The Politics of the 1920s

II. Politics of the 1920s

A. Overview of the Era

  • The 1920s is characterized by a shift in American society and politics, often noted for its emphasis on business and commerce.
  • The statement "A return to normalcy" epitomizes the national sentiment following the hardships of World War I.
  • A significant focus on merchandising and consumerism marked the decade.

B. Economic Landscape

1. Business Reigns Supreme

  • Bullish Stock Market: The stock market showed strong performance, encouraging speculation.
  • Buying on Margin: Investors would borrow money to purchase stocks, significantly increasing risk.
  • Local Banks: They invested heavily in the stock market, exposing themselves to potential failures.
  • Corporate Dishonesty: Companies often misrepresented their profits to attract more investments.
  • Lack of Regulation: There was minimal government oversight, contributing to financial irresponsibility.
  • High Consumption: Consumer spending flourished due to tax cuts for the wealthy.

C. Warren G. Harding Administration

1. Business-First Policies

  • Tariffs: Harding's government raised tariffs, particularly through the Fordney-McCumber Tariff, to protect American businesses.
  • Consequences: Such tariffs negatively impacted European economies striving to recover post-WWI and hurt American middle-class consumers by raising prices.

2. Corruption and Scandals

  • Attorney General Daugherty: Accused of mishandling seized German assets during the post-war settlement.
  • Veterans Bureau Scandal: Mismanagement and corruption within the bureau.
  • Teapot Dome Scandal: Secretary of the Interior Albert Fall was implicated in corruption involving oil reserve leases. He took bribes in exchange for transferring oil reserves to his department.
  • Comparison to Previous Eras: These instances marked a regression to the corruption seen during the Gilded Age.

3. Foreign Policy Goals

  • Isolationism: Harding focused on limiting engagement unless beneficial to business interests.
  • Arms Reduction: Aimed to lessen military expenditures and proposed a ten-year hiatus on battleship construction.
  • 9 Power Treaty: Resulted from the Washington Conference of 1922, establishing ratios for naval strength among the U.S., UK, and Japan (5:5:3 ratio).

D. Calvin Coolidge Administration

1. “Silent Cal”

  • Coolidge believed that “4/5 of our troubles would disappear if we would sit down and keep still,” advocating minimal government intervention.
  • His administration continued the precedent set during Harding’s terms, frequently supporting business interests.
  • The approach to governance was likened to a contrasting depiction of New England charm versus the chaotic environment of a speakeasy.

2. Coolidge's Business Practices

  • Herbert Hoover's Role: As Secretary of Commerce, Hoover promoted associationalism, encouraging collaboration between businesses.
  • Trade Associations: Companies would standardize production, share information, and set prices collaboratively, reminiscent of patterns in the Gilded Age.

3. Challenges for Farmers

  • Post-war New Technology adversely affected farmers, leading to excessive production and plummeting prices.
  • Farmers took loans during the war for expansion, but demand contracted afterward, leading to economic distress.
  • The 1920s were not prosperous for farmers, as they lost social status amidst urbanization trends.
  • Alliance Formation: Farmers sought to coordinate efforts through organizations such as the American Farm Bureau and Farmers Union to collectively manage production and pricing.

4. Coolidge's Foreign Policy

  • Emphasized continued isolationism, reflecting a hesitance to engage in foreign conflicts.
  • Kellogg-Briand Pact: An international agreement declaring war as an instrument of national policy, denoting a desire for peace.
  • Dawes Plan (1924): An initiative to stabilize the German economy by restructuring reparations payments, benefitting U.S. economic interests through increased trade.

E. Herbert Hoover Administration

1. The 1928 Election

  • Candidates: The Republican Herbert Hoover versus Democrat Al Smith, who was perceived as a less traditional candidate due to his background.
  • Role of Media: The radio played a significant role in campaigning, establishing direct communication with voters.
  • Hoovercrats: A term for those who supported Hoover amidst rising concerns.

2. The Stock Market Crash of 1929

  • Speculative practices, particularly buying on margin, precipitated the market crash.
  • Lack of regulatory oversight in banking and business contributed to the financial collapse.
  • Middle class individuals faced a credit crisis, leading to diminished consumption capabilities.
  • Crash Date: Notably occurred on October 29, 1929, a date that would mark the onset of the Great Depression.
  • Panic Selling: High volumes of panic selling were observed, largely fueled by farmers, who felt the impact of overproduction and international trade barriers from tariffs.

3. Societal Impact of the Depression

  • Families experienced fragmentation due to economic stress, leading to fewer children as economic viability decreased.
  • Self-blame became common, with individuals feeling responsible for their plight.
  • Riding the Rails: A term used to describe migration patterns as families searched for work.

4. Escalation of Unemployment

  • Unemployment rates soared between 25% to 33%, creating an economic downward spiral.
  • Significant factory layoffs, particularly affecting minority populations who were already marginalized in the workforce.

5. Hooverville / Shantytown Development

  • Context: The emergence of shantytowns, termed "Hoovervilles" named after President Hoover, symbolized public frustration toward government inaction.
  • Contributing factors to agricultural distress: Drought, poor farming practices, and soil erosion led to migration known as "Okies."

6. Hoover's Initial Response

  • Characterized by a belief that the depression was merely a “crisis of confidence,” leading him to initiate self-help efforts.
  • Hawley-Smoot Tariff (1930): This tariff raised rates to an unprecedented 60%, worsening the economic response.
  • Volunteerism: Hoover encouraged businesses to maintain wages to lessen layoffs, but this was largely ineffective.
  • Federal Farm Board: Implemented to provide financial aid to farmers.
  • Large Infrastructure Projects: The Muscle Shoals Bill aimed to build a dam in Tennessee, generating jobs and providing cheaper electricity.

7. The Worsening of the Economic Situation

  • Protests and discontent among farmers led to more radical demands for government intervention.
  • Notable event: The Bonus Army in 1932, where veterans demanded government assistance during the economic crisis.

8. Hoover's Shift Toward Intervention

  • As a response to political pressures and worsening conditions, Hoover began to advocate for more governmental involvement in the economy.
  • Reconstruction Finance Corporation (1932): Established to provide loans to critical industries such as railroads and banks.
  • Emergency Relief Construction Act (1932): Fed revenues allocated for job creation and immediate assistance to states.
  • Norris-LaGuardia Act: Legislation that prohibited the use of yellow-dog contracts, recognized the right to strike, and limited injunctions against striking workers.

Economic and Political Causes of the Great Depression

A. Economic Causes

  • Agricultural overproduction led to decreased prices for crops.
  • A widening gap between the richness of the affluent and the poverty of the working class.
  • The stock market crash, significantly influenced by rampant speculative activities like buying stocks on margin.

B. Political Causes

  • Hoover's adherence to a hands-off policy towards business impeded effective government action.
  • A lack of regulations further enabled economic exploitation and distress.

C. Economic Effects of the Depression

  • Deflation heavily impacted the economy, leading to a deflationary spiral.
  • Unemployment rates surged to approximately 25%.
  • Sharp declines in production across various industries eventuated.

D. Foreign Affairs Impact

  • The rise of Adolf Hitler in Germany has interrelations with hyperinflation resulting from the economic turmoil.
  • The departure from previous governance practices led to Franklin D. Roosevelt's election in 1932, initiating a significant expansion of the government's role in the economy through New Deal programs.