AMERICAN POLITICS AND THE ECONOMY DURING THE 1920’s A RETURN TO "NORMALCY": AMERICAN POLITICS AND THE ECONOMY DURING THE 1920’s
TIMELINE OF TWENTIES POLITICS AND NOTEWORTHY EVENTS
THE POLITICS OF THE 1920’s Republicans enjoyed complete control of the Presidency, as well as majorities in both houses from 1921 to 1933. Controlling Congress gave them the ability to halt further progressive reform legislation and focus on establishing a friendly relationship with big business. This relationship between government and big business would prove to be the undoing not only of the Republicans, but of the American economy as well. Democrats were divided throughout the twenties, and were content to use that time to lay the groundwork for the future by winning over millions of new voters, especially ethnic groups in large cities.
THE REPUBLICAN CRUSADE TO LOWER THE NATIONAL DEBT WHILE CUTTING TAXES… Harding, Coolidge, and Hoover all reduced the national debt by cutting spending on government programs. They increased tariffs to protect U.S. manufacturing from foreign competition. They also cut taxes for the wealthy, arguing it would help create incentives for the rich to invest more, which would create more jobs, more products, and more wealth for everyone. And the Federal Reserve Board kept interest rates low so that those who weren’t wealthy could borrow money to invest. Warren Harding Calvin Coolidge Herbert Hoover
HELPING OUT THE RICH These tactics seemed to work. Businesses became more productive by using new techniques that made workers and machinery more efficient. Chemical processes, for example, tripled the amount of gasoline that could be extracted from crude oil. Advances in electricity transmission sped development of larger manufacturing plants. U.S. manufacturing output rose 60 percent in the 1920s. And greater efficiency and productivity naturally translated to more profit for business owners.
Developing Industry Several factors shaped the development of American industry in the 1920s: New technologies and innovations were applied to existing industrial practices More patents were issued for new inventions in the 1920s than in any previous decade (421,000). Industry began the switch from coal powered machinery to electricity. Industries began using the mass production techniques pioneered by Henry Ford.
Innovation Changes Everything The automobile industry now dominated the U.S. economy. Other industries such as processed foods, household appliances, office machinery and chemical production also increased dramatically. All of this led to the rise of the corporation. Only giant corporations had the money to pay for mass production and innovation, but that had its problems too.
Industry Evolves As production grew more efficient thanks to innovation and technology, about a million jobs were lost in manufacturing, coal mining and railroads. To that end the ranks of white collar workers increased eighty percent by 1930. Women began to move into the workforce and by the end of the decade, held the majority of clerical positions in the U.S. All of these changes show a nation that had begun to evolve from an industrial economy based on manual labor to a postindustrial one based on sales and service.
Prohibition and It’s Effects One of the great myths of the twenties is that the nation was immediately inundated by a torrent of illegal beer and booze. In reality, during the early years of Prohibition, the amount of liquor consumed actually decreased substantially. From 1911 to 1914 the average amount was 1.69 gallons per head. Under wartime restrictions, consumption dropped to 0.97 gallons in 1918 and 1919.
Prohibition’s Early Years At the outset of Prohibition in 1921 and 1922, there was a further decrease to 0.73 gallons. Prohibition was not immensely unpopular either. Polls taken revealed that Americans felt it necessary. For Enforcement 356,193 38.6 percent For Modification 376,334 40.8 percent For Repeal 189,856 20.6 percent
Prohibition’s Setbacks Speakeasies began to pop up in every city and on almost every street corner. Many of them sold near beer, or, in many cases, hard liquor to their eager consumers. Champagne sold for $25 a quart, cocktails were a dollar and prostitutes time was easily bought at many of the clubs, especially in New York City. Jane Addams noted that, “Speakeasies opened, families broke up, children hero-worshipped the petty gangsters and bootleggers, and drunks began appearing with regularity in the once orderly streets.”
Setbacks, cont. Federal judges ruled that whiskey could be sold for medicinal purposes and that physicians could issue prescriptions to that end. Before Prohibition ended, an average of 10 million such prescriptions were issued each year. Some doctors did a brisk business by selling books of prescription blanks outright. Congress declined to make the purchase of alcoholic beverages a crime and five states refused to enforce the Volstead Act (Maryland, Montana, Nevada, New York, and Wisconsin).
