U.S. History II
Chapters 23-24: The 1920’s and Great Depression

Warren G. Harding took office in 1922 and presided over a nation returning to normalcy after World War I. Following Wilson’s activist foreign policies, the nation wanted nothing more than to settle down and let the world fend for itself.

The 1920 census was the first census to report urban dwellers outnumbered rural citizens. More citizens lived in towns or cities with populations greater than 2,500 than in rural communities and farms. More than 10 million citizens lived in cities with populations greater than 1 million in 1920, growing to 15 million by 1930. By 1930, roughly 19 million people migrated to the cities. Rural areas weren’t nearly as exciting as the cities.

While the nation retreated behind the oceans, immigration resumed after the War. Unfortunately, resistance to immigration grew until Congress had to react. In 1921, Congress put an emergency quota law into effect that limited immigration from Europe to only 600,000 people annually; 805,000 Europeans had immigrated to the U.S. in 1921. In 1924, Congress passed the National Origins Act, limiting immigration from Europe to only 150,000 people annually. Most immigrants from areas other than Northern Europe and Britain were discouraged from coming to the U.S.; Asian immigration was barred completely. Still, immigrants continued to come to the U.S. until the Depression. More than 500,000 people came from Mexico in the decade.

Anti-immigrant sentiment fed numerous groups in the decade, but none more than the re-constituted Ku Klux Klan. The Klan had re-emerged in 1915 and begun recruiting by feeding racist, anti-Catholic, and anti-immigrant feelings throughout the nation. The Klan came to dominate entire state governments, especially in Indiana, the West, and the South. The Klan also supported Prohibition. However, the Klan’s power did not last long. A series of scandals among the Klan leadership brought the organization down in 1923.

Racist sentiments continued to dominate most of the nation. In November 1920, in Ocoee, Florida, Klansmen surrounded the mostly black community and burned it to the ground, killing over 50 people and rendering over 450 homeless. Blacks did not return to Ocoee until 1981. Race riots in Tulsa in 1921 practically purged the entire black population from the town.

Blacks in the U.S. did not take these events lightly. Many black Americans had fought in World War I and seen that Europeans did not possess the same racist feelings of white Americans. Southern blacks had been migrating to Northern cities for years, leading to thriving communities in New York and other major cities. In New York, the Harlem neighborhood became a center of black culture.

In 1916, a man named Marcus Garvey had immigrated from Jamaica, preaching Pan-Africanism, or the uniting of the “400 million Negroes of the World into a vast organization to plant the banner of freedom in the great continent of Africa.” Garvey tried to start several businesses, including shipping lines that would unite Africa with black communities throughout the world. Garvey’s businesses all failed, costing his investors everything they had placed in the businesses. The failure of Garvey’s businesses, joined with his denouncing the NAACP and black labor groups, led some of his opponents to turn him in to the federal government for prosecution. Garvey was sent to prison in 1925. President Coolidge later commuted his sentence, and in 1927 Garvey returned to Jamaica.

Black intellectual life centered in Harlem in New York. The noted poet Langston Hughes and others gathered there and, removed from the racism that permeated most of American society, produced some of the best African American works in the nation’s history. The Apollo Theater in Harlem was the place where artists such as Billie Holiday and Ella Fitzgerald launched their careers.

Meanwhile, a musical form originated in New Orleans and spread throughout the nation, eventually settling in Harlem as well. Jazz began as a synthesis of blues and gospel but quickly established itself as a unique style of music. Louis Armstrong’s trumpet, and Jelly Roll Morton’s piano, became the signature sound of Jazz in the 1920’s.

The 1920’s produced some of the nation’s classic culture. F. Scott Fitzgerald wrote The Great Gatsby in 1925; his wife, Zelda, was also a famous writer. Ernest Hemingway wrote The Sun Also Rises and A Farewell to Arms during this decade. Sinclair Lewis write Main Street, Arrowsmith, and Elmer Gantry. Thornton Wilder, famous for his play Our Town, published his first play in 1926. The 20’s were also the decade of George and Ira Gershwin, Cole Porter, and Frank Lloyd Wright.

