Roosevelt rode the reform wave to a great extent. Although he had difficulties in
managing congress, his justice department did initiate a number of anti-trust suits,
regulation of rail, food & drug laws, meat packing regulation, creation of departments of
labor and commerce, etc, but by the end of Rooseveldt’s first full term of office in 1908,
he had lost control of his own political party. It should be clear that the R party in the
beginning of the 20th century was in a crisis: split between the progressive and
Progressivism was a broad enough handle to cover both sides.
The financial panic of 1907 was a a tremendous issue. The stock market crashed,
business failures multiplied, and many of the NY banks went under. Faced with this panic
(as depressions were called), Roosevelt made a deal with JP Morgan. US Steel would be
able to absorb a Tennessee mining company in return for the help of Morgan backing the
US treasury notes that were being placed in private banks in New York City. This was a
deal Roosevelt would be criticized for later. Following the panic of 1907, Teddy signed
an emergency measure that allowed regional bonds to back circulatory notes. A federal
tax of 10% was put on all securities by nationally franchised banks.
Feeling nothing in Congress was going to support him, Roosevelt opted to support a non-
personality to be his successor: Taft. Taft had a very uneasy relationship with Roosevelt,
but said he would implement his policies.
WJB ran again. Wanted a constitutional amendment to directly elect Senators. Bryan said
the county needed lower tariffs, more regulation of the railroads, federal licensing of
In 1908 for the first time, the AFL supported a candidate: Bryan.
1908 was not a case of Bryan fighting for a bunch of various oppressed groups, but of a
bunch of racists spread all over the country. 1896-1924, it was the Republican party that
won the majority of votes in the twelve largest cities.
It’s ironic that the Taft administration pursued far more anti-trust suits than Roosevelt.
Taft proposed a federal incorporated law. Also proposed a federal corporations
commission to regulate day to day corporate activity.
The court said restraint of trade was confined to “unfair methods designed to eliminate
competitors and set market prices or trade norms that violated the public interest.” The
Supreme Court is saying there’s a very high bar that has to be met before the government
can pursue an anti-trust suit. “Legal restraint of trade that attempts to monopolize an
industry and eliminate competition and violate the public interest.” So, conceivably, two
of the three conditions is not violating anti-trust law.
The desire to lower the tariff reflected the wants of urban consumers to have cheaper
prices for their purchased goods.
By 1909, La Follette had a group of insurgent Republicans, representing mostly the
Midwest, behind him.
Roosevelt thought, with the forests, like many other areas of focus, should be run by
The New Nationalism was based on a book by California journalist Croly. Americans had
to accept large corporations: they were the engine of progress and prosperity and the
basic economic unit of the new economy. At the same time, the Federal Govt. needed to
create a safety net for those falling through the cracks: a federal welfare state. The
government also needed to create, he said, a bureaucracy to oversee the corporate system.
Croly also argued (and Roosevelt accepted) that the government needed to accept the
legitimacy of trade unions.
The Republicans still held a majority of US Senate seats—51 of 98—but several were
insurgent Republicans, including Robert La Follette. In 1912 after much speculation,
Roosevelt delivered an address on Lincoln’s birthday: his intention to run against Taft in
the primary for Rs in 1912. What developed was a three way fight in the Republican
party, truly a struggle for the soul of the party. Taft, who intended to be renominated and
elected, represented the traditional R loyalists: bankers, industrialists, and minimal
government interference in the economy. They feared the insurgents and democrats
wanted to create bureaus and regulate too much American life. Roosevelt was not Taft’s
only opponent, however: La Follette fully intended to run for the nomination, too. La
Follette organized the National Progressive Republican League.
Both La Follete and Theodore Roosevelt are invoking the name of the people: the name
or the genuine rule of people. Roosevelt did very well; 13 states held direct primaries.
Roosevelt won ever one, including Ohio (Taft’s home state). But the Republican
convention was a disaster. La Follette was so embroiled in his personal animosity with
Roosevelt, his delegates joined with Taft’s for a credentials dispute, leaving Roosevelt to
walk out of the Republican convention, letting Taft win easily. Roosevelt complains that
Taft stole delegates.
George W. Perkins, a partner of J.P. Morgan, and together they formed a new Progresive
Party. The PP (three in American history on the national scene—having nothing to do
with each other). Another in 1924 under La Follette, then Henry Wallace’s in 1948. The
party include a platform of social insurance, dropping child labor, and the eight hour day.
The PP also supports womens suffrage and wins the support of social worker Jane
Addams. Roosevelt also got the party do adopt a platform that allowed for the recall of
certain decisions by federal judges—very radical. PP supports direct US Senator election,
and also that business compeititon is inevitable, but also needs to be regulated.
Wilsonian reforms were a fairly big deal. His “corporate-oriented progressivm” meant
that the reforms were in the name of democracy, but the agenda magnified the power of
interest groups through the spread of special interest lobbies that were very close to the
administrative and regulative staff people. In turn, bureaucrats in the government could
use these constituencies to increase support and appropriations. Once the regulatory
agencies are set up, it’s in the interest of the regulated to lobby.
To some extent, you could argue that after Wilson’s presidency, the issues of trusts and
monopolies never become a central issue of government again.
In 1914, a mining company owned by the Rockefeller syndicate, experiences a strike in
the town of Ludlow. As the miners went on strike, the Rockefeller syndicate kicked the
striking miners and their family out of mining housing. The national guard was called in;
after several shootouts between the miners and the National Guard, the guard attacked the
mining camp with bombing and machine gun fire. Nearly 90 deaths in total on the
miners’ side. As the confrontations continued, federal troops were sent in and the strikers
were indicted as the instigators. This became known in labor circles as the Ludlow
massacre. Interesting consequence: Taft, during his administration, created a commission
on industrial relations. The response of the Rockefeller subsidiary and the national guard
was condemned. Then a curious thing happened: John D. Rockefeller had turned his
empire over essentially to his son, John D. Rockefeller Jr.. Jr. was approached by Ivy
Lee, a practitioner of the new arts of public relations.
Wilson, against his better judgment, later addressed the needs of independent farmers.
HE signed a law about how to better teach farmers, created federal land banks, and also,
on the model of the federal reserve system, created a federal farm loan system, to create
long-term credit for farmers.
Every past member of the American Bar Association testified against Brandeis because
he was a labor attorney by training, and may not have the objectivity to sit on the
Supreme Court (as opposed to the wealthy corporate attorneys, of course.) Wilson, very
courageously, stood up for Brandeis (who later became a very conservative justice).
Wilson approved the dismissal of federal employees solely on the basis of race. Wilson
came out of a culture of white supremacy. His history work on the restoration of the
South pretty much reaffirmed this. He had Birth of a Nation shown at the White House:
“it was like history struck with lightning.”
Under the Sussex pledge, the Germans declared that their submarines would no longer
sink merchant ships without warning as long as they didn’t resist. However, the pledge
was given on the condition that the US convinced the British to give up their blockade of
Wilson, at the time, was running for reelection on “He kept us out of the war.” Wilson,
however, didn’t have much of a choice, if the Germans continued submarine warfare
(which was in turn also dependent on the British giving up their blockade)
Wilson, albeit a peace candidate, expanded the US army to 250,000 soldiers in five years
under the plan. The national guard to almost 500,000, and a bunch of money to create an
officer training school. Congress passed a revenue catcher, the first major income tax in
history and the inheritance tax was also increased.
Wilson said he wanted to orchestrate a peace without victory—a peace amongst equals.
Freedom of the seas, he also thought, was itself an intrinsically important principle.
