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The New Era: 1921-1932
Presidents during this period were Warren G. Harding (elected 1920) who died in 1923 and was replaced by Calvin Coolidge. Calvin Coolidge went on to win on his own in 1924. In 1928 Herbert Hoover won. He was replaced by Democrat Franklin Roosevelt in 1932. But, you'll get to learn more about Hoover and Franklin Roosevelt in a little while.
Normalcy was a word coined by Calvin Coolidge (i.e., the people wanted to return to normalcy.) Since the correct word is "normality" Coolidge has given history writers an opportunity to mock him, just as the reporters of the 1990's mocked potatoe head, Dan Quayle. Senator Henry Cabot Lodge, a supporter, noted that Woodrow Wilson had been great with the English language but seldom said anything meaningful. Harding won the Republican nomination when convention could not settle on Teddy's progressive General Leonard Wood or Illinois governor Frank Lowden. In the election he beat James Cox, the Democrat's nominee. He created a cabinet that included Charles Evans Hughes (Secretary of State), Herbert Hoover (Commerce Department), Andrew Mellon (Treasury) and Henry C. Wallace (Agriculture). Like Bill Clinton, and other presidents, he also assigned key positions to his pals, the "Ohio Gang", who would do their best to steal as much taxpayer money as possible. Some of these crooks were caught. In those days there were not as many legal ways for big money to find its way into politician pockets. The power buyers could not legally "donate" to campaign funds. They needed to resort to black bags crammed with money.
The Ohio Gang was headed by Harry M. Daugherty (Attorney General) and included Albert B. Fall (Secretary of the Interior), Ed Scobey (Director of the Mint), and Charels R. Forbes (Veteran's Bureau). Harding later came to complain "The White House is a prison," but some of his pals actually got to prison. "Regulating" Business under Harding in 1920 was just like the regulation of business in the 1990's. Secretary of the Treasury Mellon was a multimillionaire and "master of the aluminum industry" who lowered the taxes on the rich -- while opposing lowering taxes on anyone making less than $66,000, increased prices for consumers — by raising tariffs. He also reduced the government's spending and balanced the budget, always a nice thing to do, especially when the government is providing very limited checks and balances on the powerful. To make sure he and his wealthy friends could hold onto their cash till the grave he proposed eliminating all inheritance taxes. Mellon's proposals did not win the day. But changes were made in government, with the Budget and Accounting Act (1921), The Revenue Act of 1921 which cut the top income tax rate from 73% to 59%. The Fordney-McCumber Tariff of 1922 placed heavy duty on Agricultural products (a sellout to the farm bloc) and protective duties for "infant industries," another sell out to business interests. Harding's men were willing to screw average Americans, like the veterans who asked for a bonus. The veterans said that they had worked in the army for a pittance while others — who stayed home — made lots of money. The argument carried no weight with the President. It may be that future president Bill Clinton, a student of history, knew this and it helped him rationalize his avoidance of the draft during the Vietnam War. Harding and Coolidge turned watchdog agencies like the ICC and FTC into probusiness agencies, just as they were in the 1990's. The Harding Scandals involved petty money taken illegally, when compared to the large amounts of taxpayer monies legally sought by Mellon. Jesse Smith was an influence peddler who was a pal of James Daugherty. Today influence peddling is a mature industry in State and the National Government, with lawyer-lobbyists earning huge sums of money — legally. In Harding's days it was seen for what it was and — when caught — Jesse Smith committed suicide. Charles R. Forbes figured out how to put taxpayer money, intended to build hospitals, directly into his own pockets. He fled to Europe to avoid prosecution but eventually returned and was sent to prison — or two years. Stealing from the American taxpayers then — as always — has never been a very weighty crime. Charles F. Cramer, an assistant to Forbes, committed suicide. Daugherty was implicated in fraudulently returning German assets and escaped prison by pleading the Fifth. (Today's sophisticated politicians often plead "I just don't remember.") Thomas W. Miller, the alien property custodian, took a bribe and went to jail. Secretary of the Interior Albert F. Fall arranged with Secretary of the Navy, Edwin Denby, to transfer naval oil reserves to the Interior Department, where Fall