While the 1920’s were known for artistic culture and a general loosening of morals from the Victorian morality that had prevailed in the U.S., many saw the “progress” as an abandonment of the nation’s moral and religious heritage. The U.S. had been a mostly Protestant nation until this period, but massive Catholic immigration had diluted Protestantism’s hold on the country. Protestant denominations also faced the liberalism that came from Europe during the early part of the 20th century. The “liberal” scholars, building on work done in Germany during the latter half of the 19th century, began questioning such issues as the composition and authorship of Scripture, as well as its reliability. Those scholars who kept the traditional teachings on composition and authorship mostly left the literal meaning of the Scriptures and began looking for other explanations for Scriptural teachings.

Between 1910 and 1915, a series of writings entitled “The Fundamentals: A Testimony to the Truth” appeared to contradict the liberal teachings. Then, in 1920, Baptist layman Curtis Lee Laws first used the term “Fundamentalist” to refer to Christians who were ready “to do battle royal for the Fundamentals.”*1*

Darwinism played a huge role in the Fundamentalist-Modernist controversy, as it came to be known. William Jennings Bryan, the erstwhile perennial Democratic presidential candidate, became one of the chief expounders of Fundamentalism in opposition to Darwinism. Bryan is said to have retorted, “It is better to know the Rock of Ages than the age of rocks.” At least 12 state legislatures passed laws against the teaching of evolution. The issue came to a head in Dayton, Tennessee in 1925. A science teacher, John Scopes, taught a lesson on evolution in biology class. When he was charged with violating the anti-Darwinism law, the American Civil Liberties Union recruited the famous lawyer Clarence Darrow to defend him. Bryan showed up to help the prosecution. Although Bryan won the case, Darrow’s rigorous cross-examination of him regarding supposed contradictions in the Bible left the Bryan looking like a country bumpkin in the media-intensive trial. To most Americans, Darwinism and Darrow won the day. (Interestingly, the state-mandated textbook contained a chapter on evolution — a chapter Scopes skipped because he felt he didn’t know enough about evolution to teach it.)*2*

Politics

Harding proved to be an inept president who trusted his friends too much. Harding gathered some of the most qualified advisors, including Charles Evans Hughes as Secretary of State, Andrew Mellon (a banker) as Secretary of the Treasury, and Hebert Hoover (of the Food Administration fame) as Secretary of Commerce. Unfortunately, Harding also brought his friend Harry Daugherty to serve as Attorney General. Dougherty gave little direction at the Justice Department, and many scandals occurred right under his nose (as well as that of Harding). One of Daugherty’s aides destroyed papers relevant to the investigations and then committed suicide.

The worst scandal occurred in the Department of the Interior. Secretary of the Interior Albert B. Fall leased federal oil reserves at Elk Hills, California and Teapot Dome, Wyoming to private oil companies in return for $400,000 in loans from friends in the oil industry.

In foreign policy, Harding concluded the Berlin Treaty that ended the war with Germany in 1921. The U.S. had to face a major situation during his term: Japan’s growing strength in the Pacific. Coming after World War I, the nation was in no mood to engage in an arms race. At the Washington Naval Conference in 1921, the U.S., Britain, and Japan agreed on the Five Power Treaty: For every 5 ships the U.S. built, the British could also build 5 ships, but the Japanese could build only 3. The Japanese were unhappy, but in return the U.S. agreed not to fortify Guam and the Philippines. The Washington conference was also the site of the Nine Power Treaty which guaranteed China from interference with its internal affairs.

Harding did not live his entire term. While in the Pacific Northwest in 1923, Harding fell ill; he died on 2 August 1923 in San Francisco.

Calvin Coolidge: “Silent Cal”

Where Harding was quite a party man, his vice-president, Calvin Coolidge, was seen as a “typical New Englander.” Coolidge was once bet by a woman at the White House that she could make him say more than 2 words. He replied, “You lose.”

Coolidge was at his family home in Vermont when he received word that Harding had died. The home still had no electricity and no phone. Coolidge’s father, a notary public, administered the oath of office to his son a 2:47 a.m. on 3 August. Coolidge was the only man to have been sworn into the office of President by his father. Coolidge was later sworn in again by former president and Chief Justice William Howard Taft when he returned to Washington.

Coolidge ran for the presidency in 1924 and won his own term. His inauguration was the first ever to be broadcast on radio.

Coolidge, as Harding, was pro-business. Coolidge asked for a tax cut; Congress agreed. Coolidge also supported laws governing the airline and radio industries. Congress twice passed the McNary-Haugen Plan to help American farmers sell their crops overseas; the government would buy the crops and market price and then dump the crops on the world market for whatever they would bring. Coolidge vetoed the bill both times, arguing that the government had no business intervening in market prices.

