Ch. 14: Politics and Prosperity (1920-1929)

1. Ch. 14: Politics and Prosperity (1920-1929)

2. Section 1: A Republican Decade • The Republican Party dominated all three branches of government throughout the entire 1920s, including the Presidency. Presidents were Warren Harding, Calvin Coolidge, and Herbert Hoover.

3. Russian Revolution • 1917 Bolshevik Revolution • Vladimir Lenin: Red Army • Resistors: White Army • The U.S. backed the Whites because the Bolsheviks threatened their business investments in Russia.

4. Russian Revolution/Communism • The Reds retained control and in 1922, the new nation became known as the Union of Soviet Socialist Republics (USSR) or Soviet Union. • Communism became the official ideology of the USSR, which meant… • Government ownership of all land and property • Single political party controlled government

5. Red Scare • Americans feared Communism would spread throughout the world. • The intense fear of the spreading of communism is referred to as a Red Scare.

6. Schenck v. U.S. • During WWI, Charles Schenck urged draftees not to report for duty and was convicted for breaking the espionage and sedition acts. • He appealed on the premise of free speech. • Supreme Court ruled that the government is justified in silencing free speech in the face of “clear and present danger”.

7. The Palmer Raids • U.S. Attorney General, A. Mitchell Palmer, set up a special force to conduct raids and arrest suspected “subversives”. • Targets included suspected Communists, Socialists, and anarchists. • Federal agents arrested thousands of suspected radicals without evidence. • Most of the suspects were born overseas. • 500+ were deported.

8. Sacco and Vanzetti • Nicola Sacco and Bartolomeo Vanzetti, two Italian, anarchist immigrants, were arrested, convicted, and sentenced to death for a murder case in Massachusetts. • Many Americans believed the men to be innocent, that the men were targeted and sentenced due to their immigrant status and radical political beliefs.

9. Labor Strikes • A wave of labor strikes preceded the Red Scare of the 1920s. • Many believed that Communist “agitators” were behind the labor unrest. • Hindsight shows differently: inflation caused the cost of living to double after WWI, while wages had stayed the same.

10. Boston Police Strike • Boston police officers hadn’t received a raise since the start of WWI. • Tried to unionize- 19 officers were fired. • The entire police force went on strike. • Rioting broke out immediately and there were not police to intervene.

11. Steel and Coal Strikes • In 1919, steelworkers launched a strike against the U.S. Steel Corp. • 350,000 workers walked off the job. • Calling it the work of communists, U.S. Steel fought hard against the strike. • Thousands of African Americans were brought up from the South to fill the place of the strikers, the strike failed and the workers went back.

12. Strikes Decline • After 1920, the spike in union membership and strikes began to decline with the booming economy of the 20s. • Public and governmental opposition played a role in reducing strikes, as well as the upturn of the economy.

13. Harding Presidency • Warren G. Harding became president in 1921, succeeding Woodrow Wilson. • “return to normalcy” • Americans were weary from WWI and the labor strikes that immediately followed, wanted “normalcy”.

14. Foreign Policy • Harding was an isolationist, he avoided political or economic alliances with foreign countries. • He had opposed the League of Nations. • Also called for disarmament, nations of the world to voluntarily give up weapons to “disarm” the world.

15. Domestic Issues • Increased nativism (anti-immigrant sentiment) • Religion: opposed to Catholics, Orthodox Christians or Jews. • Jobs: feared immigrants would take their jobs. • Urban conditions: blamed slums and corruption on immigrants. • Harding placed a quota on immigration, greatly reduced the number of immigrants after 1922.

16. Teapot Dome Scandal • Harding’s Secretary of the Interior, Albert B. Fall, secretly gave oil-drilling rights on government oil fields in Elk Hills, California and Teapot Dome, Wyoming to private oil companies. • Fall received more than $300,000 in illegal payments. • Teapot Dome is considered one of the greatest scandals in American politics.

17. Coolidge Becomes President • Harding died in 1923, possibly from heart problems and stress related to Teapot Dome and other scandals. • Vice President, Calvin Coolidge, became President.

18. Coolidge and Laissez Faire • “The chief business of the American people is business.” • Coolidge believed in Laissez Faire business philosophy, no government involvement. • Cut business taxes and deregulated industry.

19. Kellogg-Briand Pact • Frank B. Kellogg, Coolidge’s Secretary of State, made an agreement with French Foreign Minister Aristide Briand that the U.S. and France would not go to war. • Over 60 countries eventually joined the pact, which proved to mean very little due to a lack of enforcement.

20. 1928 Election • Coolidge decided not to run for reelection in 1928, despite eligibility. • Republicans nominated Herbert Hoover, who won the election.

21. Section 2: A Business Boom • The 1920s was marked by an economic boom, deregulation, and prosperity, until the stock market crash in 1929.

22. A Consumer Economy • Average wages rose 28 percent between 1914-1926. • During the same time period, the number of millionaires in the U.S. doubled. • With more income, Americans purchased more goods and services, which in turn strengthened the economy and their own wages.

23. Buying on Credit • Prior to the 20s, Americans paid cash for most items. • Manufacturers began offering installment plans. • Customers paid some money up front, and the rest at intervals over a period of time.