leased them out. He leased California's Elk Hill Reserve to Edward L. Doheny's Pan American Petroleum Company. He also leased Wyoming's Teapot Dome reserve to Harry F. Sinclair's Mammoth Oil Company. In return, Fall got a little black bag with $100,000, a loan from Doheny. He also got $300,000 in cash and negotiable securities from Harry Sinclair. Word leaked out. The Senate investigated, led by Wyoming's Senator Thomas J. Walsh. There was no conviction, although Fall did go to jail for contempt of the Senate, for 9 months, and required to pay back 25% of his bribes. Harding went to Alaska, got sick, was diagnosed with ptomaine poisoning and died August 2, realizing that he had been betrayed by his "Goddamn friends." Coolidge Prosperity reigned. Coolidge replaced the petty crook politician Daugherty with Harlan Fiske Stone, a lawyer and kept Mellon on as Treasury Secretary. Coolidge said things like "The man who builds a factory builds a temple," for which Garraty mocks him. Coolidge won against John W. Davis, who the democrats picked of pro Klan William G. McAdoo (Wilson's Treasury Secretary) and Alfred E. Smith (Catholic governor of NYC). Robert M. Follette also ran as a new progressive advocating the nationalization of public railroads, direct election of the president, and labor's right to collective bargaining. Peace Without a Sword was achieved by Secretary of State Charles Evans Hughes. Coolidge and Harding left Hughes alone. They did not meddle with him. American's, after seeing love ones who died in the Great War, and -- after listening to politicians lies about "the war to end all wars" -- were in an isolationist mood. Hughes did manage to spearhead the Five Power Treaty (US, GB, Fr, It, Ja) to stop building battleships and maintain a fixed ratio of their fleets. The Four Power Treaty (US, GB, Fr, Ja) committed each to respect each others pacific territories.
The Nine Power Treaty agreed to maintain America's open door policy and respect China's neutrality. The treaties were toothless and had lots of problems (no limits on other forces, types of other ships to be built, ceded Japan pacific power). America continued to grossly discriminate against the Japanese, by allowing only 100 immigrants a year. The Peace Movement was alive and well in America in the 1920's, a reaction to the lies of Woodrow Wilson and other war minded politicians responsible for The War to End All Wars, including the Women's International League for Peace and Freedom. Edward Bok, retired editor of the Ladies Home Journal offered $100,000 for the best essay on promoting peace by a system of justice. Franklin Delano Roosevelt tried for the prize, writing, "We seek not to become involved as a nation in the purely regional affairs of groups of other nations." FDR would later take America into World War II.
In 1928 the Kellogg-Briand Pact was signed. Kellogg was America's Secretary of State. He did not like French Foreign Minister Aristide Briand's initial suggestion that only France and the USA sign a treaty that they never would go to war against each other. Kellogg wanted the treaty expanded to include all nations. It was.
UNDER CONSTRUCTION
The Good Neighbor Policy
"Yankeephobia"
Dwight W. Morrow, Coolidge's sympathetic ambassador to Mexico
Herbert Hoover's Undersecretary of State, J. Reuben Clark disassociated from the right to intervene, unless self preservation was involved.
The Platt Amendment to the Cuban Constitution was abrogated, ending America's right to intervene in Cuba.
The Totalitarian Challenge
In September 1931 Japan went from dominating Manchuria to occupying it as a puppet state, Manchuko.
Henry L. Stimson, Hoover's Secretary of State, wrote his doctrine that "the USA would never recognize the legality of seizures made in violation of American treaty rights.
Japan attacked Shanghai in January 1932.
Adolf Hitler became chancellor of Germany on January 30, 1933.
War Debts and Reparations
European politicians were deadbeats. They had borrowed money from American taxpayers during the Great War. They didn't pay it back. Instead, they tried to make the impoverished German taxpayers pay some $33 Billion.
Senator Hiram Johnson of California said the Europeans were treating the USA as an "international sucker." He was wrong. The USA already WAS an international sucker for lending the money in the first place. It did not help Europe make any money. It had actually come back — in a large part — to pay Americans who built and shipped war goods to Europe. War goods produce no income. Even Woodrow Wilson must have known this.
The deadbeat French political leaders called the US "l'oncle shylock," for expecting to get repaid at a 2% interest rate.
In 1924, the Dawes Plan loaned Germany $200 million to stabilize its currency.