The U.S. had remained out of the League of Nations, but the country was still actively engaged with Europe. Coolidge tried to bring the U.S. into the World Court, or the Permanent Court of Interational Justice. The Senate refused to ratify the treaty without major conditions for membership, so the U.S. remained outside any League institutions.

Instead, the nation became involved financially with Europe. Germany had been hit with a $33 billion reparations payment as part of the Treaty of Versailles (over $423 billion in 2005 dollars). The German government was in no condition after the war to afford this tremendous debt, so the Coolidge administration endorsed a plan that loaned money to Germany to meet its obligations while reducing its reparations. The Germans borrowed almost $1.5 million from the U.S. over the next 4 years and used it to pay reparations. The European nations then used that money to buy U.S. goods.

One of the more notable — and more novel — foreign policy advances of the Coolidge administration came in 1928. The French foreign minister, Aristide Briand, proposed a mutual security agreement between France and the U.S. The American Secretary of State, Frank Kellogg, proposed going a step farther: a multilateral agreement to renounce war as an instrument of national policy. Briand agreed. The Kellogg-Briand Pact was signed in 1928. The pact was eventually signed by 62 nations, including all the major European powers and the U.S. The U.S. Senate approved the pact by an 85-1 vote.

Although Coolidge was immensely popular, he delivered a simple message to reporters in 1927: “I do not choose to run for President in 1928.” Herbert Hoover, the Secretary of Commerce, became the Republican nominee. Hoover was elected over the Democratic nominee Al Smith. Smith was the first Roman Catholic to capture a major party’s presidential nomination. After his defeat, Smith was said to have sent a one-word telegram to Pope Pius XI: “Unpack.”

Herbert Hoover and the Depression

Hoover was the first president to have a phone installed in the Oval Office. Hoover was a hard worker who worked almost every day. As a former engineer, Hoover was more of a technocrat than a politician.

Hoover faced a problem almost as soon as he was inaugurated: Prohibition. Enforcement was sporadic at best in most of the nation. Hoover appointed a commission to examine enforcement of the 18th Amendment. The commission reported that the Amendment was not being uniformly enforced, and a majority of its members favored repealing the Amendment.

Hoover faced other problems with his presidency. His tendency toward technical solutions made him unpopular with Congress, with whom he never tried to foster good relations. Hoover also alienated the press corps, undoing the good relations that Harding and Coolidge had enjoyed with the reporters. Even worse, Hoover never connected with the public at large as had Harding.

During the summer of 1929, the American economy seemed sound. The New York stock market, the bellwether of the nation’s economy, had nearly doubled from 1928 to September 1929. Stocks were selling at an all-time high.

The trouble started when people began borrowing money to buy stocks. Everyone thought they would make money on the stock market, so the loans seemed like a good investment. Other people began buying “on margin.” This meant they would buy a certain number of shares and use the future value of the stocks to control more stock than they bought. For example, someone would buy 1,000 shares, but they would control 2,000 shares by promising to buy the additional 1,000 shares — at the original price — at a future date. As long as prices continued to climb, this seemed like a good idea. People also borrowed money to buy on margin. By September 1929, stockbrokers had borrowed $8.5 billion (more than $96 billion in 2005 dollars) to invest in the stock market.

The stock market continued to climb; Radio Corporation of America (RCA) went from $85 a share to $420 a share in August 1928. DuPont stock went from $310 to $525 a share.

Not everyone was impressed. Hoover himself told his stock broker to sell some of his holdings. Still, the Dow Jones Industrial Average (DJIA) hit its peak on 3 September 1929 at 381.17.

Then, later in September 1929, stocks lost value early in the month and then began drifting downward. Still, there was no major selloff until 24 October 1929. On that day, known as “Black Thursday,” 13 million shares were sold, but almost no one was buying. Prices sank, leading to a total loss of $9 billion ($102.2 billion in 2005 dollars). Only intervention from J.P. Morgan, Jr. and Co. kept the market from crashing. However, on 29 October 1929, more than 16 million shares were traded; Most markets crashed as few people bought, and others began selling their stocks for whatever price they could get. The DJIA lost 38.33 points on the 28th and 30.57 on the 29th. In 2 days, the DJIA had lost 24% of its value and dropped to 230.07. By November, GE had dropped from $403 a share to $168 a share; Standard Oil fell from $83 a share to $48 a share.

