and air craft carriers between America, Great Britain, and Japan. Only after America and Britain agreed not to fortify their Far East possessions, like the Philippines. – They also secured the Open Door in China. Kellogg-Briand Pact was ratified by 62 nations and was an agreement were only defensive wars were permitted. – Lacking both muscle and teeth, it was useless in a showdown.

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8 V. Hiking the Tariff Higher Scared of a flood of cheap goods from a recovering Europe, the U.S. was looking to keep American markets to themselves and looked to the tariff. – Fordney-McCumber Tariff Law (1922), boosted the tariff rate from 27% (under Wilson in 1913) to 38.5%, which was almost as high as Taft’s Payne- Aldrich Tariff of 1909. The high-tariff course squeezed out Europe like it was supposed to, however, without any profits Europe wasn’t able to pay their war time debts to the U.S.

9 – America needed to give foreign nations a chance to profit if they were going to collect on their loans. – America was slow to learn that international trade is a two way street. If people don’t have any money, they can’t buy anything, which eventually hurts everyone.

10 VI. The Stench of Scandal Teapot Dome scandal - in 1921 Albert Fall, secretary of the interior, talked the secretary of the navy into transferring valuable properties over to the Interior Department. – Fall then quietly leased the land to oilmen Sinclair and Doheny, after he received a bribe of about $400,000. – Fall was finally found guilty and sentenced to a year in jail. As more scandals began to surface, Harding was making a speech tour that brought him to Alaska where he ended up with pneumonia and died.

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12 VII. “Silent Cal” Coolidge True to the republican philosophy, Coolidge believed that “the man who builds a factory builds a temple… and that those who work there worship there.”

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14 VIII. Frustrated Farmers Riding the boom-or-bust cycle, farmers raked in large amounts of cash during the war. But peace ended the government-guaranteed high prices and the huge demand from countries over seas, as foreign production picked back up. A favorite proposal of farmers during this time was the McNary-Haugen Bill. – It sought to keep agricultural prices high by authorizing the government to buy up surpluses and sell them abroad.

15 The bill was pushed from 1924 to 1928, but frugal Coolidge vetoed it twice... And farmers weren’t happy.

16 IX. A Three-Way Race for the White House in 1924 Calvin Coolidge would run for another term for the Republicans. The Democrats ran with John W. Davis, a man with Wall Street connections. Senator Robert La Follette would lead the new Progressive party. – With endorsements from the American Federation of Labor and a shrinking Socialist party, his main support came from hurting farmers.

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18 X. Foreign-Policy Flounderings Coolidge continued the isolationist trend by withdrawing troops from the Caribbean as well as defusing tensions between American oil companies and the Mexican government. The biggest foreign policy during the 1920s however, was the issue of international debts. – Great Britain and France had taken huge loans from America to pay for the war. – America wanted its money back.

19 – Great Britain and France wanted them to write off the loans, just as the Allies had written off millions of lives in the effort. – Not only that, the Europeans protested that America’s postwar tariff was making it impossible for them to sell their goods in order to pay the loans back.

20 XI. Unraveling the Debt Knot With America’s insistence on getting its money back, the Allies pushed even harder against the conquered Germany. – Britain and France demanded Germany to pay around $32 billion in reparations for war-inflicted damages. – France, trying to pull money out of Germany as they lagged behind in their payments, sent troops into Germany’s industrial Ruhr Valley in 1923. – Berlin responded by permitting hyper-inflation.

21 In October 1923, a loaf of bread cost $120 million in preinflation money. The German population was on the brink of anarchy The Dawes Plan of 1924, rescheduled German reparations payments and provided private American loans to Germany. America gave $$$ to Germany, which gave $$$ to the Allies, which gave $$$ to America… this worked fine until the Great Depression.

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24 XII. The Triumph of Herbert Hoover, 1928 An ideal businessperson’s candidate, he recoiled from anything suggesting socialism, or a “planned economy.” – Yet he as secretary of commerce, he endorsed labor unions and federal regulation of the new radio broadcasting industry.

