Politics in the 1920s

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Politics in the 1920s

During the Progressive Era (roughly 1900–14), many U.S. leaders and citizens believed that the government should take an active role in protecting individuals, especially children, workers, and consumers. They wanted the government to be free to make laws that would, for example, limit the size of companies so that smaller businesses could compete or stop employers from hiring children to work in their factories. In fact, U.S. involvement in World War I (1914–18; the United States entered the war in 1917) could be seen as a large-scale application of this belief, because it was supposed to make the whole world "safe for democracy" (a common saying of the period).

But that extremely bloody, destructive war took a terrible toll on humanity. When it was over, many people in the United States began to call for an isolationist stance, meaning that the nation should stay out of other countries' affairs and look after its own concerns. At the same time, they adopted a different outlook on the role that government should play in day-to-day life.

The leader of the United States during the war and for much of the Progressive Era that preceded it had been the

reform-minded, idealistic Woodrow Wilson (1856–1924; served 1913–21). He had been the candidate of the Democratic Party, whose members tended to believe that government should take an active role in improving people's lives. But after the war, and for the entire decade of the 1920s, the men chosen to lead the nation would come from the Republican Party. Members of this political organization were generally more business-oriented. They felt that those active in successful businesses were best suited to direct national affairs. They wanted government to act as a supportive partner to businesses but not try to limit or control them.

The economic growth and prosperity that occurred in the United States during the 1920s (following a short period of economic recession in the first years of the decade) convinced most people that the Republicans were right. Thus the story of politics and government during this period involves an unusually strong partnership between politicians and business. Although there were still voices calling for the government to take a stronger role in reform and people who worried about the poor and the oppressed, the laissez-faire philosophy (the belief that government should loosen its control of the economy and society in general) prevailed. The majority of U.S. citizens seemed to agree with this point of view. Only the crisis of the Great Depression, the period of economic downturn and hardship that began at the end of the 1920s and lasted until the early 1940s, would finally change their minds.

The 1920 election

After World War I ended in 1918, President Wilson had traveled to Europe to take part in peace talks with the heads of the countries—Great Britain, France, and Italy—known as the Allies. Held in Versailles, France, these discussions were to decide on the terms of the Treaty of Versailles, the document that would officially end the war, including the price that Germany would have to pay for starting the war. Wilson brought with him his own plan for the shape that peace should take, which he called the Fourteen Points. The most important of these points involved the establishment of a League of Nations, an organization that would help the countries of the world avoid another terrible war.

Norman Thomas Crusades for Liberal Causes

In a decade dominated by the Republican Party, Norman Thomas was something of a political maverick, or an independent-minded person. As leader of the Socialist movement in the United States, he represented liberal views that were out of the mainstream in a period in which most citizens were conservatives. Yet in his six bids for the presidency, Thomas attracted considerable support.

Born on November 20, 1884, in Marion, Ohio, Thomas was the son of a Presbyterian minister. He studied first at Princeton University in New Jersey, then at a theological seminary. He was ordained a minister in 1911 and assigned to the East Harlem Presbyterian Church in New York City, working among the urban poor.

Thomas was opposed to World War I and joined a pacifist organization called the Fellowship of Reconciliation. He later became one of the founders of the American Civil Liberties Union (ACLU), which provided support for conscientious objectors, who refused to serve in the military because they believed that armed conflict was wrong.

In 1918 Thomas resigned his ministerial position and became an activist for the Socialist Party, succeeding labor leader Eugene V. Debs as the organization's director after Debs's death. In this role, Thomas spoke out in favor of public ownership of industry, natural resources, and transportation. He also pushed for labor reforms like the five-day workweek and the minimum wage. Thomas ran as the Socialist Party's presidential candidates in six elections between 1928 and 1948, earning an impressive number of votes for a third-party candidate (especially in 1932, when 884,781 voters cast ballots for him).

Thomas's relative success suggested that not all U.S. citizens were happy with the laissez-faire government, which featured loosened control of the economy and society in general, the Republicans had put in place. Nor were these people benefiting equally from the general economic prosperity of the Roaring Twenties. The Socialist Party gradually lost supporters, however, when the New Deal program introduced by President Franklin D. Roosevelt incorporated many of its ideas. The party also grew increasingly divided over U.S. foreign policy.