Germany actually paid back some of its loans, until the Great Depression, when they emulated fellow deadbeat European countries, and America stopped lending money to Germany.
The election of 1928 was won by Republican Herbert Hoover, Coolidge and Harding's Secretary of Commerce, when Coolidge decided he would not run. He had never been involved in a scandal. He wasn't even a lawyer. He brought the ethics of engineering (build and build well) into Government, rather than the lawyers ethic of "take money from anyone and then zealously advocate for the ones giving you money." But, decent ethics could not help him. He was the President in place when worldwide depression occurred. The Democrats got over their anti-Catholic prejudices and nominated Alfred E. Smith who lost the general election, 21 M to 15 M, with very little 3rd party involvement. Smith even had a wealthy automobile executive, John J. Raskob, as his campaign handler, indicating the country was quite willing to live with presidents who allowed capital appreciation and great wealth. Americans of 1928, just like Americans during Clinton's 1996 run (72 years later), voted to stay with prosperity. Still, the 1928 election did see the traditional alliance between white southerners and northern city dwellers, to which blacks would soon join.
Economic Problems would soon arise. Garraty notes that outdated industries were not doing well. Oil was replacing coal. Synthetics, like rayon, were replacing cotton and wool. Some wanted to turn back the tides of time and further support dying industries. Hoover, however, vetoed the McNary-Hagen bill that would pay farmers for not growing. He did tighten the screws on railroad rates for grain shipment and made it easier for farmers to borrow money. With limited money in circulation, there were further consolidations. GM, Chrysler and Ford produced most of the cars. Four tobacco companies produced 90% of the cancer causing cigarettes. One percent of all banks controlled 46% of America's wealth — a result of the politician's Federal Reserve Board and politicians actions — like Mellon's tax plans — favoring big banks and the very richest Americans. The A&P food chain had 17,1000 stores across the country. While business men sought stability and fair prices (needed to stay in business) there was no way the politically well connected bankers were about to release their power grip on America's wealth. As Garraty notes, "The problem was one of maldistribution of resources. Production capacity (usually supported by the rich banks) raced ahead of the buying power." Wealthy bankers and other people with all the cars, homes and food they needed, used their extra money to invest in the stock market, where the US politicians had enabled people to buy stocks with only 10% down. The 27,000 richest families earned as much as 11 the million people with incomes under $1,1000.
The Crash of 1929 came in October 24 when 13 Million shares changed hands -- a record until that time. Prosperity exuberance and very low margin rates combined to raise stock prices to unusually high levels. Between November and March, RCA went from $100 to $400. Let's say you bought a single stock at $100. You only had to pay $10 down. By the time the stock reached $400 you had earned $300 on a one time investment. With one time investments return your money 30 times, who wouldn't invest. On the dark side, however, was the person who bought you stock. You got $300 and enough money to pay back your $90 bank loan. He paid only $40 for the stock, with the rich banks lending him the rest, now $360 compared to your loan of $90 a few months earlier. Now, if the stock dropped only 20% to$320, the new buyer was out his 40 dollars, and the bank was knocking on his door for more money. The new buyer turns around and gets rid of the stock as fast as he can. When investors get rid of their stocks as fast as they can, the stock market crashes. J. P Morgan Jr., tried, as his dad had often tried, to save the economy -- to no avail. The boom was over. People's wealth that had been in stock disappeared, as well as the huge amounts of wealth the banks had held. They were not likely to get back the money they had lent out for buying stock at 10% margins. Still, the market did rally in late 1929 and business activity did not decline greatly. America might have been able to recover, on its own.
Hoover and the Depression
Garraty explains "The Great Depression was a world wide-wide phenomenon caused chiefly by economic imbalances resulting from the Great War." It's certainly true that American politicians, like Wilson, and international politicians (George, Orlando, Clemenceau) had economically raped the German people. It's also true that American politicians had allowed their rich patrons so many special privileges that unused wealth had piled up in the hands of few. Since the money was not in circulation, America's factories built up inventories and laid off people. Smaller banks, with an unfair share of the big banks wealth, closed everywhere. Even the Bank of the United States in New York City closed. Average depositors were unable to get at their money. They had to give up their life savings to pay for the bad bank loans (just as Americans paid for bad bank loans in the 1980's Savings and Loan scandals). Politicians favors to their rich supporters had been given at the expense of future Americans. Unemployment rose from under 1 million (before the Federal Reserve Board) to 13 million after the FRB. Mellon wanted Hoover to just let the Depression reach a natural end, with lots of unemployed and poor, for this would make people "work harder (and) live a more moral life." Hoover chose to do something. He jawboned industry to maintain prices and wages, and others to contribute more to charity. He decide to lower average people's taxes so they could buy more, institute public works programs, lower interest rates, make it easier for farmers to borrow and create jobs for the unemployed.