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26 XIII. President Hoover’s First Moves As the 1920s roared ahead, two massive groups people weren’t feeling the benefits. – Unorganized wage earners – Disorganized farmers The Agricultural Marketing Act, passed by Congress in 1929, set up a Federal Farm Board with a revolving fund of $500 million. – Money was lent to farm organizations seeking to buy, sell, and store agricultural surpluses.

27 The Smoot-Hawley Tariff of 1930, raised the duty percentage from 38.5% to nearly 60%. – Foreigners saw it as a declaration of economic warfare, and it eventually plunged both America and other nations deeper into Depression.

28 XIV. The Great Crash Ends the Golden Twenties The expanding economy seemed to be endless (with the exception of farmers,) as the automobile, radio, movies, and other new industries pushed stock earnings higher and higher. With few dark clouds on the horizon, Black Tuesday hit on October 29, 1929. – Britain raised interest rates in an effort to bring back capital investments being sent to America. – Nervous speculators began dumping their stock, and panic followed.

29 Stock Market 1900-1960

30 – In two months time stockholders had lost $40 billion, or more than the America’s total cost of WWI. – By 1930, 4 million men were out of work. By 1932, that number jumped to 12 million. – As bread lines and soup kitchens form, unemployed fathers dealt with the guilt and shame of not being able to provide for their families.

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32 XV. Hooked on the Horn of Plenty What caused the Great Depression? – In a word… Overproduction. Few people were making all the money and they were investing it into factories, not salaries. Men and women had wrestled with physical obstacles since Manifest Destiny, but the depression was something they weren’t able to grasp.

33 – Initiative and self-respect, characteristics that were in the marrow of many Americans, were stifled as they were forced to beg for food and stand in soup lines. – In extreme cases, people set up shantytowns known as Hoovervilles.

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35 XVI. Rugged Times for Rugged Individualists As Hoover saw the distress around him, but he was convinced that industry, thrift, and self- reliance were the virtues that made America great, and if the government started giving out freebies it would weaken the national fiber. Eventually Hoover was forced to turn from his rugged individualism and accept that nationwide catastrophes' required the national governments help.

36 XVII. Hoover Battles the Great Depression Reluctantly, Hoover secured $2.25 billion from Congress to be used toward public works projects. Congress also established the Reconstruction Finance Corporation(RFC). With a bank role of $500 million, it was designed to provide indirect relief by assisting insurance companies, banks, agricultural organizations, railroads, and even state and local governments that were in trouble.

37 Hoover established some indirect benefits for labor as well. – Norris-La Guardia Anti-Injunction Act of 1932, outlawed “yellow-dog” (antiunion) contracts and denied the federal courts from issuing injunctions to restrain strikes, boycotts, and peaceful picketing.

38 XVIII. Routing the Bonus Army in Washington Among the hard-hit victims of the depression were WWI veterans. – They thought that since industry was getting a bonus (though the Smoot-Hawley tariff), then they should get one for saving democracy. – They wanted to make the bonus they were promised, that was due in 1945, payable immediately. – The “Bonus Expeditionary Force” (BEF), numbering around 20,000, marched on Washington.

39 They quickly set up a gigantic Hooverville on vacant public lots. – After their bill failed to get through Congress only about 6,000 took the government fare to get home, the rest refused to leave. – Hoover ordered General Douglas McArthur to evict the Bonus Army. Using tear gas and bayonets, the eviction ended up being more brutal than Hoover intended.

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41 XIX. Japanese Militarists Attack China In September 1931 the Japanese, watching the U.S. struggle through a depression, overran the Chinese providence of Manchuria. – This blatantly violated the League of Nations covenant along with several other agreements. – Since the U.S. wasn’t part of the League of Nations, Washington (using the Stimson doctrine) declared that the U.S. wouldn’t recognize any territory taken by force… which didn’t do much.

42 – Hurting only from a Chinese boycott, Japan bombed Shanghai in 1932, which killed many civilians. – The League of Nations had the economic and naval power to stop Japan, but lacked the courage… WWII is right around the corner.

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