Although Thomas retired from politics in 1948, he continued to actively promote such causes as global peace, nuclear disarmament, and antipoverty measures. He died on December 19, 1968.

Wilson's dream of international cooperation would not be realized, however. Although some of his Fourteen Points, including the League of Nations, were accepted by the Allies, others were not, and Wilson was disappointed by their determination (which he saw as greed) to get as much money as possible from the defeated Germany. As it turned out, predictions that this would create great bitterness among Germans and lead to another war were correct. Meanwhile, Wilson faced opposition at home to the League of Nations. Wilson saw his proposal fail because he was unwilling to compromise on some requested changes to the League. Although the United States eventually signed a document officially ending the war, the nation never did sign the Treaty of Versailles.

Two political conventions

Exhausted and discouraged, Wilson suffered a stroke and lay gravely ill for many months. As the summer convention to choose a Democratic candidate for the 1920 election approached, he had mostly recovered. Democrats wondered if he would pursue a third term as president. Wilson's delay in facing the question meant that his party was not quite prepared when, in the end, he decided not to run. They were divided on several important issues, including whether Prohibition (the ban on the sale or manufacture of alcoholic beverages that had been written into the U.S. Constitution with the Eighteenth Amendment) was a good idea, and what should be done to help struggling farmers.

In the early twentieth century political conventions were unlike those of the twenty-first century. When the convention began, the delegates really had no idea who their candidate would be, and it often took many ballots or votes for them to choose one. This was certainly the case in 1920, when the Democrats went through forty-four vote counts before deciding on Ohio governor James M. Cox (1870–1957) as their rather lackluster, middle-of-the-road candidate. Assistant Secretary of the Navy and future president Franklin D. Roosevelt (1882–1945) was chosen as Cox's vice presidential running mate. The Democratic platform (a set of official positions on various issues) included support for the League of Nations, the Nineteenth Amendment (which would give women the right to vote), and agricultural and labor reform measures. It also supported free speech and freedom of the press and opposed lavish campaign spending.

At their own 1920 convention, the Republicans had less trouble coming up with a candidate to challenge Cox. On the tenth ballot, they chose another Ohioan, a former newspaper publisher and current senator named Warren Gamaliel Harding (1865–1923; served 1921–23) who was known for his moderate views and for his strong party loyalty. The vice presidential candidate was Massachusetts governor Calvin Coolidge (1872–1933; served 1923–29), who had impressed his fellow Republicans with his firm handling of a police strike in Boston. The Republican platform supported cuts in government spending and taxes and more anti-immigration legislation.

A landslide victory

Harding took a relaxed approach to campaigning. He went back to his hometown of Marion, Ohio, and let it be known that he would share his views with anyone who cared to visit him there. A steady stream of people did indeed gather in front of Harding's front porch, where he stood doing what he called "bloviating" (making speeches that were peppered with grandiose phrases and patriotic cliches). Harding was friendly and personable, and he actually enjoyed meeting and chatting with people; he also got along well with the press, partly due to his position as a former newspaper publisher. The vice presidential candidate, whose personality was in many ways the opposite of Harding's, did not campaign very aggressively either, making only one eight-day tour through the southern states (which were traditionally Democratic strongholds).

The Democrats, on the other hand, put a lot of effort into campaigning. Roosevelt was especially energetic, averaging ten speeches a day during the campaign season. His hard work did not pay off, though. The Democrats faced some major obstacles, including their association with the unpopular Woodrow Wilson. Ordinary U.S. citizens approved of the Republican program of lower taxes and less government interference, and Harding's promise of a "return to normalcy" appealed to their postwar need for peace and quiet. (See Warren G. Harding's "Return to Normalcy" primary source entry.) Harding won by a landslide, gaining 404 electoral votes to Cox's 127, as well as 60 percent of the popular vote to Cox's 37 percent. This was the widest margin by which any U.S. president had ever been elected.

A partnership between business and government

Thus began a decade of Republican dominance of the U.S. government. As Harding took office in the early spring of 1921, the economy was in something of a downturn caused by the dips in manufacturing and employment that had followed the end of the war. The reason for this downturn was that foreign orders for war materials and other goods dried up and returning soldiers flooded the job market. Convinced that the economy would improve and prosper if the federal government would give it space to do so, Harding went about putting into place his program of cooperation between government and business.