In January 1917, seeing the British weren’t going to stop their blockade, the Germans
revoked the Sussex pledge and started attacking all neutral ships. The US was trading
with Britain a lot, and depended on foreign export markets for its economy. Wilson
thought that if the US played peacemaker, the “Open Door” might create a foundation of
international peace. The right of merchant shipping to provide trade was absolutely
essential, even if the route went through a war zone. No great nation, he said, could allow
trade to be choked off. Wilson was seeking freedom of action for the US—freedom to
engage in commerce overseas.
The so-called Armed Ship Bill passed the house overwhelmingly, and reached the Senate
on the last day of the session. The bill that went to the senate gave the President the right
to arm merchant ships. To push forth the urgency, the administration pushed forth the
Zimmerman note, said to be intercepted by the British from the Germans to the
Mexicans. It said that if Germany won, and Mexico came into the war on the side of
Germany, Mexico would regain Texas, New Mexico, California, etc.
A group of anti-war senators, lead by La Follete et al (including Portland mayor and
former senator), mount a filibuster. If they can prevent the measure from going to a vote
by midnight, the next term of congress has to consider it.
The filibuster succeeded. Nonetheless, Wilson just put out a Presidential order under the
advisement of his Secretary of Defense.
Amos Pinchot one of the opposers. Another group, including Ford and Carnegie, put
forth the idea of international arbitration.
The insurgent progressives, or anti-corporate progressives, were probably the biggest part
of the anti-war anti-involvement movement. It was also a moralistic response about the
excessive financial privilege in America, and that the middle class was going to lose its
place. Defenders of small economic enterprise, and political accountability against large
masses of power/finance. Very hostile to the power of large corporations and banks.
The groups felt the effects of militarism, feeling it would eventually change opportunity
and individual freedom. War would corrupt and frustrate the democratic and reform
segments of society. An aggressive foreign policy would require a powerful central
government that would destroy the liberties of the people. They were repeating the
assertion that Europe was old world and corrupt, and that the US would be dragged down
and corrupted by the European imperialism.
Privilege, said La Follete, was the root of economic imperialism. La Follete had also
published another idea that gained momentum in the senate: the use of experts in
government to administer reform. The conflict in Europe, La Follete insisted, involved
plutocrats—wealthy and privileged interests. It had nothing to do with democracy or
small producers that made up the US. Leaders like La Follete, George W. Norris, Lane
from Oregon, had lead the fightr against Wilsons’ military preparedness program. Bryans
claimed the arms makers would be the ones to profit from the US joining WWI. La
Follete wanted a US vote on whether the country went to war before even congress
During the 1930s, when it seemed as if a second world war was going to erupt, anti-war
activists in the Senate conducted an investigation of how the US got into WWI. By the
1930s, there was a strong sentiment to stay out of European wars. From Walter Hines
Page, urgent telegram, two weeks after the armed ship bill went down in filibuster:
“The financial inquires made here reveal an intenational … alarming the community.
England is obliged to finance her allies as well as her own war conditions. She can’t do
this under her resources, or continue her present purchases in the US without shipment of
gold, but can’t do this: England and France must keep gold to back their dollars. Second,
submarines prohibit shipping of gold. Therefore, there will be almost secession of
transatlatlantic trade, unless enough credit is given to England and France. Going to war
may be the only way to avert a panic of finances. Durin g aperiod of uncertainty, no more
considerable credit can be placed in the US---“
Economic issues may not determine how policy decisions are made in Washington, but
German outlook: we need unrestricted submarine warfare to survive. The risk: it may
bring in the US, but hopefully we’ll be all good by then.
Norris: “we’re going into this war because of gold. We’re about to do the bidding of
wealth’s terrible manner. (sp?)”
War bonds to fundraise. All sorts of popular stars, etc, lent their fame to supporting the
In WWI, US govt and business community entered and unprecedented level of
cooperation. US gov’t guaranteed a certain level of returns. Wilson created a board along
these lines, also committed to reducing waste. There were actually a few: steel, cotton,
grain all had boards, etc. Businessmen sat on the committees to help organize, also to
institute labor harmony, permitted collusive bidding, and guaranteed a “fair profit.”
Once the war was over, the committees turned into the skeletons of Americas’ trade
associations. Business learned to organize prices, etc, during WWI. One of the most
interesting agencies was the food administration. Lead by a California engineer, a
progressive, named Herbert Hoover. Hoover’s job in the food admin was to oversee the
growth of agricultural products. (Cotton, food). Food admin purchased entire crops. The
problem was that if the government was buying everything, there was less supply for
consumers at home (and therefore prices went up for everyone else). Day light savings
time was introduced to support the concept of “victory gardens.” You can either ration,
where everyone gets coupons and limitations—Hoover wanted voluntary cutbacks
instead. Hoover became an icon of efficiency.
More strikes in 1916-1917 than any other time in US history. Radical workers of the
world had scored some victories, but the real beneficiary was the AFL. Labor force had
been reduced by 1/6 for military needs, but labor won major victories. Wages up 20%
during WWI, personal departments, comparable pay for women workers, and collective
(First time back in a few days.)
The debate over the League of Nations in the US Senate in 1919 was required over the
part of the Versailles Peace Treaty that Wilson signed, and required ratification by 2/3 of
the US Senate. The debate was bitter. Three factions: Wilsonian Democrats (support
entering the league), Republican moderates (who believe in it but with certain
reservations about US sovereignty), and the third group the “Reconcilables” who say no.
One of the issues to come up amongst the Reconcilables is that joining the international
organization will implicate the US in British (and to some extent, French) imperialism.
The issue that seems to dominate the discourse is the intervention of the US and the
British into Northern Russia, 1918-1920. 14,000 US troops occupied portions of the new
Soviet Union from that point. To some extent, what could be called American
Internationalism—or “Wilsonian Internationalism”—has a humanitarian face. One
organization fed 11,000,000 a day. The relief program extended to the Soviet Union up to
1922. Wilson and others were very worried about the Bolsheviks. The Soviets, after the
commies came into power, withdrew from the Eastern front and signed a separate peace
with Germany. Wilson and the allies were concerned that the country wouldn’t pay debt
the Czarist government had incurred, and thought a socialist revolution might spread
around the world, threatening a stable democratic capitalist order as Wilson envisioned it.
The communists took other anxiety-causing policies, as well: decriminalized adultery,
attacked church and religious leaders, etc. When the Soviets removed allied war supplies
from Northern Russia, the allies intervened as apart of a move to secure their provisions
and prevent, during the war, Russia’s Northern ports from potential German infiltration.
The US joined Britian France and Japan to discourage German troops from using Soviet
resources for the remainder of WWI.
Fearing the resurgence of German military power after the war, and to covertly dissuade
communist momentum, the troops remained after the armistice of Nov. 1918. In fact,
documents later released by the American Red Cross, showed efforts on the part of the
allied troops to overthrow the communist regime. The troops were no longer there for the
reasons stated in WWI, but as a counter-revolutionary force. This two year intrusion, not
a massive invasion but an intrusion, would remain very important to Soviet leaders until
the dissolving of USSR much much later—they didn’t like the encircling of capitalist
troops around the communist rule. This helped to invoke Russian nationalism.
Johnson, during the League of Nations debate, brought up that the US was breaking its
own principles in having troops surrounding the Russians. For the insurgents, the
intervention in Northern Russia was symbolic of what the League of Nations might
entail. They described the whole effort of WWI as a scramble for spoils. “If you reduce
the Germans to desperation by imposing heavy reparations, you risk an inevitable
reaction on the part of the Germans.” La Follete accuses Wilson of being an intellectual
crook in his arguing.
