VERY BRIEF SUMMARY OF 1920s 1920-1929 loose morality + get-rich-quickism; indifference/avoidance of the outside world stable environment for economic expansion abroad, esp in Western Hemis lackluster politicians corporate capitalism [unions as un-american (Scott Paper Towels)] Prohibition women s rise to power Henry Ford symbol of era; poor farm boy to corporate giant welfare capitalism laissez faire economic welfare placed with private sector to limit govt interference US money throughout Latin America and World economic imperialism and David Ricardo s Comparative Advantage becomes world s largest creditor nation Foreign Policy Isolationism and resentment w/ foreign entanglements, esp with Europe 1 President Calvin Coolidge 1 DOMESTIC POLICY: -apostle of the status quo; high priest of the great god Business - reduce taxes and debts, esp. for large businesses; -US no longer debtor but creditor nation for many countries, esp W. Euro allies in WWI and Latin America Do we learn from our historical past? inter-war period total chaos U.S. politicians unrealistically discard foreign policy for political extreme isolationism, but U.S. remains economically international (to a point) 2 International economic policies rigid demand for war repayments; closed trade barriers 1) international relations outlawry of war Frank B. Kellogg; Kellog-Briand Pact aka Pact of Paris, 1928, 62 nations sign 2) higher and higher tariffs want to keep US buyers to themselves and fear of a flood of cheap goods fm Europe + Coolidge/Hoover like big industry SUMMARY ECONOMIC POLICY FOR EUROPEAN COUNTRIES THROUGHOUT 1920s: US govt demands repaid of war debt from Eng and France, but Allies cannot pay war debt; WHY? US refuses to forgive loans/loan more, or open up import sales to U.S. consumers (largest consumer market at time) RESULT #1: European debtors to U.S. cannot borrow or sell to US --- no way to raise capital to pay debts to US 1 Political Scandals Under President Harding - Colonel Charles R. Forbes, Teapot Dome 2 Can a government realistically withdraw from global affairs, but continue to economically remain global? 1
2 RESULT #2: Brit and French retaliate against German government Germany high inflation and political threat of anarchy U.S. will not back down fm demanding $ fm debts US politicians did not understand that could not sell to others in quantity unless they either: 1) buy from them or 2) lend them US dollars ominous global chain reaction AT HOME: enormous amount of money accumulates in the 1920s generation of urban prosperity soaring stocks on the bull market BUT, underneath it all, two warnings of upcoming depression: 1) unorganized workers 2) farmers severe economic decline plague of plenty ; farmers losing farms to banks; no federal political assistance, or even attention, to rural American At the time, however, long economic boom seemed endless except for in the farm belt Who is Hoover? D I L E M M A humanitarian vs. rugged individualism ; government handouts are heresy government dole would destroy the essence of America instead American values of industry, thrift, and self-reliance Great Depression of October, 1929 stock-market collapse --- business depression at home and U.S. of industrial economies, felt hardest in the U.S; of all countries, hardest in Chile Causes of Depression: 1) overproduction by farms plague of plenty ; caused by abundance of rural goods 2) overproduction of industrial consumer goods oversaturated market (ex. Cars) contrary to Adam Smith, no trickle down --- state involvement in econ 3) overexpansion of consumer credit installment-plan buying Buy Now, Pay Later increased industrial over production 4) technology and labor saving devices causes abnormal unemployment 5) foreign markets 6) U.S. economic policy under Hoover before depression Highest protective tariff in the nation s peacetime history, Hawley-Smoot Tariff of 1930 7) Hoover s inability to manage economic depression 8) drought through Mississippi Valley and Dust Bowl 9) consumer spending might have brought end, but no one would spend the little they had Results: -poverty -high suicide rates -rapid decline in births decade long dearth of births -questions of US Manifest Destiny shantytowns called Hoovervilles ; Hoover blankets (old newspapers) -tremendous distrust of bankers, esp. among rural farmers - bonus army veterans demand assistance -unemployment 3.2% in 1929; 25% in 1933 in four years, 12 million unemp. workers; 1 in 4 -private, personal despair 2
Major Permanent Changes in the U.S. With Depression: 1. end of extreme laissez faire government 2. moderate social welfare state will result (state assistance and market intervention, but not socialism) 3. raised lasting questions about unqualified faith in capitalism with markets 4. national and global belief in the undying success of the U.S. economic miracles remain 3 African-American experience in Depression wasn t one The country had been in the throes of the Depression for two years before the Negroes in Stamps [Arkansas] knew it. I think that everyone thought the Depression, like everything else, was for the white folks. Maya Angelou Harlem and Race Riot, 1935 3
4 Hoover policies: trusted that industrial machine would bring prosperity; then turns to state governments I do not believe that the power and duty of the General Government ought to be extended to the relief of individual suffering... The lesson should be constantly enforced that though the people support the Government, the Government should not support the people. (Hoover, 1930) Hoover Dam on Colorado River Reconstruction Finance Corporation (RFC) (1932) (too little, too late the millionaires dole ) Hoover and labor during the Depression: indirect, small assistance Norris-La Guardia Anti-Injunction Act, 1932 : -no yellow dog (antiunion) contracts -federal courts could not issue injunctions ags strikes, boycotts and peaceful picketing Hoover: played politics with human misery but led way to FDR s New Deal Bank Robberies and Images of Robin Hood Dust Bowl: 1930s life worse for farmers; drought until 1941 4
FDR - put US workers back to work wanted to create classless coalition 3 of rich and poor; workers and farmers; rural and urban dwellers faced Depression and War essentially, a fiscal conservative (always uncomfortable with dole work relief over cash subsidies) use state to save or reinvigorate capitalism rather than replace it with Communism First New Deal, 1933-1935 not a well-formulated plan designed to bring immediate economic security very personal kind of leadership personalism ; fireside chat radio aud. of 1960 bgs pbm: collapse of banking system - Emergency Banking Act conservative document first of 15 pieces of legislation Hundred Days Home Owners Loan Corporation refinance home mortgages (20% of Amkns) Federal Deposit Insurance Corporation (FDIC) insured bank deposits up to 2,500 Civilian Conservation Corps (CCC) 250,000 men work in camps reforestation/conservation Tennessee Valley Authority (TVA) govt sponsor rgnl dvlpment and public energy Agricultural Adjustment Act (AAA) repeal Prohibition unemployment Federal Emergency Relief Administration (FERA) reform business practices - Congress establishes Securities and Exchange Commission (SEC) regulate stock market to avoid fraud of 1920s on Wall Street BUT New Deal on attack from left and right 5 3 FDR accused by elite Americans in both political parties of attempting to create a class society, a facet of socialism. Additionally, many worried that providing work for unemployed Americans was FDR s effort to take state ownership (nationalize) private business, another critical facet of socialism as articulated by V.I. Lenin. 5