Harding chose some well-qualified men to head up this program, including Secretary of Commerce Herbert Hoover (1874–1964), who would himself be president by the end of the decade. Hoover called for more efficiency and for a system he called "cooperative capitalism" (in a capitalist system, a country's industry and trade are controlled by private owners for profit), which involved loosening many regulations while leaving some in place.

Another important figure in Harding's administration was Andrew Mellon (1855–1937), who would serve as Secretary of the Treasury under all three Republican presidents of the 1920s. Mellon was a strong champion of tax reform. He believed it was essential to reduce government spending while also lowering taxes, so that wealthy people could make more investments. According to what has become known as the "trickle-down" theory of economics, the result would be more jobs and benefits for everybody. This philosophy would become popular again in the 1980s under President Ronald Reagan (1911–2004; served 1981–89).

Harding's two years in office were characterized by this partnership between business and government and by the general promotion of expansion in industry and business. Between 1922 and 1927, the economy would grow at an impressive rate of 7 percent per year. The nation would become steadily more prosperous throughout the decade, with a corresponding rise in consumerism.

Farmers are in trouble

The picture was not so bright in the agricultural sector, however. Even though the 1920 census (a population count taken every ten years) had shown that more U.S. citizens now lived in urban than rural areas, much of the nation was still dominated by agriculture. The United States had 400 million acres of farmland, on which lived and worked about one-third of the country's population. As the 1920s began record amounts of crops were being grown, yet farmers were in trouble. The problem was that farmers were producing many more crops than were needed while also paying high prices for the materials and equipment they used to operate their farms. This meant that they earned very low profits and incurred large debts.

Even the formation of a farm bloc (a group of legislators or others who band together to lobby in favor of a special interest) that called for more generous credit for farmers, higher tariffs (taxes) on exports, and cooperative marketing proved ineffective. The core problems, especially those of production surpluses and the gap between low prices for crops and high operating costs, remained unresolved. By the time the Great Depression arrived in 1929, farmers had already endured a decade of hardship.

Restricting immigration

Another important aspect of Harding's administration was its support for new restrictions on immigration. During the 1920s the traditional image of the United States as a welcoming refuge for those seeking better lives shifted dramatically. Once foreigners had been encouraged to move to the United States, because their willingness to take low-paying jobs made them attractive as employees. Early waves of immigrants had been

dominated by people from northern European countries like England and the Netherlands, whose values and habits were similar to those of most native-born U.S. residents. But the early years of the nineteenth century had seen a big increase in immigrants from southern Europe, especially Italy, and eastern Europe, such as Poland and Yugoslavia. Whereas the United States had historically been dominated by Protestants—such as Baptists, Methodists, and Presbyterians—many of the newcomers were Catholic or Jewish. They came from unfamiliar cultures. Importantly, many of these immigrants did not share mainstream citizens' disapproval of liquor.

The fear and distrust that many U.S. residents felt for foreigners was increased by World War I and by the Communist takeover that resulted from Russia's Bolshevik Revolution in 1917. (Communism is a system where all property is jointly owned by the whole community.) Native-born people worried that their beloved U.S. culture was under attack by outsiders with unsavory habits and radical political views. The result was a movement toward "nativism" (favoring native-born citizens over immigrants) and toward new laws to curb the influx of immigrants from places seen as undesirable. In 1921 Congress passed an emergency law that limited immigration to 355,000 immigrants per year (those from Asia had already been severely restricted). Each nation would be allowed a quota (fixed number) of 3 percent of whatever number of residents from that country had been in the United States at the time of the 1910 census.

Despite some resistance from business leaders, who hated to lose so much cheap labor, this trend continued. It was helped by the popularity of eugenics, a pseudoscience that not only claimed to prove the inferiority of anyone who was not of northern European heritage but also warned that U.S. society would be doomed if its white citizens mixed with people who were biologically inferior. In 1924 Congress passed the National Origins Act, which capped immigration at 150,000 and lowered the earlier country quotas to 2 percent of foreign-born residents at the time of the 1890 census when very few southern and eastern Europeans had been in the United States. Immigration from Asian countries was banned altogether.