Wilson: the only way to curb militarization, was collective military security where it
would be clear that all countries would come to one’s defense. Deterrence as defense.
Reservationists: would render America defenseless without autonomy. Collective
security was thought unnecessary for minor conflicts, and could escalate small conflicts
into major ones. Getting involved in Europe’s affairs further was of no benefit to the US.
September 1919, just when the Senate is debating ratification of the Versailles treaty,
Wilson was hit with a hard stroke. His wife covered up the degree of his illness.
Wilson’s followers, in 1920, along with 16 reconcilables, prevented the amended
ratification from getting 2/3 support—the US never joined the League of Nations.
1919 was probably one of the most disruptive years of American history. Produces one of
the worst periods of racial violence.
400,000 Afro-Americans served in WWI. But the segregated units (with white leaders)
had many repercussions. Many black soldiers felt acceptance and freedom in France that
was a dramatic change from home. Black soldiers returning home believed they had
served with distinction and wanted to be treated like humans when they got home.
Lots of race riots immediately after. Chicago race riot of 1919 was the biggest. Whole
situation started when a black boy was swimming in Lake Michigan. He floated over to
the “white area” where a mob stoned and drowned him. When blacks complained to the
police, they were arrested. This lead to rumors that blacks were being attacked by white
vigilantes. 40 blacks killed, 500 injured. Destruction of black communities.
Inflation also hit the economy hard. The demand for goods increased after the war,
meaning their price increased. During WWI, the average real wages of manual workers
went up about 20%. Post war adjustments brought a period of inflation. Food prices went
up 80% in the year 1919. The dollar sank to half of the value it had in 1913. Altogether,
between 1917, when the US entered the war, and 1920, the cost of living doubled. Wages
obviously couldn’t keep up. In 1919, over the course of the year, 1/5 of the labor force
went on strike. Workers were basically seeking economic benefits to keep pace with
inflation, and to protect the collective bargaining rights that the unions had won when the
government needed the cooperation of workers during wartime. A focus in Seattle went
toward a general strike. There is no doubt that the general strike is the most effective
weapon of laboring people—it is such an important tool that it has the capacity to bring
down a government.
Another strike in Boston: 19 police officers fired. Officers were under the AFL. Wilson
called the police strike “a crime against civilization.” The governor was Calvin Coolidge,
a Republican moderate.
Later huge steel strike: lost by the strikers. The crushing of civil rights was so extreme by
US Steel that a new organization was formed: ACLU.
IWW afterward went to theatrical politics: chaining oneself to a lamp post and reciting
the Declaration of Independence. IWW also fostered a hobo subculture. In the West, a
very anarchistic organization. In the East, started the tactic of the sit-down. Instead of the
workers going out to strike, they just sit at their place of work and occupy their place in
the production line.
Workers forced to kiss the American flag. Major confrontation between the wobblies and
the American Legion in Centralia Washington. The IWW’s HQ was destroyed twice:
once during WWI and once right after, upon its rebuilding. In the second attack, the 12
IWWs were captured by the American Legion. Wesley Everest was one of them. Everest
was abducted from his cell by a mob in the middle of the night. They took him into the
woods and castrated and lynched him. The coroner declared it suicide. Centralia became
an example of violent vigilante justice across the country.
Red scare: somewhat the product of the government, somewhat the product of vigilante
activists. Roots were in the Russian Revolution that created the first soviet republic in the
former Russia. In 1919, a group of socialists broke away from the American Socialist
Party, called the American Communist Party. Claimed national membership of 50,000 (in
a nation of 100,000,000+), most members were Russian-American, Polish-American, etc.
Portland’s John Reid, author of “10 days that shock the world” (account of Russian
Revolution) organized his own Communist Party. Reid believed that the Soviet
Communists were wrong in urging Americans to work within the AFL, which he found
too conservative for social change. So Reid organized American Communist Labor Party,
with membership somewhere around 10,000. Both were very marginal and small, in no
way able to affect anything in 1919-1920, but the mood of the times was such that
communism was equated—not just with opposition to capitalism—to the very notion of
the breaking of the alliance of America, lack of respect for love and religion and
Red Scare was started by the Attorney General, A. Mitchell Palmer, a former progressive.
Palmer, as a congressman, was known for his friendliness to labor and immigrants. But
on May Day, 36 different dynamite bombs were intercepted on their way to homes of
prominent Americans. They were supposedly to be delivered as packages to Rockefeller,
Oliver Wendell Holmes, Jr., and others. In response to what Palmer saw as a communist
plot, he created an intelligence division. And hired a then young clerk in the FBI, John
Edgar Hoover, to head an internal security division. The next month, eight bombs went
off in different cities. Blamed on an Italian Anarchist, but insisted by Palmer to be the
work of communists. “Robbery is the ideal of communism.” –Palmer. The diffusion of
communist views and philosophies and other un-American ideals, stemmed from central
and eastern Europeans, he said. He lead a series of raids and deported hundreds of
communists and anarchists. Included: Alexander Berkman, the man who tried to kill
Carnegie’s superintendent, and his sometimes lover, Emma Goldman. Goldman had been
arrested in WWI for anti-war speeches, and spent two years in federal prison before being
deported in 1919. The “Palmer Raids” brought the arrests of 10,000 activists. Hundreds
were put away in “Kangaroo” trials with no due process.
The Red Scare could be described as a wave of hysteria. “When the power structure loses
its confidence. When the contradictions of a larger group of workers and a smaller elite
makes the balance of society unwieldy. Congress expels a Socialist member from
Wisconsin, Victor Berger on the grounds of being a Socialist. Reelected in 1920,
expelled. Reelected in 1922 (32?) and stayed in.
Part of the hysteria is fearing immigrants bringing “un-American” ideologies. The
American Legion starts talking about hyphenated Americans and “one hundred percent
American.” Second KKK, organized in 1913 (not quite a force by 1919), is also talking
about being pure Americans. Someone else: “we have put all of the sand into the cement
that it can stand.” Senator from MD, William Bruce: “Immigrants are indigestible lumps
in the American stomach. Insoluble blood clots in the nation’s circulation.” Congress
passed an act in 1920 to make illegal the possession of subversive materials. A mob
invaded an Italian neighborhood in Illinois—it took state troopers three days to stop the
retaliation by the Italians.
When there was a terrorist bombing on Wall Street the country was already tired of the
Red Scare sensation. First Red Scare generally dated 1919-1920. A culmination of
progressive reform, or “an attempt to reinstate American values…to purify the nation…to
call it back to its historic mission.”
Question of European immigration still strong. The labor force was made up in many
areas predominantly of immigrants. It may’ve pointed out the failure of the American
melting pot—people were scared of the hyphenated immigrants with dubious loyalty to
America. The Red Scare is then a lapse of American progressivism.
1917-1920 is really a fascinating time. A growing Socialist (and communist) movement.
The communists think the agent of change is the Communist party. Socialists,
alternatively, wanted public ownership of key points of society. Communists were more
directly driven, then. Why did socialism and radicalism meet such a tremendous end?
After 1920, socialism never has looked viable in the United States. Apart from a watered-
down popular variation in the 1930s stemming from the New Deal, it was never an option
again. Reasons: tremendous amount of repression against the Socialist movement that
erupted. Also: reaction against Europe for the frustrations of WWI.
It seems most evidence points to a lack of worker solidarity. As much as the IWW want
to sing about solidarity, that didn’t really fly across the span of American working life. A
lot of intellectuals, too, might have a disconnect from the work place, overlooking vast
differences within the labor force.
