THE NEW ERA: 1921-1933

1. THE NEW ERA: 1921-1933 CHAPTER 25 (668-689)

2. HARDING AND “NORMALCY” Warren G. Harding was a compromise candidate: the Republican party could not decide between General Leonard Wood, a Roosevelt progressive and Frank Lowden, Governor of Illinois He was a newspaperman and had been in the Ohio legislature and its Lt. Governor

3. HARDING AND “NORMALCY” Indecisive and unwilling to offend, he allowed his department heads to make policy He also gave some of his cronies jobs – men who were not necessarily of good character Harding was miserable as the president finding no relief from the pressure – he likened it to a prison

5. “THE BUSINESS OF THE UNITES STATES IS BUSINESS” Andrew Mellon, Secretary of the Treasury was determined to reduce the national debt, reduce taxes on the rich, raise tariffs, and return to the laissez-faire policies of McKinley Most of Mellon’s proposals were cut back by southern Democrats and mid-western Republicans – however he was able to balance the budget and reduce the deficit by an average of $500 million per year Harding and Coolidge used their appointing powers to turn the ICC and the Federal Reserve into pro-business entities, reversing many of the Progressive Era reforms

6. THE HARDING SCANDALS Harding appointed several corrupt officials Harry M. Daugherty – Attorney General – accused of the fraudulent return of German assets Charles R. Forbes – head of the Veterans Bureau – siphoned millions of dollars out of hospital funds Albert B. Fall – Secretary of the Interior – leased oil reserve lands to private oil companies Harding allowed bootleg whiskey to be given to guests after dinner parties at the White House Harding died of heart failure in San Francisco during a trip to Alaska (He was the first President to visit) – his personal physician and friend was incompetent and diagnosed him with ptomaine poisoning – he actually died of a heart attack – rumors swirled that he killed himself or that his wife poisoned him

7. COOLIDGE PROSPERITY Vice President Calvin Coolidge took office after Harding died Coolidge was a conservative and cleaned up Harding’s corrupt appointments He was devoted to laissez-faire policies Coolidge was easily re-elected in 1924 – complacency was the order of the day – “Mr. Coolidge’s genius for inactivity is developed to a very high point”

9. PEACE WITHOUT A SWORD Both Harding and Coolidge handled foreign affairs as they did domestic ones: they relied heavily on their Secretary of State to make policy After the war, many Americans wished to return to isolationism in order to prevent another war – but America had economic interests all over the world - it needed raw materials and markets

10. PEACE WITHOUT A SWORD The Open Door policy remained in effect The State Department worked to open opportunities in underdeveloped countries Meanwhile, Japan was growing in influence in China, threatening Open Door Japan, Britain and the US were in the midst of a naval arms race

11. PEACE WITHOUT A SWORD Washington Conference – Nov 1921-Feb 1922 5 Power Treaty – US, GB, France, Italy, and Japan agree to limit their capital ships to a fixed ratio to produce a balance of power 4 Power Treaty – US, GB, France, Japan – agreed to respect each other’s interests in the Pacific Islands 9 Power Treaty – all parties would respect the independence of China and Open Door These treaties were mostly toothless – the shipping ratio gave Japan the balance of power – Japan did not relinquish its Chinese territorial claims in China – The Japanese became more antagonistic towards the US, beginning to believe that war was inevitable

12. THE PEACE MOVEMENT Americans wanted peace but would not build the defenses to ensure it Peace societies flourished – Carnegie Endowment for International Peace – Woodrow Wilson Foundation The US refused membership in the World Court Kellogg-Briand Pact of 1928 – France wanted to collect allies against a resurgent Germany – they would agree never to go to war against each other – Kellogg had it broadened to all nations – in Paris 15 nations signed – it was a worthless gesture but many Americans felt good about it

13. THE GOOD NEIGHBOR POLICY President Herbert Hoover reversed Wilson’s policy of trying to teach the Latin American nations how to operate He removed intervention from the Roosevelt Corollary and abrogated the Platt Amendment to the Cuban constitution Self-preservation would be the only reason for intervention n the future Marines in Nicaragua, Haiti, and the Dominican Republic would all be withdrawn by 1934 The “Good” part of the Good Neighbor policy never really materialized, however – resentment against America was high

14. THE TOTALITARIAN CHALLENGE In 1931, Japan marched an army into Manchuria and made it a puppet state called Manchukuo This violated both the Kellogg-Briand and Nine Power Treaty Chiang Kai-shek appealed to both the League of Nations and the US – neither could help In 1932 Japan attacked Shanghai, was condemned by the League of Nations and promptly withdrew from it and extended their control over China The lesson was not lost on Adolf Hitler, now chancellor of Germany…

17. WAR DEBTS AND REPARATIONS The great democracies were fighting over war debts – German debts to the Allies and Allied debts to the United States The Allies owed the US $22 billion to be paid over 62 years but they could not afford it – much of the money had been spent on weapons rather than factories – so they pushed as much as possible into Germany - $33 billion – When Germany defaulted, so did the Allies

18. WAR DEBTS AND REPARATIONS All sides were at fault Germany allowed runaway inflation that put the mark at 1 trillionth of its prewar value The Americans refused to see the connection between high tariffs and the debt The Allies made little effort to pay any of their obligations The Dawes Plan (1924) The US loaned Germany $200 million to stabilize the economy – then Germany would play $250 million per year – in 1929 the payments were scaled down even further Soon the US stopped loaning money, the Great Depression struck (in large part due to the war debts) and Germany defaulted on its payments, the Allies stopped even attempting to pay anything After 1933, the only thing left was mistrust and hostility