An unexpected loss

Even though Harding had made some wise choices in staffing his administration—including Hoover, Mellon, and Secretary of State Charles Evans Hughes (1862–1948)—he had also made some poor ones. Harding was not just a loyal Republican, he was a loyal friend, but some of his friends proved unworthy of his faithfulness. In the middle of 1923 rumors began circulating that Harding's administration was riddled with corruption. Key figures in the scandals would include not only attorney general Harry M. Daugherty but also Interior Secretary Albert B. Fall and Charles Forbes, who was the head of the Veteran's Bureau.

It is thought that by the summer of 1923, when Harding embarked on a speaking tour to the West, he probably already knew something about the scandals that were soon to break wide open. In any case, Harding would not be around when the truth was revealed. On August 23, he died suddenly in a hotel in San Francisco, California, of an unidentified ailment that was probably related to heart disease.

When word of the president's death reached Vice President Calvin Coolidge, he was vacationing at his family home in Plymouth Notch, Vermont. Coolidge's father woke him up with the news at 2:30 a.m. The elder Coolidge was a notary public, and as such, was authorized to deliver the oath of office to his son. Upon returning to Washington, D.C., Coolidge took the oath of office again.

As vice president, Coolidge had been an especially quiet, unassuming presence in the Harding administration, and became know as "Silent Cal" due to his unwillingness to engage in small talk. When he took over as president, he vowed to continue with the policies that Harding had established. Coolidge's calm, low-key manner and his reputation for honesty and integrity did much to reassure the U.S. people after the unexpected loss of their elected president. Just as Coolidge took office, the scandals that had swirled beneath the surface of Harding's presidency broke through. Coolidge quickly took steps to see that the wrongdoers were investigated and prosecuted, which also helped to distance him from the corruption that had been exposed.

The Teapot Dome scandal

All of the scandals involved public officials who had taken advantage of their positions to gain something for themselves at public expense. Some commentators have suggested that the close links forged between business and government during the 1920s created an atmosphere in which corruption could, and did, thrive. In any case, some of the perpetrators were among those closest to Harding, including his old friend Harry Daugherty, who was accused of taking bribes from former clients in exchange for political favors, and Charles Forbes of the Veteran's Bureau, who was convicted of cheating his agency out of thousands of dollars that went into his own bank account. Of all the political misdeeds that occurred during the 1920s, however, the Teapot Dome scandal is perhaps the best known.

Teapot Dome involved some rights to oil reserves in the western United States. During the Progressive Era, conservationists (people who believe in protecting or restoring the natural environment) had sought to preserve these areas by making them federal property. Thus these areas were off limits to private oil companies that would have liked to lease these lands so that they could drill for and sell the oil located there. Because the oil was eventually to be used to fuel warships, the reserves were under the control of the Department of the Navy.

When Harding took office, he appointed a staunch anti-conservationist, New Mexico senator Albert B. Fall, as secretary of the interior (the federal department responsible for looking after government-owned land). Fall persuaded Secretary of the Navy Edwin Denby to transfer the rights to the western oil reserves to the Interior Department. Then he started granting oil drilling rights to several of his friends in the oil industry. Edward L. Doheny of Pan-American Petroleum and Transport Company got the rights to reserves in California, while Harry Sinclair of Mammoth Oil Company got those at Teapot Dome, Wyoming.

Conservationists who were concerned about these developments, along with some members of Congress, started an investigation that led to public hearings that began on October 23, 1923. The case began to get a lot of attention after it was learned that Fall had, as he put it, "borrowed" about $100,000 from Doheny. The hearings, which lasted through the spring of 1924, resulted in Fall's conviction on bribery charges. Fall became the first member of a president's cabinet to go to prison, while Daugherty and Denby were both forced to resign; two other men who were probably involved in the scandal committed suicide. Coolidge, meanwhile, emerged untouched by the taint of corruption.

Coolidge wins reelection

Coolidge was true to his word, continuing with the same conservative, pro-business policies, as well as many of the same administration officials, that Harding had promoted. As 1924 unfolded, Coolidge decided to run for reelection, hoping to win the presidency on his own merits rather than by chance.