The Federal Farm Board, created in 1929, under the Agriculture Marketing Act, could buy up unsold crops. By 1932 Hoover was spending $1000 million a year on public works projects, but normal government building declined twice that amount. Charity sources dried up, with so many needing charity. When crops were destroyed in the South and Southwest in 1930 the government lent them money for seed and food for their livestock. In 1932 he approved the Reconstruction Finance Corporation (RFC) to lend money to banks, railroads and insurance companies. The Glass-Steagall Act eased the tight credit restrictions by allowing the Federal Reserve banks to make riskier loans. At all times, whether lending to bankers or farmers, he insisted upon loans — not giveaways of taxpayer money. He also insisted on a balanced budget, noting that Americans were being forced to live within their needs, and so should government. Hoover was also happy to sign , The Hawley-Smoot Tariff Act, placing prohibitive tariffs on foreign goods, hoping to improve the lot of American workers at the expense of the deadbeat European governments, while simultaneously suspending repayments of foreign loans for one year. While he tried to work a recovery AND balance the budget, foreign nations simply printed more money and greatly devalued their currencies. Hoover's efforts were not appreciated. Americans wanted money and jobs NOW. They were living in tent cities called Hoovervilles.
Hitting Bottom
In 1932 there were no public relief funds in Philadelphia for 11 days, but people survived.
Seventy-five percent of the unemployed got by without any public aid.
Enterprising farmers burned corn they could not sell for fuel.
Evicted Americans made homes of reused material, in Hoovervilles.
Farm Holiday movements saw farmers refusing to ship goods that were priced too low.
In June and July 1932 a Bonus Army marched to Washington to ask that they get their promised bonuses sooner. The settled on Anacostia Flats and sent the troops in (McCarthur and Eisenhower) to disperse them. They succeeded without any direct deaths, doing a much better job than Janet Reno's federal troops did in Waco in the 1990's.
Intellectuals responded well to crackpot communist ideals — figuring they had to be better than what was happening in the USA. In a few years they would learn about communism's failures, which lasted until 1992. Muckraker Lincoln Stephens saw the future and "All roads lead to Moscow."
The Depression and Its Victims became depressed. E. Wight Bakke, a Yale Sociologist wrote that the final stage of a working person's depression involved a permanent readjustment of giving up. Lillian Wald saw unemployed people at her Henry Street settlement as without "ambition or pride." Still, Bakke reported that 50% of the unemployed he interviewed never chose to go on public welfare. It seemed pride still existed and Americans felt they could come back without living on other taxpayer's money. It also explains why there were few strikes and radical meetings. Americans were actively looking for jobs. Americans compensated. They had less children. The birth rate declined from from 27.7 per thousand to 18.4. Women worked hard to make ends meet.
The Election of 1932 saw TR's distant cousin Franklin Delano Roosevelt (and VP John N. Garner) soundly defeating Hoover. Franklin Roosevelt would become the first American president to ignore Washington's precedence of serving two terms. As NY governor he had provided aid for the needy, old age pensions and unemployment insurance. Like Bill Clinton, he had been an political chameleon, switching views to suit the moods of the time. He hid his polio from the public, with the help of largely monopolistic national newspapers. He did not know what to do, but he did try lots of things. Some worked. Some didn't. He had professor help form men like Raymond Moley and Rexford Tugwell, James N. Garner and others. He was NOT opposed to devaluing America's currency by printing money or — as he put it -- "keeping the national budget out of balance." His willingness to experiment was called the "New Deal." The bottom came with a lame duck congress doing nothing. (The 20th Amendment ended these lame duck congresses by inaugurating the president January 20th and simultaneously calling the Congress into session.)
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