20. THE ELECTION OF 1928 Coolidge decided not to run again and Herbert Hoover received the nomination Hoover had never been in elective office before He was a modernist – businesses should cooperate with each other and labor He opposed union busting and trust busting He supported prohibition Hoover easily won 444-87 However, a political change was sweeping the nation – many working class voters in the cities became Democrats

22. ECONOMIC PROBLEMS Not every industry was sharing in the prosperity Coal was down – competing with petroleum Textiles were down – competing with new synthetics Industries resumed a trend toward consolidation by 1929 200 companies owned half the nation’s corporate assets GM, Ford and Chrysler made 90% of American cars and trucks 4 tobacco companies produces 90% of cigarettes

23. ECONOMIC PROBLEMS The weakest part of the economy was agriculture Prices slumped and costs increased Farmers faced high tariffs and quotas Harding opposed direct aid to agriculture The prosperity of America rested on unstable foundations

24. THE STOCK MARKET CRASH OF 1929 In late 1928, prices on the New York Stock Exchange were at an all time high and continued to rise In early 1929, they continued and many people entered the market as speculators In September, the market began to fall, On Oct 24, major sell off began On Oct 29, the bottom dropped out and prices plummeted

26. HOOVER AND THE DEPRESSION Stocks rallied later that year but in the spring of 1930, they fell even more sharply Several key issues: The default of WWI war debts by Germany and the Allies Poor distribution of wealth – too much money in too few hands – people could not afford to buy the goods being produced Too easy credit policies of the Federal Reserve Mellon’s tax structure which favored the rich

27. HOOVER AND THE DEPRESSION Unable to sell products, manufacturers closed plants and laid off workers – making the problem worse – demand fell even further 5000 banks closed between 1930 and 1933 Millions of depositors lost what little they had Unemployment rose to 13 million from 1 million (23%)!!!!!!!! The national income fell from $80 billion to $50 billion

28. HOOVER AND THE DEPRESSION Secretary of the Treasury Mellon advised Hoover to allow the crash to run its course – “people will work harder, live a m ore moral life. Values will be adjusted and enterprising people will pick up the wrecks from less competent people.” – Hoover disagreed Hoover’s plans required a great deal of cooperation between businesses and citizens and relied on their good will and ability to help – without legal compulsion

29. HOOVER AND THE DEPRESSION Hoover refused to allow crop or acreage controls He refused to shift responsibility from states to federal agencies He refused – on Constitutional grounds – to allow federal funds to be used for individual relief – state, city, and private groups must take care of the needy As the depression worsened, breadlines lengthened, and millions continued to be out of work, the public grew increasingly resentful

30. HOOVER AND THE DEPRESSION Almost everyone at the time believed that a balanced budget was essential to recovery: Economists, business leaders, labor leaders, even socialists – this only took more money out of the economy Hoover signed the Hawley-Smoot Tariff Act in 1930, raising duties on manufactured goods to very high levels, which affected Europe tremendously – they could not earn the money they needed to pay their war debts and went onto their own depression Hoover was ultimately unable to be flexible and change when desired results were not obtained – something the next president had no problem with doing

32. THE ECONOMY HITS BOTTOM In the spring of 1932 thousands faced starvation About ¼ of the unemployed were getting any public aid Many people were evicted from their homes and gathered in shanty towns fondly called “Hoovervilles” Tramps and Hobos roamed the countryside looking for food and work Nebraska farmers organized a “farm holiday” – basically a boycott where they refused to ship their crops to market

33. THE ECONOMY HITS BOTTOM Immigration agents began rounding up Mexican-Americans and deporting them – many were legal Summer 1932 20,000 WWI vets marched on Washington (the Bonus Army) demanding payment of their compensation – when they were rejected, 2000 refused to leave and were chased away by tanks and tear gas Changes needed to be made, just few knew what to do

35. THE DEPRESSION AND ITS VICTIMS Depression described the economic situation and soon described the psychological situation as well Many simply gave up trying to work, many became ashamed of themselves, and were driven to drink Food consumption went down and people became listless due to lack of vitamins and proteins Birthrates dropped Children suffered – lack of attention, lack of food, lack of clothing

36. THE ELECTION OF 1932 The Depression, coming after 12 years of Republican rule, ensured that a Democrat would be elected – Hoover’s attitude didn’t do him any favors either Democrats chose New York governor Franklin D. Roosevelt – a distant relative of TR New York led the nation in providing relief for the needy, enacted a program of old-age pensions, unemployment insurance, conservation and public power projects – exactly what many wanted on a national scale

37. THE ELECTION OF 1932 Roosevelt was crippled by Polio in 1921 – he could only walk a few steps with the help of braces and 2 canes He was a liberal Democrat, known for his hard work and geniality Despite his handicap, Roosevelt was an energetic campaigner, traveling across the country radiating confidence and good humor Roosevelt believed that there must be a “re-appraisal of values” a “New Deal” and he was willing to try anything to make it happen – the government should do whatever was necessary to protect the unfortunate and advance the public good

38. THE ELECTION OF 1932 Roosevelt’s approach was very different than Hoover’s – Hoover refused to change, sticking to what he thought was right even when it wasn’t working – and Roosevelt easily won the White House 472-59 During the interval between the election and taking office, the Depression continued but neither Congress, Hoover or Roosevelt could do anything – the nation drifted aimlessly