1. Politics and Prosperity (1920- 1929)
Chapter 14
Politics and Prosperity ( )

2. A Republican Decade
As the 1920s began Americans feared the spread of Russian communism, one party control of people and land. Their fears encouraged a Red Scare, an intense fear of communism and other politically radical ideas. In a controversial case, two Italian immigrants, Sacco and Vanzetti, were tried and executed for the robbery and murder of a shoe factory guard. Many believe they were convicted only because they were immigrants with radical beliefs. The Supreme Court made two important rulings in the 1920s. Justice Oliver Wendell Holmes, Jr. stated that the government had the right to silence free speech when there is a “clear and present danger”. In the second ruling the Supreme Court held that the Fourteenth Amendment protected the right of free speech against restriction by state governments as well as the federal government. Labor unrest added to people’s fears, as many Americans thought Communists were behind strikes, riots, and bombings. Distrusting Democrats, people looked to Republicans. Republican President Warren G. Harding embraced the policy of isolationism, avoiding political alliances with foreign countries. Harding proposed disarmament, in which nations would voluntarily give up their weapons. Nativist feelings were strong in the 1920s and the government restricted immigration, placing a quota, or numerical limit, on certain ethnic groups. When Calvin Coolidge became President in 1923, he instituted a laissez-faire policy toward businesses. This helped fuel the 1920s economic boom.

3. Objective Questions
What events fueled the Red Scare of the early 1920s?
What conflicts led to the major labor strikes of 1919?
How did Republican leadership during the Harding and Coolidge presidencies shape the 1920s?
What issues influenced the presidential election of 1928?

4. The Red Scare
In 1920 many Americans are weary from World War I and feeling threatened by events in Europe.
Lenin’s Communists have taken control of Russia, and they announce their intention to spread communism throughout the world.

5. Labor Strike
These fears are heightened when workers in various industries strike, and bombs are sent to government officials. 
Although the strikes deal with national and regional issues, sensational newspaper stories promote the anti-radical, anti- immigrant aspects of the stories.
Americans are soon on the grip of a red scare, and many call for known communists to be jailed or driven out of the country.
Several Supreme Court decisions support legal action against the radicals and those who disagree with the US government.
The US Attorney General A. Mitchell Palmer leads a series of raids arresting thousands of suspected radicals, without evidence.
Many are deported. Fear of radical ideas and immigrants also fuels the conviction and ultimately results in the execution of Niccola Sacco and Bartholomew Vanzetti, two Italian immigrants accused of robbery and murder in 1920.

6. Republican Leadership
The red scare solidifies the power of the Republican Party for the entire decade, as Americans decide that the Republicans are more able to maintain stability then the Democrats.
Despite a return to isolationism by most Americans, Republican President Harding does continue limited international involvement by pursuing disarmament, and the US businesses also continue international trade.
At the same time, Harding supports limiting immigration and in 1921 Congress passes a law imposing immigration quotas on the number of people from certain ethnic groups or Nations.

7. The Harding Presidency
Strained and disturbed by major corruption scandals, Harding dies in office in 1923.
His Vice President, Calvin Coolidge, assumes office and keeps government involvement in American life absolutely minimal.

8. The Election of 1928
His successor in 1928, Herbert Hoover, continues the Republican domination of government.
His victory is a reflection of the rural-urban split in the United States, with the Protestant Hoover, who supports Prohibition, winning a strong victory over his opponent, Catholic Alfred Smith, who opposes Prohibition.