Give Me A “Near” Beer! Near beer was the equivalent of a non-alcoholic brew today. However, there were ways to “spike” a near beer, none of which were conducive to good health. You could spike it with wood alcohol, or drop a cake of yeast into the cask at the speakeasy and allow it to ferment upon arrival. However this had disastrous consequences: A Chicago city chemist spilled some in his laboratory sink and it ate away the enamel. Twelve people in the Red Hook section of Brooklyn died from drinking whiskey made from wood alcohol.
Prohibition’s “Successes'”: Izzy Einstein and Moe Smith Using various disguises to infiltrate illegal liquor establishments, and their trademark, “There’s sad news here. You’re under arrest,” they made daring arrests of those who dared to go against Prohibition. Over five years, Izzy and Moe confiscated five million bottles of booze worth $15 million, and broke up hundreds of illicit stills and breweries. They made 4,392 arrests and that resulted in a 95% conviction rate.
“My God, This Is a Hell of a Job!” The Troubled Presidency of Warren G. Harding
THE HARDING PRESIDENCY Harding made some good choices as President appointing Herbert Hoover as commerce secretary and Charles Evans Hughes as Secretary of State. He had been a dark-horse contender for the presidency in the election, and his only responsibility if elected was to pass anything that the Republican-controlled Congress sent his way. However, it can never be just that simple.
The Veteran’s Bureau The President, and Mrs. Harding were determined to do something about the mentally and physically scarred veterans that the Great War (World War I) had created. No preparations had been made to treat the thousands of wounded and disabled veterans and they were instead shuttled away to poorhouses, insane asylums, and other private institutions away from the public eye. So Harding created the Veterans bureau out of a half dozen other overlapping agencies and gave it a budget of a half a billion dollars, over one fifth of all government expenditures. After speaking with him, Harding appointed the slick, fast-talking Charlie Forbes to head the Veterans Bureau. Harding believed he had picked the right man for the job.
Veteran’s Bureau Cont. What Forbes actually did with the bureau was “solicit” loans from companies bidding for contracts to build hospitals, took rake-offs on these contracts and emptied vast government warehouses of medical equipment and supplies which he sold to private contractors at a fraction of their cost. In all, Forbes disposed of medical supplies worth approximately $7 million dollars for only $600,000. Meanwhile, disabled veterans lacked bandages, bedding and drugs.
Forbes’ End Forbes was allowed to flee to Europe, where he submitted his resignation from the Veterans Bureau to President Harding. It was the only scandal to break while the President was still alive, but others were on the horizon.
THE TEAPOT DOME SCANDAL Harding made the mistake of appointing two very corrupt men to his cabinet. The two men in question were Attorney General Harry Daugherty, and Secretary of the Interior Albert B. Fall. Daugherty would become embroiled in a series of scandals that would force his ultimate resignation. Fall, on the other hand, would bring the trustworthiness of the entire administration under question with his actions.
TEAPOT DOME, CONT. Fall was the chief figure in the Teapot Dome scandal. Fall managed to convince Harding that there was a drainage problem in the reserves. Oil was leaking into the private holdings surrounding them, so the oil ought to be used up before it disappeared. Fall even got the Secretary of the Navy to hand over control of the reserves so that his department could handle the “leakage” problem. Fall turned drilling rights over to Edward Doheny and Pan-American Petroleum and Transport Company for a payment of $100,000. Doheny joking said, “I would consider it bad luck if we got any less than $100 million out of this deal.”
Fall’s End Fall turned the drilling rights to the Teapot Dome reserve over to Harry Sinclair and received $233,000 in Liberty Bonds and $70,000 in cash. Thus, in exchange for roughly $400,000 in bonds and cash, Fall had disposed of navy petroleum reserves estimated at the time to be worth several hundred million dollars. Fall would remain in the cabinet until March 1923, when he finally submitted his resignation. He would later serve one year in jail. Elk Hills was sold to the Occidental Petroleum Corporation for $3.63 billion in 1997 (New York Times, October 7, 1997.)