24. Electric Power • New home appliances demanded unprecedented amounts of electricity. • From 1913-1917, the number of electric customers more than quadrupled. • Increased the demand for new goods in the home.

25. Advertising • New forms of advertising sought to popularize new goods. • Earlier advertising had listed information about the product; fabric, design, price, etc. • New advertising spoke less about the product and more about the consumer, how the product would improve the consumer’s image.

26. Rise in Productivity • Electric power, new advertising, and installment plans all launched a buying spree in the 1920s. • To meet demands, productivity increased. • Gross National Product (GNP), the total measure of goods and services produced annually, grew by 6% each year during the 1920s. • GNP had grown by less than 1% a year from 1910-1920.

27. Henry Ford and the Automobile • The first automobiles were invented in Germany in the 1880s, but were inaccessible to the public. • From 1892-1920, 8 million cars were produced and sold. • During the 20s alone, 15 million cars were sold, many from the innovative business model of Henry Ford.

28. Henry Ford • Originally an engineer of a lighting company, Ford spent his spare time inventing a “horseless carriage”. • By 1903 he had started his own automobile company and started selling his version of the automobile, the Model T.

29. Ford and Assembly Line • Henry Ford perfected the assembly line and mass production. • He did not invent the concept of an assembly line, but greatly enhanced its efficiency. • At Ford Plant in Detroit, Michigan, they produced a Model T every 24 seconds. • Ford built half of all the automobiles in the world from 1908-1927, 15 million total.

30. Business Model/Fordism • Henry Ford offered an unprecedented business model. • In 1914, he announced he would pay workers $5/day and limit work weeks to 40 hours (5, 8 hour days) • This was more than double what he had been paying ($2.34/day), or what a laborer could earn anywhere else.

31. Business Model/Fordism • Jobs at Ford became very competitive so Ford was able to demand hard work from employees. • Ford was also able to greatly reduce the cost of an automobile. • The combination of increasing wages while reducing costs of a finished car allowed the workers themselves to purchase Ford automobiles, causing a full-circle economy. • This economic philosophy is sometimes called Fordism. Ford was able to reduce the cost of a Model T every year. From $825 in 1908 to $360 in 1916

32. Industrial Growth • Automobile production became the largest manufacturing industry during the 20s. • Cars became a symbol of American identity. • Created new industries. • Garages, car dealerships, gas stations, motels, restaurants, road construction. • Cars also boosted the housing market by enabling an expansion of suburbia.

33. Bypassed by the Boom • The new prosperity bypassed a significant portion of the country. • Unskilled laborers, immigrants, and African Americans remained poor. • Farmers struggled during the 1920s. • After WWI, food prices dropped and farmers struggled to remain in business. • Many new conveniences, such as electricity, did not extend to rural areas.

34. Section 3: Late 1920s Economy • Overwhelming optimism lead many Americans into risky investments, leading to the collapse of the stock market and the Great Depression.

35. “Wonderful Prosperity” • Stock prices soared in the late 1920s. • In 1925, the value of all stocks was $27 billion. • 1929: $87 billion. • Workers wages rose more than 40 percent during the decade. • In 1928, the New York Times described the year as one “of unprecedented advance, of wonderful prosperity.”

36. “Everybody Ought to Be Rich” • Americans believed wealth was available even to ordinary people. • John J. Raskob: stated an income of $15/week over 20 years could bring a $400/month income from investments. • “Anyone not only can be rich, but ought to be rich.”

37. Welfare Capitalism • To combat unsatisfied labor unions, many larger companies became proactive in meeting their employees’ demands. • By raising wages, offering new benefits like paid vacation, health plans, and recreation programs, employers were able to strengthen company loyalty and morale. • Became known as welfare capitalism.

38. Uneven Prosperity • It was mainly the rich who benefited from this success. • In 1929, 0.1% of the families had incomes of over $100,000 and 34% of all national savings. • 71% of families earned less than $2,500 a year and had little or no savings.

41. Personal Debt • Credit spending led to increased levels of personal debt. • The new credit option gave Americans the illusion that they could have it all. • Traditionally, Americans feared debt, but with talk of abundant prosperity, they counted on future income to pay for their purchases.

42. Playing the Stock Market • “get-rich-quick” success stories prompted small investors to enter the stock market. • Prior to WWI, only the wealthiest Americans were invested in the stock market. • The new wealth of the 20s beckoned ordinary people to play the market, sometimes investing their life savings.

43. Buying on Margin • Stockbrokers encouraged buying on the margin. • Investors paid a fraction of the stocks price and borrowed the rest. • Brokers charged high interest rates on the amount borrowed.

44. Oversupply • Rising productivity brought prosperity, but eventually created a problem: oversupply. • Goods became produced more rapidly than consumers demanded them. • Although the stock market continued to rise, some industries, including the automobile industry, began to slump in the late 20s.

45. Trouble for Farmers and Workers • Falling crop prices after WWI. • Many farmers lost their farms. • Many rural banks failed when loans were not repaid. • Life also remained difficult for most factory workers who worked long hours for low pay.

46. This all leads to…