Labor collectivism may have implied a permanence of working status, which didn’t
sound like upward mobility. Also, popular culture (and leisure time to dance or drink or
whatever) and identification outside of work, released a lot of tensions from the
workplace and tied Americans to the economic order. One worked so that one could
spend money to buy things that made life seem better. Workers in America tended to see
themselves as consumers, not workers. The Marxist notion of worker solidarity doesn’t
State ballot measure in 1920 in Oregon: proposal to register voters to choose their state
legislature to vote by occupational category: choose your category then have it vote
accordingly. However, consumerism moreso than the role in production, seemed the
universal identification for Americans. Workers also not interested in the absolving of
capitalism as much as the notion of scarcity.
Relative economic prosperity provided hope of social mobility, if not for workers
themselves, at least potentially for their children. This thinking works against labor
Also, corporate liberalism. Capitalism could provide at least the minimalist conception of
comfortable society. Stabilize the social order. The progressives, to some extent,
reformed capitalism. Starts with: limitation of working hours, minimum wages, collective
There is clearly a class structure in America, but no sustained class conflict. The problem
with socialist isolation may have intensified when Socialists, out of necessity, embraced
the ESL foreign immigrants, which invited anti-immigrant hysteria. The Socialist
movement has never regained its standing or become as viable.
Harding told voters he was a “white haired progressive.” “It has always been my poltical
plan to invite the support and cooperation of everyone, and to submerge our differences
in the goal of obtaining a common cause.” The Marion idea was working together with
neighborhood counsel. Harding sensed the country was exhausted in 1920 over the war,
the red scare, Wilsonism, etc. In his most famous speech (always quoted): “America
‘s present need is not heroics, but healing. Not nostrums but normalcy. Not revolution but
restoration. Not agitation but adjustment. Not surgery but serenity. Not the dramatic but
the dispassionate. Not experiment but equipoise.” Asked regarding the communist threat:
“Too much has been said about Bolshevism in America.” Implying: communism isn’t a
threat; we have a successful model.
So: Republicans took every state outside of the South, plus Tennessee. +1.6million votes
in the largest cities. Low turnout, however. Democrats did very poorly. Socialists with
Debs (imprisoned candidate) won 900,000 votes (~3.5%). Interesting thing about Debs:
Harding issued a federal pardon releasing him from prison, also invited him to the
Whitehouse. They apparently smoked cigars outside the Whitehouse, talking about the
printing business (both came from families of printers); when Harding talked about
coming together, he sorta meant it.
The 20s, Leuchtenburg wrote, was “a time of paradoxes: an age of conformity and
liberation. Persistence of liberal values and triumph of the city. Of isolationism and new
internationalist ventures. Of competition and merger. Despair and joyous abandon.
Embodied a fear of what was solid in the past, and the excitement of what was new in the
future. The dynamic era of American capitalism. Where modern capitalism established
itself (consumer capitalism). New ways of thought and behavior, but brings an equal
amount of resistance. Period that accelerates the tension between modern and traditional
modes of thought and behavior.”
Relative prosperity in the American economy, 1922-1929. Not uninterrupted, but relative
prosperity. Business leaders called it the new era. Gives us a preview of the modern epic
of growth, affluence, economic concentration, the rise of science and technology, and
conspicuous consumption. First age of media like the radio, nationalized distribution,
book clubs, etc. 20s builds its prosperity on the foundations of WWI. Estimates are the
war so devastated European economies, it put them back 8 years. While Europe’s
economy was slowed down and returned to its rprevious rates, the US gained 6 years.
The pace of American productivity, with mass production and distribution, made us
ballers. Became a creditor (not debtor) nation. Period of relative prosperity is one in
which wages advanced modestly. Long run increase in per capita income that certainly
adds to a sense of economic security among working people that had never been
Henry Ford, the visionary of the auto industry, also the pioneer of the weekend. Meaning,
more time for the consumption of commodities. Didn’t think the auto would become
central to the economy for trucking, etc, but for leisure. In 1919, 2mil autos sold. In 1929,
5.6mil sold. By 1929, 2/3 American households had a motor vehicle of some kind. About
2/3 of all autos, items of furniture, electric appliances and radios, were but on installment
plans. A novel device to allow working class families to afford commodities they
certainly didn’t have the cash for. Interestingly, about 80% of all personal credit was
issued to women.
Chain stores: 1913: 30,000. 1929: 160,000. Bulk stores allowed merchants to buy in bulk
for better rates. By the 1930s, movies were the fifth largest industry in America. ¾ of all
Americans attended a movie at least once a week by the end of the 20s. Movies
legitimized the consumerism of the corporate economy. Movies taught how to flirt, kiss,
etc, bout also introduced consumerism associated with happiness.
Standardization of parts, etc, grew the economy. Consumerism was sustaining
production. As long as expansion of consumers continued, there was no end to how much
production the industrial system could put out. Most great growths in profits represented
a conquest that industrial managers had found the route to permanent prosperity.
Business’ superiority over politics was that it gave happiness to the masses. America was
an ecomoic democracy, then. Hoover, in 1928, running for the Presidency, said poverty
would be banished from American life in the coming days. Coolidge, retiring in 1929,
said the American industrial system was “a new heaven and a new earth.”
“The vacuum cleaner and the electric iron were worth more than all of the politics of La
Follette or William Jennings Bryan combined: the politicians weren’t helping the average
person as much as industrialists “delivering the goods.””
Large corporations started setting consumer taste with production and advertising.
Although people in ethnic communities mostly stayed to their own, avoiding the chain
stores (rather getting credit from their neighborhood ethnic sharer), most success was in
the corporate model.
Number of salaried employees increased by eight fold from 1880-1930. Salaried
employees consist of 60% of middle class income receivers. 25% of the entire workforce
is in the fields of education, professions, personal services (real estate, lawyers, etc), trade
or government work by 1930. Had important significance. Meant the economy was no
longer a testing ground of individual people wishing to rise from the bottom ot the top.
No longer the rags to riches model, but more middle class men interested in securing a
steady income as opposed to running their own business. Economy was not a testing
ground for pioneer interests, rather earning enough income to afford leisure and the
purchase of consumer goods. This means a shift from the old producer values of the
American middle class, emphasizing self control and invidiual achievement, to a leisure-
oriented ethic that emphasized self-expression and the virtues of having a congenial
personality (not the requirements of having a moral character.) Through the variety of
goods, this shift takes on a more tangible form. Family size also started to decrease in the
20th century. From 1900 with a statistical size of the family at 4.6, to 3.8 in 1930. Family
was having less than two children on average.
Birth control: most far-reaching development of 1920s, maybe even modern times.
Men lost their conneiton to work, women lost their chase of purity. Movie stars taught
married middle-class people to relax and have fun within the confines of marriage. Going
dancing, fun loving, cosmopolitan, wear cosmetics to keep their partner’s interest:
marriage was no longer about spiritual compatibility or financial efficiency.
By 1920, more youth going to movies than church. (Sweet!)
The college crowd was extremely influential in widespread taste, albeit a minority. 12%
attended college in the 1920s. Now it’s like >50%. Colleges, which were basically
residential, created a peer culture that found its model in the celebrities in the emerging
popular culture. College students in the 20s redefined the relationships between young
men and women: it involved sexuality (albeit of a limited kind). The practice of dating—
going to a drug store or movie or show without a chaperone. To a certain extent, college
youth sought to free themselves form the constraints of family or community. Instead,
peer groups on campus created a very clear sense of limits. Example: one of the things
fraternities and sororities liked to do was petting parties. Pre-marital sex, however, was
only accepted with engaged parties; casual sex could get one booted (especially a
women) from college. College women also experiemented with the role of flapper:
walking around town with your galoshes unbuttoned, unaccompanied. The sound of the
galoshes coined the term “flappers.” The flapper came to represent the archetype of
independent woman: smoking cigarettes, drive if she were wealthy enough, etc.
