1. THE NEW ERA: 1921 TO 1933 Harding and “Normalcy” –Harding gained Republican nomination largely because of genial nature and lack of convictions –hard working and politically astute, Harding was also indecisive and unwilling to offend –Harding appointed able and reputable men to the major cabinet posts, including Charles Evans Hughes, Herbert Hoover, Andrew Mellon, and Henry C. Wallace –however, many lesser offices, and a few major ones, went to his Ohio cronies

2. The Business of the United States is Business –Secretary of the Treasury Andrew Mellon dominated domestic policy –Mellon sought to lower taxes on the rich, reverse the low-tariff policies of the Wilson period, and reduce the national debt by cutting expenses –his policies had considerable merit, but Mellon carried his policies to an extreme –even with large Republican majorities, Congress refused to grant unqualified approval

3. –moreover, the farm bloc, a coalition of mid- western Republicans and southern Democrats, offset the Republican majority –Mellon nevertheless balanced the budget and reduced the national debt by an average of over $500 million a year –the business community heartily approved of the policies of the Harding and Coolidge administrations

4. –both Harding and Coolidge used appointments to convert regulatory bodies, such as the Interstate Commerce Commission and the Federal Reserve Board, into pro-business agencies that ceased almost entirely to restrict the activities of the industries over which they had control

5. The Harding Scandals –although personally honest, Harding appointed cronies known as the “Ohio Gang” who demonstrated a propensity for corruption –scandals rocked the Veterans Bureau and the office of the alien property custodian –the greatest scandal involved Harding's secretary of the interior, Albert B. Fall –Fall leased naval petroleum reserves to private oil companies

6. –a Senate investigation into the Teapot Dome Scandal revealed that Fall had received over $300,000 in loans from these oil companies –the American people, who had not yet learned the extent of the scandals, genuinely mourned Harding’s death

7. Coolidge Prosperity –Vice-President Coolidge had no connection with the Harding scandals and cleaned house on taking office –his pro-business philosophy endeared him to conservatives –in 1924, Coolidge easily won the Republican nomination –the badly divided Democrats finally chose a compromise candidate after 103 ballots

8. –in the general election, Coolidge easily defeated the Democratic challenger, John W. Davies –Robert M. La Follette, running on the Progressive party ticket, finished a distant third

9. Peace Without a Sword –Disillusion with the results of World War I led Americans to withdraw from foreign involvements, but American economic interests made complete withdrawal impossible –while the United States avoided formal alliances, diplomatic efforts included the Washington Conference (1921), at which leading nations agreed to maintain the Open Door in China and to limit the costly naval arms race

10. –three far-reaching treaties were drafted –the Five-Power Treaty limited the number of battleships of its signatories –countries signing the Four-Power Treaty agreed to respect each other’s interests in the Pacific –the Nine-Power Treaty pledged to maintain China’s sovereignty and the Open Door –by initiating the Conference, the United States regained some of the moral influence lost when it refused to join the League –however, the treaties were essentially toothless

11. The Peace Movement –while sincerely desiring peace, Americans refused to surrender any sovereignty or to build an adequate defense –so great was the nation’s desire to avoid foreign entanglements that the United States refused to join the World Court –peace societies flourished –the Carnegie Endowment for International Peace and the Woodrow Wilson Foundation worked for world peace

12. –many Americans urged pacifism in the conduct of foreign policy –the desire for peace culminated in the Kellogg- Briand Pact of 1928 –signed by over fifteen nations, the pact renounced “war as an instrument of national policy”

13. The Good Neighbor Policy –during the 1920s the continued presence of marines and the economic power of the “Colossus of the North” fueled anti-Yankee sentiment in Latin America –under Herbert Hoover, American policy began to treat Latin American nations as equals –the Clark Memorandum (1930) disassociated the right of intervention in Latin America from the Roosevelt Corollary

14. –according to Clark, the United States’ right to intervene depended on “the doctrine of self- preservation” –Franklin Delano Roosevelt continued the Good Neighbor Policy –by 1934 the Marines had withdrawn from Nicaragua, Haiti, and the Dominican Republic; and the United States abrogated the right to intervene in Cuba