Once again the Democrats found it difficult to choose a candidate. For a while the favorite was the widely respected William McAdoo (1863–1941), who had been both Wilson's treasury secretary and his son-in-law. But McAdoo's reputation had been scarred, even though he was a Democrat, because he had served as a legal adviser to one of the men involved in the Teapot Dome scandal, and because he had accepted support from the Ku Klux Klan. (The Ku Klux Klan is a white terrorist group first formed in the South just after the American Civil War, which once again emerged in the early 1920s.)

Eventually the Democrats selected John W. Davis (1873–1955), a lawyer and diplomat with a conservative, pro-business approach not very different from that of Coolidge. This election also featured the participation of a third-party candidate, Senator Robert LaFollette (1855–1925) of Wisconsin, who ran on the Progressive Party ticket. LaFollette's platform included support for a tax increase for wealthy citizens, an end to child labor, encouraging urban and rural workers to unite, and condemning the Ku Klux Klan.

Coolidge's approach to campaigning was in keeping with his nickname: he was almost completely silent on the issues. Instead he allowed his vice presidential running mate, Charles G. Dawes (1865–1951) to take on the burden of active campaigning. (Part of the reason may have been that Coolidge's son Calvin Jr. had died of blood poisoning that summer after getting a blister on his toe while playing tennis on the White House grounds.) In the end Coolidge's low-key approach—his slogan was "Keep Cool with Coolidge"—to the election mattered not at all, because he won decisively. He earned an impressive 54 percent of the popular vote to Davis's 29 percent; LaFollette won a surprisingly large 17 percent.

Coolidge continues laissez-faire policies

Coolidge's victory had shown that the laissez-faire approach to government he favored was strongly supported by the majority of U.S. citizens. The second (and first full) term of his presidency was marked by his belief that private enterprise was the backbone of U.S. society and that the main purpose of government was to assist business in every way possible. His most famous line was that "the chief business of America is business," uttered in a speech he made a few months after his inauguration. He pushed for high tariffs, low taxes, and prompt payment of the loans the United States had made to the Allies during World War I. He and Treasury Secretary Mellon sought to cut government expenses dramatically while also loosening the government's grip on many industries. For example, budget cuts meant that there were fewer inspectors to keep track of the quality of the food and drugs that U.S. citizens consumed.

Despite his general popularity, Coolidge was disliked by farmers because he did not support efforts to provide government assistance to the agricultural sector. In both 1927 and 1928 Coolidge vetoed the McNary-Haugen Bill, which called for price supports for agricultural products (in other words, farmers would charge higher prices for their crops than the market demanded to help close the gap between their profits and expenses). Although the bill was flawed, it did call attention to the problem of surpluses and to the idea of paying farmers to reduce the number of acres they cultivated. This reform strategy would be used later, after the Great Depression made the farmers' problems inescapable.

The revival of the U.S. economy that occurred during the 1920s was so closely associated with the man who was president during much of the decade that it was often referred to as Coolidge Prosperity. The country was producing more goods and wages were rising, allowing many people to buy things like cars and appliances. The unemployment rate fell from 11.7 percent to 5 percent. At the same time, though, the country was dominated by a get-rich-quick mood that led to widespread speculation on the stock market, with investors buying stocks on credit in the hope of making huge profits with which to pay back their debts. This and other indicators were already warning some more cautious observers that trouble was on the way.

Foreign affairs

On the international front, Coolidge's approach to foreign affairs was not really as isolationist as it may seem. For one thing, U.S. businesses were still interested in selling their products to foreign markets. For another, the United States was intervening in several troubled countries in the Caribbean and Central America, including Haiti, Honduras, and the Dominican Republic. In Nicaragua, concerned about the region's stability and about preventing the spread of radical political ideas, the United States lent support to a conservative government, despite protests that it should stay out of other nations' affairs.

Another notable political event of Coolidge's presidency was the signing of the Kellogg-Briand Pact, an agreement intended to outlaw war between the nations of the world, justifying armed conflict only as a last resort. (See the Kellogg-Briand Pact Primary Source entry.) The idea of taking such a step had been discussed among peace activists since the end of World War I, when many began to fear that Germany's harsh treatment under the Versailles Treaty would lead that country to start another war. One of these activists was a Columbia University professor named James T. Shotwell, who proposed a peace agreement to French foreign minister Aristide Briand (1862–1932).