Coming out of records = mainstay of popular music industry, replacing sheet music.
There was a tremendous interest in dancing. Many of the dances that white middle class
people liked came form black people in the South. (Charleston, etc). Most popular dance
of the 1920s: “making whoopee.” The anthem of the speakeasy.
Period of relative prosperity. Trust in corporations and belief what is good for them is
good for people. Period in which political ideology is not as important to many
Americans as the prspect of continuing prosperity is. The Democratic party really had to
fight to find their appeal/viability. The farm was in a period of retraction, but the farm
belt in general (South and Midwest) were strongly Republican. What you find in politics
in the 1920s is that the main opposition to corporate was from insurgent Republicans,
particularly in the US Senate, particularly from 4-5 fgures: La Follette, George W.
Norris, Peter Norbeck, Wheeler, etc. Dialog politically is not between Rs and Ds, or
liberals and conservatives, but between corporate and insurgent Republicans. The
insurgent wing includes progressives opposed to Wall Street and big business, as well as
intervention in the international arena. Insurgent block also includes members of
Congress from the “Farm Block”—agrarian interests. The twin evils: Transportation Act
provided a process in which the railroads could revert to private management (held
publicly during WWI), but insisted in compensation for the government’s use of the
railroads. Transportation Act gave compensation, and also gave some protection from
anti-trust legislation, and gave “fair rates” as well. Midwestern Politicians argued the law
allowed railroads to base their rate increases on assessments of the corporate value of
railroad corporations that had been inflated by Wall Street speculation. The railroads,
therefore, were charging higher freight rates for farmers’ goods based on an inflated
evaluation of the railroads’ worth. Also argued: special privilege law, giving railroads
guaranteed profits at the expense of shippers. Second of the twin evils: Federal Reserve
Board. Raised interest rates to slow economic activity. In other words, when member
banks in the Federal Reserve System borrowed, they had to pay higher interest rates. So
the banks would in turn have to charge higher interest rates. Government during WWI
encouraged farmers to expand (so farmers went to banks to take out loans.) The interest
rates given during WWI no longer made the banks’ loans profitable. This led to a
situation in which the local banks had to call in the loans they made to farmers. As
farmers were forced to pay off loans, they had to sell their crops at whatever price the
open markets would give them. Therefore, it was argued the Federal Reserve
purposefully decreased the cost of crops (by laws of supply & demand). The Contraction
of 1920, then, brings about a pervasive deflation. Also discouraged local banks from
borrowing. A transcript from a Federal Reserve Board meeting was later released: one
member said under the prospect of local banks failing because of over-extending: let
Wheat sold for $2.50 a bushel at the beginning of 1920--$1/bushel at the end of the year.
Deflation of 1920 was blamed by many political representatives for the later agricultural
depression of the 1920s. While the 20s were a period of boom for the industrial economy,
the 20s provides a predecessor for the depression of the 30s when it comes to agriculture
(decreasing of prices, limiting of credit, low commodity prices). Aggregate value of
American farm property in 1920: $79b. $46b in 1930?
Twin Evils brought a consciousness to Farm-representing politicians that aligned them
with the insurgents.
Social feminists were organized womens groups who looked to expand the so-called
feminist sphere. Social feminists hoped to use the women’s newfound vote to expand
reforms by increasing government influence: education, health, labor, and social-welfare.
Aligned with social workers and educators, many women’s organizations joined together
to create the Women’s Joint Congressional Committee—a lobby in Washington for social
welfare. This is a period that continues the progressive emphasis for better working
conditions for women, and the attempt to abolish child labor. Between 1915 and 1923, a
period which embraces the so-called progressive era, and the Republican presidency of
Warren Harding, 15 states passed minimum wage laws for women. Although in 1923 in
the Atkins case, the US Supreme Court invalidated all of these state laws as
unconstitutional. Interfered with the contract rights of women, apparently—giving
women the right to vote took away the need to protect women workers. Congress in 1916
under Wilson passed a child labor act, outlawing certain ages and industries, but the
Supreme Court nullified this as well. The women’s groups in 1924 came pu with a new
way to do it to get around the Supreme Court.
The reversals of the minimum wage laws, child labor laws, all hurt, but women still had
three major victories: Infancy and Maternity Protection Act. First time that the US
government allocated money toward any health program. Focus was on education:
medical education program, not health care delivery.
In 1921, the Secretary of the Interior was able to manage the removal of the Fed Gov’s
Petroleum reserves from the jurisdiction of the Navy to the Department of the Interior.
This brought protests from independent oil dealers because the Sec. of Interior, Albert
Fall, immediately leased these government oil reserves to the Sinclair Oil Organization.
Independent oil dealers saw this as a case of collusion with a dominant force in the
industry, squeezing out the small refiners. At some point in 1922, friends of the
independent oil dealers saw a series of improvements to the home of Albert Fall, perhaps
too wide for his salary. La Follette and Wheeler caught wind, and got the US Senate in
1923 to create a special committee, chaired by Democrat Tom Walsh, to look into
allegations of govt collusion with private industry. The oil reserves in Wyoming had been
located on a hillside called Teapot dome—turned into one of the biggest scandals of
1920s. It became clear that Albert Fall had receive $300,000 in cash and bonds from the
Sinclair oil interests. Also turned out, as the investigation expanded, that the Attorney
General had received kickbacks: German properties in the US that had been frozen by the
government by the “Alien property custodian.” Also a scandal in the Veterans’ Bureau. A
lot of old friends of Harding from Ohio, the “Marion Gang,” that had lined their pockets.
Harding wasn’t involved, but had been overly indulgent to his friends’ idiosyncracies.
For the Republican insurgents, this was ugly stuff. Insurgent Republican Borah: “this is a
huge waste and a clear lesson: as a Republican conservative believing in free enterprise,
you have to watch for corruption because of the huge power of corporations. Monopoly
basically automatically led to corruption of the government.” In the end, Albert Fall
became the first Secretary of Interior to serve prison time, Daugherty resigned, and the
Secretary of the Navy barely escaped federal prosecution. Lesser figures in the
administration committed suicide. The public tired of the investigations—nobody seemed
to be particularly concerned except the insurgents, that people had lined their pockets.
Americans seemed to assume that people were going ot line their pockets. Increasingly,
there was an attempt to isolate Wheeler, the real force behind the investigation, to say he
had abused his power. Wheeler became the model for Mr. Smith goes to Washington.
Regardless of the issues in his administration, everyone loved Harding—more than
Regan, even. Died because of a stroke eventually. Above the fray. Nobody blamed him
for the teapot scandals. Most Americans really didn’t care about the scandals anyway.
Comedian Will Rogers used to say: “yep, the Democrats are investigation Republican
corruption schemes: trying to figure out where the Republicans get the money from.
(“how do we get in on this?”)”.
One of the incredible vulnerabilities of the powerful: feeling untouchable.