9. A Business Boom
Many features of modern American society were born in the 1920s. Fast- food chains and shopping centers appeared. Americans bought new appliances in record numbers, created a demand for more electrical energy. The 1920s created a consumer economy that depended on people spending large amounts. Businesses also introduced paying by installment plan, which allowed payment for items over a period of time. This encouraged consumers to spend more money and go into debt. Mass- media advertising also began in the 1920s, persuading people to buy more and more. Advertisers appealed to people’s emotions, promoting products by implying that they would enhance someone’s image or make someone socially acceptable. As consumers bought, productivity rose to meet the demand. The Gross National Product (GNP), which is the total value of goods and services a country produces annually, rose at an average of 6 percent per year. One sector of great growth was in the automobile industry, largely due to the efforts of Henry Ford. He wanted ordinary people to have cheap cars, so he adapted the assembly line, the process in which each worker does one special task to make it more efficient. Industrial growth soared for businesses such as oil and steel, and new businesses arose to meet the demands of auto travel. Some people and industries, however, did not profit from this economic boom. Unskilled laborers and migrant workers remained poor. The farm economy was slumping as Europe recovered from WWI and bought fewer American farm products. The coal and textile industries and the railroads suffered when markets dried up.

10. Objective Questions
What role do businesses and consumers play in a consumer economy?
How were Henry Ford and the automobile important to the 1920s?
In what ways did industrial growth affect the economy of the 1920s?
Why did the economic boom bypass some people and benefit others?

11. A Consumer Economy
Even with the political fears, the US economy is growing rapidly, mostly based on the developing consumer economy.
Increased spending leads to larger profits for businesses, which in turn push wages up.
Higher wages give people the confidences spend more.
Other factors that increase buying include new kinds of advertising, lower costs, widespread availability of credit, and new products.

12. Ford and the Automobile
One of these new products has an enormous impact on the economy.
Even though Henry Ford did not invent the automobile or the assembly line, his application of the assembly line to the production of automobiles makes him one of the most influential people of the twentieth century.
Ford also uses vertical consolidation to build his empire, and automobile making becomes the nation’s biggest single manufacturing industry in the 1920’s.

13. Industrial Growth
Not all Americans are part of this economic boom. Unskilled laborers, especially African Americans, remain poor.
Farmers, too, suffer from debt and low prices for their product.
Certain industries, especially cotton textile manufacturing and soft coal mining fail to develop new markets when the war ends.
Railroads also suffer from shrinking demand, mismanagement, competition from new trucking firms, and labor union demands.

14. Economy in the Late 1920s
Entering the late 1920s, the American economy appeared to be in good shape, and people were optimistic about the future. When Herbert Hoover became President in 1928, he sought to keep government out of business and promoted what he called “rugged individualism.” People were encouraged to make investments in businesses. As the economy stabilized, companies tried to meet labor’s demands through welfare capitalism. Employers began to pay better wages and provide benefits such as paid vacations and health plans. Welfare capitalism caused a decline in organized labor membership. However, the economy was not as stable as it seemed. There were warning signs that serious problems existed. There was an uneven distribution of wealth, and large companies dominated the economy. A small number of families held the bulk of the nation’s wealth, and tax policies benefited the wealthy. Many American bought on credit, increasing their personal debt. Others played the stock market, indulging in speculation, the practice of making high-risk investments in the hopes of getting a huge return. Some people invested by buying on margin, in which investors bought a stock for a fraction of its price and borrowed the rest. Overproduction caused problems, too there were too many goods, more than consumers could buy. Industry began to stagnate and decline. Farmers, factory workers, and coal miners were facing poverty and starvation. Clearly, the economy was in trouble.

15. Objective Questions
Why did the economy of the late 1920s appear healthy to most Americans/
What danger signs were present in the economy of the late 1920s?

16. The Economy in the Late 1920s
When President Herbert Hoover takes office in 1928, the economy appears healthy.
The stock market is booming, and businesses are offering Benefits such as paid vacations, health plans, recreation programs, and English classes for immigrants.

17. Economic Danger Signs
Prosperity is uneven, with the very wealthy and huge business making most of the money.
Most people make only the minimum standard of living, most have no savings.
Many are buying on credit and creating personal debt.
Stocks are also bought on credit, which encourages speculation.
In addition, rising productivity creates overproduction.
By the late 1920’s warehouses are overstocked, and the people cannot afford to buy goods as fast as the assembly lines are making them.
There are clear signals of trouble in the economy.