Stock brokers started calling people who had bought on margin, demanding they pay full price for the stocks they controlled. People who had borrowed money to buy stocks or on margin could not repay their loans. Banks affected by the defaults began calling in loans from smaller banks to maintain liquidity, causing the smaller banks to call in loans. The prosperity of the 1920’s never reached the rural areas; 550 small banks had failed in 1928 and 1929, the height of the prosperity. When depositors learned that banks were running short of money because they were trying to pay their loans, they panicked and began withdrawing their savings. Banks failed at an even faster rate; by the end of the year, 659 banks had failed. As banks failed, their deposits were wiped out. Savers lost everything.

The stock market crash had another, predictable outcome. Companies finance their operations and expansions by selling stock. When no one buys stocks, companies find themselves without the funds to finance expansions. Worse, companies found themselves producing goods but finding no one could buy them. Companies began laying off employees to maintain solvency.

What caused the crash and the resulting Depression? By 1929, more than 5% of Americans at the top income level received 1/3 of all the total annual personal income; the bottom 40% of the population received only 1/8 of the available income. About 2.3% of families with incomes above $10,000 a year (more than $113,000 a year in 2005 dollars) held 2/3 of the available savings in banks. These were the people who bought consumer goods. These people were the ones most affected by the bank failures. While more than 80% of the nation’s population had no savings at all and therefore lost no money, they often worked for those who did.

Immediately after the crash, it seemed as if the economy would recover on its own. Hoover actually told the nation at one point, “the fundamental business of the country is sound.” The government could do little about the situation, anyway; most of the government programs didn’t exist to help. There was no unemployment insurance for those thrown out of work; no deposit insurance to protect depositors when banks failed; and almost no pension programs. Furthermore, many in government felt that the depression may not have been altogether bad; it would eliminate many of the abuses that led to the situation. In the early months of 1930, everyone thought they were right. The DJIA actually recovered to 293.43 on 12 April 1930.

Then, Congress enacted the Smoot-Hawley Tariff; Hoover signed the legislation into law on 17 June 1930. The tariff imposed a rate of 60% on more than 3,200 imported products. In theory, the tariff should have protected domestic industries and spurred production. In reality, trade plummeted, costing many jobs in both import and export-related industries. Imports fell from $4.4 billion to $1.5 billion by 1933, while exports fell from $5.4 billion to $2.1 billion. The nation’s unemployment rate was at 9% (almost 4 million people) when the bill was made law; in 1931, unemployment rose to 16%, and in 1933 it hit 25%.

The tariff also hit Europe heavily. Europeans could no longer sell goods to the U.S., costing jobs there. Furthermore, American banks, on the brink of failure themselves, could no longer loan money to Germany to pay its reparations. Germany cut its payments to France, costing the French government needed revenue. Hoover declared on 21 June 1931 that the U.S. would observe an 18-month moratorium on the collection of foreign debts; the French dithered for 2 weeks, sending Germany into chaos. Great Britain devalued the pound sterling within months in a desperate attempt to make its goods more competitive on foreign markets. Other nations followed, causing a death spiral of national currencies.

In 1930, 1,350 banks failed in the U.S. Corporations began layoffs to reduce costs even when Hoover asked them not to, causing him to lose credibility with the nation. In October 1931, Hoover tried to persuade bankers to create the National Credit Corporation to underwrite failed banks and insure their deposits. The top bankers were unwilling to buy the assets of failed competitors, and the scheme failed. Hoover was handicapped by his belief that the government should play only a regulatory role in the economy. In 1930 and 1931, a drought hit the Midwest. Congress responded with $60 million to help victims buy food and fuel, but Hoover disagreed, saying government money should only feed farm animals, not the farmers themselves. One Congressman responded by saying the president would give food to “jackasses but not starving babies.”

As unemployment grew, so did the homeless rate. Thousands lost their homes and began wandering the nation looking for jobs. Shantytowns called “Hoovervilles” appeared outside major cities. Despair set in for many cities. Bread riots hit several cities. Communists, a new group in American society who emerged only after the Soviet Revolution of 1917, predicted the end of capitalism in the U.S.