Coolidge delivered in the next election one of the most famous sound bytes of American
history: the chief business of the American people is business. Democrats, alternatively,
were infighting bitterly. Their rural and urban wings were split. 103 ballots and no one
could get 2/3 to choose a candidate. Ended up choosing a coalition platform: Wall Street
Attorney plus William Jenning Bryan’s brother. The interesting candidate in the 1924
election was Robert La Follete. Now 64 years old, who engineers his own nomination at
a Progressive Party convention. La Follett chooses his running mate, Wheeler, a
Democrat. The coalition did make a lot of sense. Despite party differences, coalition
made sense. Third party run got 2/3 the votes of the Democrats. Platform: publicly owned
water, cheap electricity, environmental conservation, federal aid to farmers, popular
election of judges (a Teddy Roosevelt idea), injunction into labor by federal courts, and a
plank in the platform for being in favor of outlawing war as an instrument of national
policy. The main issue: monopoly capitalism. “The great issue before the Amreican
people today is the control of industry by corporations. Crushed competition, stifled
private initiative, independent enterprise, and extorts massive profit.” Comparing cost of
living to corporate profit (an attempt to relay this to the normal person. “The great mass
of people who produce the wealth of the nation against the invisible government.” The
progressive party was a creation of La Follettte who went out of his way to say he didn’t
want a coalition with socialists or communists—this was in the tradition of American
Democracy and free enterprise, small business, etc. Party did win the endorsement of the
AFL. Outpolled the Democrats in a bunch of states, won 16% of the popular vote.
Democrats won 29%. Coolidge won 59%. “Coolidge or chaos.” Coolidge ended up
scooting more to the corporate community than did Harding. When there was a vacancy
in the Federal Trade Commission, he appointed a corporate attorney. Humphrey was the
appointee. Informal agreements between the government and big business became the
Coolidge: two directions. 1) advancement of overseas loans and private investment in
overseas markets. 2) expanding of export markets. By the late 1920s, the USA accounted
for about 16% of all the exports deriving from every country in the world (wth 2% of the
Through Hoover’s commerce department and the dept. of state, Coolidge was making
sure the USA had access to petroleum, etc, and trade arrangements, and to encourage
American bankers to make loans overseas. One of the problems with financial
international capitalism was the stalemate of loans to the European allies during WWI.
The inability of the allies was based on the failure of Germany to pay the required
reparations to Great Britain and France. Before the 1924 election, Coolidge sent
economist Charles Dawes to Europe to stabilize the system of debt. Dawes came up with
the Dawes plan. The governments owed money by Germany agreed to an extended
schedule and to reduce the required payments. To help Germany, Dawes, a banker
himself, negotiated a series of loans from American private bankers to Germany so that
they economy could offset the inflation it was experiencing, and so that the Germans
could pay the owed reparations. $1.2b worth of loans were extended by prvate bankers to
Germany between 1924-1930 as part of the Dawes plan. Supposedly, Germany would not
only be able to pay the reparations, but Germany would be able to repay the US
government, too. Finally, in order to help out Britain and France, and to gain their
cooperation, the US agreed to reduce the debt that the allied governments owed the US
Insurgents’ frustration: 1) The insurgents were opposed to how arms manufactures, etc,
profited from WWI. People like La Follette said US foreign policy was being sculpted to
benefit the American international bankers. Furthermore, the more US stayed out of
Europe, the better. All the US gained by intervening was a perpetuation of the arms race
in Europe, European imperialism, etc, etc, that only aided big business and bankers. The
renegotiation of loan debts, they argued, only set it up so JP Morgan would get repaid. It
allowed European militarists, as well, to continue their imperialism. The war debts issue
was one that particularly rankled the insurgents. “Why extend aid to European warring
nations and not our own famers?”
2) A permanent court of international justice. Created as an extension of the League of
Nations. Purpose of the World Court was to resolve civil (financial) disputes between
countries. Harding was opposed on the grounds of preserving national sovereignty. It
took three years—after Harding was gone—for the Senate to debate/amend it. Coolidge,
in 1926, received the Senate’s version of joining the World Court. So much, in fact, that
the Court asked the US to fix their version of acceptance. Additionally, seven key
supporters necessary for the 2/3 majority to pass a treaty were no longer in the Senate.
The US didn’t join the World Court until the creation of the UN in 1945.
Insurgents denounced the propsal. The World Court, they said, was the backdoor into the
League of Nations and all it did was serve the international bankers. The insurgents
insisted the US should look after its own national interest, and stay away from
entanglements in Europe, war debt plans, World Court, and continue to stay away from
the League of Nations. One of the few foreign policy accomplishments of the Coolidge
Administration was the signing of a treaty that said: “the [signed] nations renounce war
as an instrument of national policy unless attacked.” Why did we sign on to such a
rhetorical statement? It came at a time when business internationalism looked to be the
cement to hold together the world. Resorts to war were counterproductive—they just led
to social revolutions. It’s an attempt to stabilize the relationships of capitalist countries.
Two countries most interesting in regards to Coolidge foreign policy:
Nicaragua and Mexico. In Nicaragua: US had 100 marines to guard the embassy.
Withdrew them in 1925. But just when they were being withdrawn, there was a social
rebellion and disputed election. Coolidge sends the marines back to help, and says the
Nicaraguans should recognize the conservative faction. The liberals, alternatively, were
supported and recognized by the Mexicans. Coolidge asserts the Mexicans were
spreading communism to Mexico. Coolidge starts dropping hints that a full scale US
invasion might be necessary. Insurgents in the Senate, Borah Norris and Wheeler, claim
that the US is engaged in sordid imperialism that goes against the precepts of the
Declaration of Independence. By 1927, the insurgents hold the balance of power pretty
evenly in US government. Coolidge essentially backed down and sent a diplomat, Henry
Stimson, to arrange a truce. He works out a deal: the US will supervise new elections in
1928. Simultaneously, US Marines will help create a non-political Nicaraguan national
guard. The Marines will take on a temporary police role in the country. This agreement
holds throughout Coolidge’s administration. He uses the opportunity, too, to send US
Ambassador Dwight Morrow (whos daughter marries Charles Lindburgh) to Mexico to
negotiate through the nationalist revolution who claims Mexico has all of the rights to the
petroleum at and below the soil where US companies are in charge. Morrow also
arbitrates a decision were Mexicans were trying to nationalize Catholic churches.
Coolidge, known as an arch-conservative, actually has some success negotiating in Latin
Coolidge, for no clear reason, decides not to run again. The Democrats are scrambling to
find out who to run. They’re trying to negotiate the balance between their rural support
and their growing urban/ethnic support. In 1922, the congressional representation of the
largest cities in the country went to the Democratic party for the first time since 1896.
But the House of Reps still refused to reanct the reapportionment/redistricting from the
1920ish census. The House, still dominated by rural members, found ways to
procrastinate. The 1910 census was the basis for apportionment until 1930. In 1924, the
Democrats had held one of the most divisive national conventions in their history. The
great underdog of the urban wing of the party was Al Smith—the first Irish Catholic
trying to run as a major party candidate. Product of the lower East side of NY. Attend
parochial schools until he dropped out in 9th grade and worked at the Fulton fish market.
“Graduated with a diploma from the fish market.” Became a book keeper and entered war
politics under the guise of Tammany Hall. Was a runner—worked as an agent for the
bosses by running around town getting as many people to vote as many times as possible.
Was rewarded for his loyal work by being put up to be a State assemblyman in his safe
Democratic district. In Albany in the legislature, became very effective. In 1924, his
friends put him up to run for the Democratic nomination for president. Opponent of
prohibition and signet of the white immigrants and the American dream. Perfectly
represented the European working class: blue collar, mainly Catholic and Jewish,
opposed to Protestant piety, proud of upbringing. NY accent, etc. He was a symbol that
frightened the rural and Protestant wings of the party. The rurals put up McAdoo who
represented the South and the West. When nominated, he called NYC an “imperial city of
privilege, greed, and corruption.” Claimed Smith’s supporters were kept drunk so they
didn’t know what they were doing. Crazy convention. Key note address was delivered by
a delegate from Mississippi. Most controversial part of convention: addendums to
platform to prohibit bigotry and intolerance, one of which named the KKK.