Briand subsequently announced that France would be willing to sign such an agreement with the United States. Secretary of State Frank B. Kellogg (1856–1937) was initially cool to the idea, but pressure exerted by members of Congress, peace activists, and the press finally changed his position. The Kellogg-Briand Pact was signed by fifteen nations in August 1928 (eventually a total of sixty-two countries signed the agreement) and approved by the U.S. Senate by a vote of eighty-five to one. Although the pact is now seen as having been totally ineffective (another world war broke out in the late 1930s), it did represent some willingness on the part of the United States to cooperate with other nations.

The 1928 election

As the 1928 election approached Coolidge's admirers assumed that he would run for president again. He seemed to be at the height of his career and enjoyed widespread support. Coolidge surprised everyone when he announced that he would instead return to a quiet life in Vermont. Some historians have suggested that Coolidge had read the warning signs and, knowing what was coming—that is, the Great Depression—wanted to put himself as far away from the trouble as possible. Others argue that he was simply tired of being president and that all the joy had gone out of the job after the death of his beloved son. In any case, the Republicans were left with the task of choosing someone else as their candidate.

The man they chose was already fairly familiar to U.S. citizens and admired by many. Herbert Hoover was a self-made man: born in California and orphaned at ten, he had graduated from Stanford University, worked as a mining engineer, and become a millionaire before he was forty. He had also built a stellar career in public service.

During World War I, Hoover had done an outstanding job in the role of administrator of food distribution in Europe. As commerce secretary under Coolidge, he had promoted efficiency and self-regulation in government, with such success that people began to use the word "Hooverize" to stand for economizing and saving. Hoover managed to combine the typically Republican, laissez-faire approach to government with his own concern for minorities, women, and children, even earning the nickname "The Great Humanitarian." In fact, during the terrible flood that occurred in Mississippi in 1927, Hoover personally took charge of the relief effort, overseeing the set-up of tent cities to house the more than a million people who were left homeless and the building of a thousand wooden boats that were used in rescue and evacuation efforts. Another of Hoover's accomplishments as commerce secretary is still a major U.S. landmark: he encouraged several western states to cooperate in the building of the large and much-needed dam that bears his name on the Colorado River.

At the Republican convention in the summer of 1928, Hoover was nominated on the first ballot. His running mate was Charles Curtis (1860–1936) of Kansas, who was chosen mainly for his appeal to midwestern farmers. The party's platform endorsed the main positions of the Coolidge administration, especially lowering taxes, reducing the federal debt, and maintaining an isolationist stance in foreign affairs.

Once again, the Democrats were suffering from deep divisions. Theirs was a party that tended to appeal to people from a wide variety of backgrounds, with members from both rural and urban, native-born and immigrant, Catholic and Protestant backgrounds. They disagreed on the issue of Prohibition, with some supporting the ban on alcohol and some opposing it. The deciding factor in choosing a candidate for this election was that the Democrats needed to win New York, with its high electoral vote count. Thus they chose the governor of that state, Alfred E. Smith (1873–1944), as their candidate.

Smith was a controversial figure because of his Irish-Catholic background (there had never been a Catholic president, and in fact would not be until the 1960s, when John F. Kennedy was elected) and his anti-Prohibition stance. He also favored again opening up immigration. But the Democrats hoped that adding vice presidential nominee Joseph T. Robinson (1872–1937), a senator from Arkansas, would increase their ticket's appeal in the South.

They hoped in vain, however. In fact, Hoover won many more votes across the South than Smith, in spite of that region's usual tendency to vote for Democrats. Smith won only eight states, gaining a relatively impressive 41 percent of the popular vote. At his inauguration Hoover expressed the same confidence and optimism that had characterized the national mood for most of the decade. As quoted in Erica Hanson's The 1920s, Hoover said, "I have no fears for our country. It is bright with hope."