Overseas, the depression toppled many governments and led to the ascension of totalitarian states. In Asia, war broke out between Japan and China over Manchuria, a mineral-rich area of northern China. Japan occupied Manchuria to gain access to its mineral wealth to provide jobs back home. The Japanese government planned for a time when Japan would control not only Manchuria but all the Pacific. The League of Nations criticized the Japanese invasion, but Japan responded by withdrawing from the League. The U.S. was too weak militarily to enforce its nonaggression treaties regarding China (of which Japan was also a signatory). In Germany, Adolph Hitler won the office of chancellor in 1933 when conservatives in the Reichstag supported him in an effort to preserve power in the country. Hitler appointed Hermann Goering as Minister of Interior in control of the police. Hitler immediately called for new elections; the Nazis won more seats. The Nazis later burned the Reichstag building and blamed it on the Communists. Hitler suspended civil rights as a result, censoring the press and abolishing free speech. In March 1933, the Reichstag voted Hitler dictatorial powers in an effort to deal with the economic crisis gripping the nation.

Back in the U.S., Hoover faced immense unpopularity for the Depression. His plans for voluntary aid to the unemployed and suffering lacked popular support; in many areas, people were too worried about their own affairs to try to help their neighbors. As the 1932 elections drew near, New York governor Franklin Delano Roosevelt (a distant cousin of Teddy Roosevelt who had married Teddy’s niece Eleanor) built a strong campaign for the Democratic presidential nomination. Roosevelt won the nomination at the national convention in Chicago; his closest rival, John Garner of Texas, became his running mate.

The federal budget faced a deficit because of declining tax revenues. Congress passed new taxes on corporations, estates, and incomes. Hoover’s unpopularity grew worse with the implementation of the new taxes. Hoover resisted efforts to pass relief legislation for the poor, but he encouraged support for wealthy businesses.

Then, in 1932, the final blow in Hoover’s presidency came when veterans marched on Washington, D.C. In World War I, war veterans were promised cash bonuses to be paid in 1945. The veterans wanted their money when they needed it, and they needed it desperately in 1932. Hoover vetoed a bill to allow veterans to borrow against their bonuses in 1931, and Congress refused to pay the bonuses early in 1932. Thousands of veterans responded by going to Washington during the summer of 1932. City authorities did their best to accommodate the veterans, but Hoover pointedly ignored them. When Congress adjourned without paying the bonuses, Hoover told the veterans to go home and allocated $100,000 for the return trip. Some left, disgusted with Hoover; others stayed to try to change the government’s mind.

On 28 July, the secretary of war Patrick Hurley ordered the police to remove the marchers who were staying in government buildings. Officers began shooting veterans, killing 2. Then, the president ordered the Army to remove the marchers from their main camp on the Anacostia River. General Douglas McArthur sent his troops storming into the camp, complete with tanks and machine guns. As word of the assault spread through the nation, public opinion rejected Hoover.

As the election drew near, Roosevelt campaigned vigorously in spite of his poor health (he had been stricken with polio in 1921 and could no longer walk). Hoover also campaigned hard, but he had been abandoned by the GOP and was immensely unpopular with the voters. Roosevelt won in a landslide, winning the Electoral College by a vote of 472 to 59. Democrats also won a majority in both houses of Congress.

During the months between the election in November and FDR’s inauguration in March, the economy worsened. Congress passed the 20th Amendment to shorten the time between election and inauguration, but it would not go into effect until 1937. Hoover tried to get FDR’s support for his efforts to help; Roosevelt refused to box himself into any solutions until he took office.

1,453 banks failed in 1932. In October, the governor of Nevada declared a “bank holiday” that lasted 12 days to prevent depositors from withdrawing their money. The governor of Michigan declared a bank holiday for 14 February 1934, and governors in 9 other states joined him. Banks in New York City shut their doors on 4 March.

Roosevelt took office in the midst of the worst financial disaster that ever faced the nation. The nation waited to see how he would respond. FDR’s programs would change the nation permanently and definitively settle the issue of government involvement in economic affairs.

*1*Religious Movements Homepage: Fundamentalism. Available online: http://religiousmovements.lib.virginia.edu/nrms/fund.html, last accessed 20 February 2006.
*2*Source: “John T. Scopes — Wikipedia, the free encyclopedia. Available online: http://en.wikipedia.org/wiki/John_Scopes, last accessed 20 February 2006.