The resolution to prohbit bigotry and intolerance, without naming anyone, passed by one
vote. What this suggested was that the Democratic party was hopelessly split between its
two wings, about 50/50. The rules at the time stated you needed 2/3 votes to nominate—
nobody was going to get it. They went 102 ballots in the heat of July for weeks.
Somehow John W. Davis, the Wall Street attorney, with the brother of William Jennings
Bryan, got nominated as a compromise.
DuPont engineered the Democratic convention of 1928 to support prohibitin,
immigration restriction, and limited government spending—all platforms taking from the
Republican party. Essentially told Southern delegates: Al Smith would support states’
rights on the vital issues of voting, citizenship, and civil rights. These assurances to the
white supremacy Southern states allowed them to support a Catholic for President, even
though Smith hinted very strongly that ultimately he stood for reworking the prohibition
laws. Raksob traded race for Catholicism.
The delegates at 1928 that were black were literally segregated by chicken wire. This was
opposed to the growth of civil rights in the 1920s: black colleges in the South were
producing an articulate and effective middle class. House of Reps passed anti-lynching
bill in 1922, which proposed to make it a federal crime for a local law enforcement
official to allow someone to be removed from jail to be lynched. Never made it through
the Senate, but significant nonetheless. The Democratic Party ignored this, believing their
power to come from the South.
Smith then got the nomination in 1928, easily, but had no chance in 1924, because of the
brokering (trading support for racism to ignore his religious difference) by RAskob.
Hoover became the Republican nominee, the “boy wonder” of the party. Organized food
relief, and worked effectively in the Department of Commerce. Hoover called prohibition
a great social experiment: noble in purpose and far reaching in (?). Appealed to the
Prosteant. Republicans had the advantage in Hoover also opposing excessive federal
regulation and spending. Wrote American Individualism. Wanted everyone to sort of get
along and do it well without regulation. There was also a relative period of prosperity
since 1922—six years. Hoover won 57% of the popular vote and every state except the
six in the deep South and two very Roman Catholic states.
Democratic party was becoming that of the urban underdog. The Republicans had the
Protestants locked up, and the rural vote, but that wouldn’t help the way the country was
trending. Hoover did believe in a limited Open Door policy. Limited internationalism:
voluntary cooperation between international institutions, etc. Crafted the Good Neighbor
Policy. Before even been sworn in, took a Good Will Tour of Latin America. Hoover
pledged the US wouldn’t interfere and would consider the Latin Americans equals. The
first test of this was Nicaragua. Upon an election, the US took out some of its marines.
Part of the deal with Stimson, though, was that the US was going to train a non-political
Hoover’s main interest when taking over the presidency was not, however, foreign
policy. Thought of himself as someone who could continue growing prosperity for all.
Hoover called a special session of Congress—his first act—for farm relief. Said he didn’t
believe in intervention, but is in fact the first direct US intervention into the marketplace
in peace time. Law set up a $500m revolving fund to support coops and make
“stabilization corporations.” Would purchase surplus grain/etc and resell when prices
stabilized. The law called for the creation of a Federal farm board, like the Reserve
Board, and also put money to help aid farmers in all ways. Agricultural marketing act.
All of this becomes moot on Black Tuesday. In one month, the stock market lost 40% of
its original value.
Exam: weeks 5-10. Tafts presidency forward. Like the midterm, these questions want
details from the readings and class lectures to support our assertions. Start with Taft and
question: is he maintaining Roosevelts progressive legacy? Taft more conservative?
Whats the source of his political differenceies? Election of 1912—difference between
reform agend of people like Taft. Do election ambitions frame positions? The legacy of
Woodrow Wilson at home as a reformer, The Corporate Liberal State, Modern Liberal
State, Federal misc., appointment of Brandeis—all part of Wilson’s response to the
perceived corporate influences. How successful is Wilson or does it solidify the corporate
order? Wilson and foreign policy. Management of his entry to WWI, his attempt to make
US involvement part of a nihilistic crusade (14 points), how is this related to the Open
Door policy, controversies between insurgents like La Follette and Wilson into WWI. All
open for discussion. Another theme to think of: to what extent is WWI a crusade to
extend progressivm to the world. To what extent does the war effort align with
progressive principles? Why does Wilson encounter bitter resentment from insurgents?
Wilson as progressive on the world state; Wilson as an opponent of progressives at home.
To what extent does the Red Scare come out of these assumptions?
1920s: In Harding and Coolidge admin: What does Hoover mean about the associative
state? Eneabling the government to support the private sector without excessive
intervention? How does the business internationalism particularly of the Coolidge admin
fit into the the kidn of precepts that Hoover outlined as Sec. of Commerce. Why do
progressive republicans voice a strong opposition to Business Intenrationalism? Antoerh
area of the 1920s (important): controversy over Jazz-age consumer values. The culture
Think of: how does the contraveries over jazz age, consumer values, social wars—change
all. How is populism a response to it? Kazin’s chapter on prohibition. Along those lines,
the Pres election of 1928 offers a dramatic case of social and political cvontroversies
ceom to the forefront.
Finally, Prsident Hoover: his reponse to the stock market crash and the coming of the
great depression. How does a fair-minded historian place into perspective Hoovers
attempts to involve the government to some degree in intervention in the domestic
economy in a time of peace.
Use details and examples in whatever points I chose to make. IF you want more
comments, write ‘comment’ on the front.
10:15-11:20 MWF 1890-1940 (?) populism course
Hoover comes in, boy wonder, fresh from a goodwill good neighbor tour of Latin
America, a venture capitalist, humanitarian, voted most important factor for American
prosperity, and the first thing he wants to do is address the Farm problem. Agricultural
Marketing act. All of this goes to nought with the stock market crash. In one month, stock
exchange lost 40% of its value. Lost $26b value. End of Hoover’s presidency, 83% of
stock market’ value was eradicated. Crash didn’t necessarily mean the country was going
into an economic depression, but a psychological indicicator of investor confidence.
When investors are nt confident, it can bring a market economy to a grinding halt. The
question is, what led to the crash? No absolute answers.
Economic historians love to debate this with metrics and so forth, but generally, three sets
1) great prosperity, but a lot of sick industries. Not only independent
agriculture, but industries part of the “old” economy. Coal, for
instance. New sources of petroleum for heating fuel and autos hurt it.
Timber, use of wood was declining betwcause the housing market was
saturated. Steel, a lot of great infrastructure had already been built.
Cotton, industiy was in trouble because of synthetic fibers. Textile
industry itself was in decline. Railroads, being usurped by trucking,
busses,. Ship building with a decline in global trade. These were all
old economy industries that were in serious decline in the 1920s, even
though the general economy in an aggregate sense was being
prosperous. Thee sick industries were balanced by new economy
industries: retail goods (department stores), food processors,
appliances, radios, medical care, recreation (movies),. But the
tremendous prosperity was not sufficient for the decline in the old
sector. Economic historians suggest there was an over extension of the
production of production facilities. (ie, for cars). Housing.
2) Galbraith’s theory. The Stock Market Crash. Poor distribution of
wealth in American society. For example, by 1929, the top 5% of
income receivers were responsible for more than ¼ of all income. Is it
related to the coming of the great depression? Debatable
3) Embraced by anti-corporate insurgents: the economy was based on too
much speculation. For example, holding companies and investment
firms that did nothing except produce stock. Also, tons of corporate
mergers. Many industries like steel experienced vertical combinations:
the coal mines, railroads, etc—all the related industries. Federal Trade
Commission, under Harding and Coolidge, as not very concerned with
anti-trust matters. A combination of vertical combination, lax
prosecution, led to disappearance of 10,000 companies. Bank
legislation was also very lax. Stock traders borrowed up to 90-97% of
the value of the stock from brokers, and used other stocks as collateral.