FALLOUT OF THE SCANDAL Just before the scandal broke in 1923, Harding set out to the West Coast on a speaking tour across the U.S. While in Seattle he suffered an attack of food poisoning, recovered briefly, and then died of a heart attack in a San Francisco hotel a few days later. The Teapot Dome scandal broke a few months after his death, allowing Harding to escape prosecution. However, there were some things he just couldn’t escape, even in death.
HARDING’S HARLOT: NAN BRITTON In 1927, four years after his untimely demise, an Ohio woman named Nan Britton published a sensational book detailing the numerous sexual encounters she and Harding had in the White House. She even boasted that he was the father of their daughter. A love child no doubt conceived on one of their many romps in Washington. To strengthen her case, Harding’s love letters to another man’s wife also surfaced around the same time as the book was published.
Keeping Cool With Coolidge The scandals that damaged Harding’s administration did not affect his party. His successor, Calvin Coolidge, restored public faith in the Presidency. Under Coolidge the Federal government expenditures dropped from $6.4 billion in 1920 to approximately $3.1 billion by 1924.
“It’s All About the Money, Money, Money”: The Rise of Easy Credit and Mass-Market Advertising
INCREASING AMERICAN SPENDING HABITS The 1920s saw the rise of two elements that are still both banes and blessings to the American consumer: advertising and installment buying. Advertising, spurred by the development of national media, such as radio and popular magazines, had become a $1.25 billion-a- year industry by 1925.
SPENDING MONEY = GOOD TIMES…RIGHT? In addition, the idea of buying on time, paying a little each week or each month, plus interest, became more and more popular. Between 1920 and 1929, installment buying increased 500 percent. By 1929, more than 60 percent of American cars, large appliances, and pianos were being purchased on installments.
LET’S GO SHOPPING WITH ALL THAT CREDIT! The drive to sell government bonds during World War I made the average American more confident in buying securities like stocks and more willing to invest money rather than save it. The increased availability of capital enabled industries and retailers to expand, which in some cases meant lower prices. The A&P grew from 4,621 stores to more than 15,000. By 1929, retailer JC Penney had a store in every major city from coast to coast. The last one opened two weeks before the stock market crashed.
PSEUDO-PROSPERITY (WHAT A BUMMER) Below the veneer of prosperity, there were indications of trouble. More and more wealth was being concentrated in fewer and fewer hands, and government did far more for the rich than the poor. It was estimated, for example, that federal tax cuts saved the hugely wealthy financier Andrew Mellon (who also happened to be Hoover’s treasury secretary) almost as much money as was saved by all the taxpayers in the entire state of Nebraska.
Overproducing, Yet Underpaid: Farmers and Farming in the 1920s
FARMING IS FOR CHUMPS! Probably worst off were American farmers. They had expanded production during World War I, because of the Food Administration’s (headed by Herbert Hoover) mandate to feed the troops, and when demand and prices faded after the war, they were hit hard. Farm income dropped by 50 percent during the 1920s, and more than 3 million farmers left their farms for towns and cities.
NOT SO “COOL” IDGE WITH THE FARMERS The affection Republican administrations felt for business did not extend to agriculture. Coolidge twice vetoed bills that would have created government guaranteed minimum prices for some farm goods, and idea called “parity.” “Farmers have never made money,” he explained, “I don’t believe we can do much about it.”
From Coolidge to Hoover Republicans nominated Herbert Hoover for President in 1928 after Coolidge unexpectedly backed out. He polled 58.2% of the popular vote and carried forty states, soundly defeating Democratic nominee Al Smith. It was the Republicans largest electoral victory of the decade, but success was short lived.
THE WORST ECONOMIC DISASTER IN AMERICAN HISTORY Despite the troubles of farmers, the economy continued to hum along throughout the 1920s. On October 16, 1929 Yale economics professor Irving Fisher stated that, “Stock prices have reached what looks like a permanently high plateau.” Eight days later, the plateau collapsed. An overinflated stock market crashed, costing investors $15 billion in a week. America was plunged into an economic mess the likes of which it had never seen before.