15. The Totalitarian Challenge –the limitations of isolationism became evident in 1931 when Japan occupied Manchuria in violation of both the Nine-Power and the Kellogg-Briand pacts –China appealed to United States and League of Nations for aid, but neither would intervene –the United States announced the Stimson Doctrine, which stated that the United States would never recognize the legality of territory seized in violation of American treaty rights

16. –Stimson Doctrine served only to irritate the Japanese –in January 1932, Japan attacked Shanghai –the League condemned the aggression, and, in response, Japan withdrew from the League

17. War Debts and Reparations –quarrels over war debts hindered efforts by the former Allies to deal with Japan’s aggression –the United States demanded repayment of loans made to its allies during World War I –the Allies could not repay the loans, and the American protective tariff made it nearly impossible for them to gain the dollars necessary to pay the debts –the Allies added the cost of their debts to German reparation payments

18. –Germany could not pay the huge sums assessed for reparations and was reluctant even to try –despite the restructuring of reparations under the Dawes (1924) and Young (1929) plans, Germany defaulted on its payments; in turn, France and Britain defaulted on their loans

19. The Election of 1928 –a successful businessman, a technocrat, and a skilled bureaucrat, Herbert Hoover easily won the Republican nomination –he believed that capital and labor could cooperate to achieve mutually beneficial goals –his opponent, Alfred E. Smith, a New York Democrat, was in many ways Hoover’s antithesis –a Catholic antiprohibitionist, Smith represented the urban, immigrant, machine-style politics of the nation’s cities –Hoover won a smashing victory

20. Economic Problems –the prosperity of the 1920s masked serious flaws in the economy –not all sectors of the economy shared in the prosperity; the coal and cotton industries lagged behind the general economy –the trend toward consolidation of industries continued throughout the period –voluntary trade associations, with government backing, now practiced self-regulation –the weakest sector of economy was agriculture

21. –while most economic indicators reflected an unprecedented prosperity, the boom rested on unstable foundations –maldistribution of resources posed the greatest problem –productive capacity raced ahead of purchasing power –large sums of money were invested in speculative ventures rather than in productive enterprises

22. The Stock Market Crash of 1929 –stock market raced ahead beginning early 1928 –prices climbed still higher during the first half of 1929 –the market wavered in September, but few saw cause for serious concern –on October 29, 1929, the stock market collapsed, and the boom ended

23. Hoover and the Depression –stock market collapse was more a symptom of economic woe than the cause of the depression –the Great Depression was a worldwide phenomenon caused primarily by economic imbalances resulting from World War I –in the United States, concentration of wealth, speculative investment, and underconsumption contributed to the severity of the depression –Hoover relied upon voluntarism and mutual self-interest to cure the economic ills

24. –he rejected classical economics and proposed a number of measures to combat the depression –however, he overestimated the willingness of citizens to act in the public interest without legal compulsion and relied too much on voluntary cooperation –private charities soon ran out of money –as the depression deepened, Hoover placed more emphasis on balancing the budget, which further decreased the supply of money –the Hawley-Smoot Tariff (1930) imposed high rates on manufactured goods, which contracted trade

25. The Economy Hits Bottom –in the spring of 1932, thousands of Americans faced starvation –people unable to pay rent established shantytowns they called “Hoovervilles” –people begged for food while agricultural prices dropped so low that farmers organized Farm Holiday movements –in the summer of 1932, twenty thousand World War I veterans marched on Washington to seek immediate payment of their war bonuses

26. –when Congress rejected their appeal, some refused to leave and established a camp on the Anacostia Flats –federal troops dispersed the Bonus Army –the unprecedented severity of the depression led some to propose radical economic and political changes

27. The Depression and Its Victims –the depression had a profound psychological impact on the American people –there were simply no jobs to be found –people who lost jobs at first searched for new ones; after a few months, however, they became apathetic –economic stress brought personal stress –power shifted within families; family size decreased –hopelessness and malnutrition contributed to the lack of political radicalism during the depression

28. The Election of 1932 –Democrats chose Franklin Delano Roosevelt of New York to challenge Hoover in 1932 –Roosevelt campaigned on optimism and grand, but unspecified, solutions to the nation’s economic woes –desperate for a change in style and substance, Americans rallied to Roosevelt's promises of a New Deal

29. –he proposed that the government take whatever steps were necessary to protect individual and public interests –Roosevelt won with an electoral margin of 472 to 59 –the last days of the Hoover administration and a “lame duck” Congress witnessed the nadir of the depression