All, essentially, was a house of cards. When things started to fold in,
all went exponentially shitty. The investment into the market, as
opposed to in emerging industries, may have prevented companies
from opening up. Real estate speculation, too. During all of this,
reserve interest rates were kept low, encouraging over-expansion.
When the debts were called in, all went shitty as well.
The twenties could’ve/should’ve created the grounds for permanent prosperity. Friendly
to corporations, low taxes, no national deficit, labor was crushed, no threat of government
regulation, no serious threat from reformers/insurgents (who may have had power but
couldn’t agree on reforms). So how does Hoover deal with all of this? Being PR expert,
he did not want to describe the economic downturn as a panic. Instead he used a
euphemism: a depression. Hoover continued to preach optimism and confidence. If
anything, it was from European sources, a better day was around the corner; just have
confidence. He preached volunteerism, harmony between social classes, and local
control. Some of this sound sa little cold, considering the suffering, but the fact of the
matter is that Hoover had walked the walk. Hoover got private money raised for relief of
a big flood in Mississippi. He had done what he preached, basically: coordinating
volunteer efforts without huge government efforts. The best Hoover could do, was win
agreements form leading industrial corporations to sustain wages and employment. “It’s
temporary if we continue to produce goods, hire people, and maintain wages.”
So Hoover provided good learship, but no bueno. Also had continuing problem of
European instability. Private American banks were issuing credits to Germany to have
more capital. That credit system, infusion of capital or whatever, would allow Germany
to pay some of its reparations to Britain and France, and supposedly then they could in
turn pay back USA for their debts. Also sent a second message: NYC was now the capital
of world finance. This practice showed off some of Hoover’s more enlightened practices.
But under pressure from the traditional wing of the party which also represented
industrialists who wanted a tariff to protect from foreign exports. Canadian wheat,
Argentiaa wheat, etc. So Hoover signed a controversial tariff law, the Smoot-Hawley
tariff, which raised agricultural duties by 70%, rates on industrial imports from 32-40%.
One thousand professional economists paid for advertisements in the newpapers asking
Hoover to veto the bill. But Hoover seemed subservient to the tide of Republican party
politics, and perhaps to the strain of nationalism that underlay the protectionist impulse.
The Tariff, in a sense, contradicted the visionary aspects of the Young plan. It brought
reprisals from the Europeans, who had weak economies because of their war debts.
Now the tariffs discouraged the buying of US products, becasues the US was buying less
European products. So less American outflow to Europe. In a sense, European financial
markets came to the verge of collapse. Germany defaulted on their payments, so Hoover
set up a moratorium on payments. Under pressure, Britain dropped the gold standard.
People, to pay off their own debts, sold their investments in the stock market and the US
government bonds to try to get gold.
During the 1920s, insurgent progressives argued that the Reserve, by lowering rates, was
encouraging excessive speculation on Wall Street. Way after the fact in 1928, the
Reserve raised interest rates to slow the economy. But by then, the market was already
slowing, and displaying an excessive value of American industries. The reserve board
was more concerned with getting back to the gold standard than having control over rates
in the US. Afetr 1930, it was criticized for encouraging things in the 1920s. but tight
money policy only lessened confidence in banks,etc. Between 1929-1932, 6,000 banks
went under losing $4b in assets. Two of the great financial empires collapsed in 1931:
Ivar Krugar, a Swede, and someone in Chicago.
Large numbers of Americans became increasingly cynical about stocks and bankers.
Peter Norbeck, who chaired an investigation of Wall Street: “the worst Crap game in
America’s industrial corporations were eventually unable to keep their promise to
Hoover: the had to lay off workers because nobody wanted their products. The US was
then deeply deeply embedded in an economic depression. Basically speaking, a crisis
marked by the absence of work and by the collapse of investment, and basically, the
collapse of th capitalist economic system. Some stats are truly frightening. 1929-1932,
lost an average of 100,000 jobs every week. By the end of 1932, unemployment figure at
25%. (probably an underestimate). Wages declined by 40% over this period. 100,000
businesses were bankrupt by 1932. By 1932, industrial production was cut in half from its
1929 high. National income was literally cut in half. Farm income was off 60%. Auto
sales down 75%. Construction fell by 83%. No way of outlining the human cost. Apple
producing/distributing company: idea of hring WWI veterans to sell apples on urban
street corners for 5c an apple. Giving them a profit of 1c an Apple. The image of
homeless desperate men selling apples on street corners became an icon of the Great
Depression. A sign of despair rather than recovery. Renters evicted. 1,000,000 transients
riding the railroads, 1/5 were children. Homeless camps called “Hoovervilles.” Bread
lines permeated every population center. It’s impossible to describe the whole human
Study done: 6,000 families that refused to apply for relief on the basis of pride: 81%
lacked sufficient food. 88% behind on rent. 63% behind on life insurance payments. 74%
borrowed money from relatives or friends.
In 1931, the American Corporate Community came up with a plan to battle depression.
Plan from the head of GE. System of old age pensions, government sponsored life
unsrance, unemployment, direct federal supervision of the business community. Proposed
trade organizations take over the business communities. Fix prices, control production,
and regulate trade practices. Hoover rejected this: too much govt. centralization and
would produce bureaucrats and cartels. Also rejected diret relief. This, he said, would
produce a country that engendered dependence.
Having said that, he was the first president to intervene directly in the economy during
peace time. Democrats won some offices and pushed for federal government response,
and Hoover went along. First emphasis: public works. Massive government projects:
reproductive works (things that would in turn lead to more production). $2.25b invested.
Congress also passed the Reconstruction Finance Corporation, created in 1932, Hoover
signing, to authorize $0.5b in loans to private companies like banks and insurance
companies and railroads, to grease the wheels of economic recovery. Also gave the
authority to issue more money with tax free bonds. Also authorized in another bill the
loaning of money to local/state governments. Hoover also signed Glass Steagal bill. Said
commercial paper could be used as partial backing for govt securities. Freed gold up.
Home Loan Bank Board also created. Smaller—capitalized at $125m. Hoover also signed
the Norris Laguardia Act, which liberated labor unions from federal court injunctions: no
longer was it legal for a court to intervene and stop a strike.
Many Acts lost money or didn’t fully spend. Either like holding on to too much wheat or
not investing in other cases. In 1931, Dems were able to pass a bill that allowed WWI
vets to borrow half the value of their veterans’ bonuses (not due to them until 1943).
Hoover vetoed. Vets argued: if you give us some of our bonus, we can help spend and
bring up the economy. Vets organized a march on Washington, was successful and
peaceful. 5,000 vets chilled on govt property, making Hoover uncomfortable. Hoover
ordered them dispersed. He asked Gen. McArthur to clean out the property of camped
veterans. Explicit directions: no force to be used. McArthur tore up Hoover’s instructions
and went in with tanks, bayonets, gas, chasing the veterans in the streets of the US was a
horrendous sight. Hoover also, as the dems began to organize for 1932 election
campaign, proposed Dem proposal to lower the tariffs. Hoover seemed remote and cold
and to lack compassion for the terrible things people were going through; it was
perceived he’d aid big business but not people. So, it’s in this context o fa discredited
Hoover administration and the Dems in control of both houses of congress, when the
election of 1932 comes in: FDR.