Signs of trouble to come

Hoover would have only eight months in office that could be called bright or hopeful. During those eight months he proved himself an able and even progressive leader, taking positive steps toward improving child welfare, prison reform, conservation, and better treatment of African Americans. Yet it is not these accomplishments for which Hoover is remembered. Because of the events that took place before the end of his first year in office, his name would always be linked to the Great Depression.

When Hoover's presidency began, things really did seem positive. The country had enjoyed nearly a decade of rising prosperity, and it seemed that things would continue along this same path. Yet there were warning signs that the economy was not as strong as most people assumed. For one thing, construction was declining, which can be seen as a negative economic indicator. For another, more goods (such as cars) were being produced than people were buying; in addition, poor economies overseas were affecting U.S. investors. Banks were lending money at high interest rates (the cost borrowers pay for the money they receive) to people who were using it to invest in the stock market.

When a person buys stock in a company, he is giving that company some money to help it operate, with the promise of a share in the profits later, when the company performs well. When a stock price goes up, it means that more people want to buy that stock, so it is more valuable. When the price goes down, it means that the stock has lost value, and an investor may lose money. During the 1920s many more U.S. citizens, especially ordinary people who were not wealthy, were investing in the stock market than had ever before. Sometimes they used their own savings, and sometimes they borrowed money or bought stocks on credit with the hope of making huge profits and paying back their debts.

By 1928 the New York Stock Exchange was trading six to seven million shares (or stocks) per day, compared to a more normal rate of three to four million. The prices of stocks had risen higher and higher, but these prices did not reflect the stocks' real value or the real earning capacity of companies. All across the country people were frantically playing the stock market, hoping to get rich fast. Some thought this could go on forever, but it could not. In the fall of 1929, the stock market started taking big dips downward.

Investors began to worry, and even to panic, which meant that many were selling off all of their stocks. Then came Black Thursday. On Thursday, October 24, orders to sell stocks rose at an alarming rate, while prices fell and fell. On the streets of New York City's financial district, crowds gathered and panic and hysteria mounted. This led to even more selling that took place across the nation. Five days later, on what is known as Black Tuesday, the devastation was complete, as banks with no cash in their safes began to close their doors. Many people had lost their life savings, with no chance of getting them back again.

Hoover's efforts to restore people's confidence in the U.S. economy failed as things grew worse and worse. Scores of businesses closed, and unemployment rose from 700,000 to 3 million. Suddenly the country was deep in the worst depression in its history. The nation's mood shifted from the joyous confidence of the 1920s to doubt and fear of what the future would bring. Unable to find a way to mend things, Hoover was voted out of office in the next election. In 1932, a dynamic Democrat named Franklin D. Roosevelt would convince the U.S. people that his New Deal program of government and economic reform would light the way out of the Great Depression.

Warning signs from overseas

While many U.S. citizens of the 1920s were overlooking the warning signs at home, fateful things were occurring in Europe that would soon impact the entire world. World War I had ended with Germany's surrender, and many of its citizens were enraged by the harsh terms of the Treaty of Versailles. One of these was a war veteran named Adolf Hitler (1889–1945), who blamed his nation's Jewish population for many of its problems, including the economic depression under which Germany (like other European countries) was suffering.

In the early 1920s Hitler became the head of the National Socialist German Workers Party, also known as the Nazis. In November 1923 he was involved in a failed attempt to take over the government. Jailed for nine months, he wrote Mein Kampf, a book that expressed his theory of Aryans (white people) as the Master Race and Jews in particular as undesirable aliens. He spent the rest of the decade rebuilding the Nazi Party and gathering more and more supporters. In 1934 he would become head of state and begin a campaign of aggression and terror (including the murder of six million Jews and a million others) that would lead to the outbreak of World War II (1939–45). In that conflict, Germany would be allied with Italy, under the control of dictator Benito Mussolini (1883–1945). Also joining what would come to be known as the Axis countries would be Japan, whose military strength and desire to expand its empire were growing during the 1920s.

For More Information


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"Calvin Coolidge: 30th President of the United States." The Calvin Coolidge Memorial Foundation. Available online at http://www.calvin-coolidge.org/index.html. Accessed on June 17, 2005.

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Warren G. Harding. Available online at http://www.whitehouse.gov/history/presidents/wh29.html. Accessed on June 17, 2005.

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Politics in the 1920s

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Politics in the 1920s