NOTES ON USA 1919-1941 YR 12 MODERN

HISTORY
Note: ‘Leuchtenburg’ refers to quotes from ‘The Perils of Prosperity, William Leuchtenburg,
1958’

Politics in the 1920’s

Conservatism, Dominance of the Republican Party
Conservatism

Significant Conservative Politicians

o Calvin Coolidge, President of the United States 1922-29

o Warren Harding, President of the United States 1921-22
o Herbert Hoover, President of the United States 1929-1933
o Andrew Mellon, Secretary of the Treasury 1921-1933
o William Taft, Chief Justice of the Supreme Court, 1921-1930

Conservatism, generally means opposition to radical change, and favours the ‘Status quo’ in
society, both in social tradition and the current economic status quo.

Main principles of 1920’s Conservatism

 Economic Principles, see 1920’s Economic Issues notes:

o ‘Laissez Faire’ (Leave it be), Capitalism, meaning Capitalism with little
government regulation or interference
 Could also be said that it was Hamiltonianism, named after the first
Secretary of the Treasury Alexander Hamilton, believed in
government policies that most favoured big business
 ‘A president’s only function was to see that the government
interfered with industry as little as possible’ (Leuchtenburg, talking
about Coolidge)
 ‘Calvin Coolidge... aspired to be the least President the country had
ever had; he attained his desire’ (Irving Stone, quoted in
Leuchtenburg)
 ‘By allying Government with Business, the Republicans believed that
they were benefiting the entire nation’
o Low taxes
o Fewer government regulations
  Can be seen in the Appointment of many conservatives to the Federal
Trade Commission, who ignored or were lenient on many ‘Anti-trust’
(anti-monopoly), and labour regulations
o A general respect and appreciation for the Capitalist Free-Market economy of
the United States that was during the 1920’s
o High Tariffs
o Anti-Unionist
o Pro-Business
 ‘The Chief Business of the American people is Business’, Calvin
Coolidge
 ‘Coolidge’s prescription for government was simple. All prosperity
rested on business leadership’ (Leuchtenburg)
 ‘the Republican right wing was determined to call to a halt the social
welfare measures and to push legislation favourable to big business’
(Leuchtenburg)
 ‘No political party, no national administration, could conceivably have
been more co-operative with big business’ (Leuchtenburg)
 Social Principles, broadly defined or understood as Traditionalism
o Traditionalism being the White, Anglo-Saxon, Protestant, Rural society that
Traditionalist believed was the true America
 All of the beliefs of Social Conservatives in the 1920’s extended from
this belief, and legislation was used in an attempt to preserve this kind
of America
o Opposition to Communism and Communists
o Support for Prohibition
o In the South most of them were ‘Southern Democrats’, conservatives
supported the ‘Jim Crow laws’ that discriminated against Blacks.
o Opposition to Immigration, who were believed to undermine US society
 ‘Dislike of foreigners had been a traditional plank of American
Conservatism throughout much of the history of the Republic’
(Snowman, The 1920’s: An Age of Rose- coloured Nightmares)
 Foreign Policy, generally seen as Isolationist, see Isolationism noted
o Opposition to the Treaty of Versailles and the League of Nations
o Distrust of Communists, seen in the Intervention of the USA in the Russian
Civil War in 1919, intervene on the side of the anti-communist ‘Whites’
o Supported the ‘Banana wars’, wars in Central America during this period to
maintain American security and interests:
 The operation of the Panama canal
 US Business interests
  The repeated interventions of the USA in Honduras and
Nicaragua, to protect the interests of the United Fruit
Company
 US Marine Corps General Smedley Butler, who fought in the
Banana wars said in his 1935 book War is a Racket ‘I spent 33
years and four months in active military service and during
that period I spent most of my time as a high class muscle man
for Big Business, for Wall Street and the bankers. In short, I was
a racketeer, a gangster for capitalism

In 1918, the conservative Republicans win control of the House of Representatives and the
Senate in Congress. This was at the midpoint of the Progressive Democratic President
Woodrow Wilsons Second term, and at the conclusion of the First World War.

Woodrow Wilson attempted to have the Treaty of Versailles ratified by the US Senate, as by
per the US Constitution, the US Senate must pass all foreign treaties with a two-thirds
majority vote. The Republicans blocked any attempt to ratify the Treaty by the Democrats.

o As a result of this Isolationist Conservatism from the Republicans, the United States
never ratified the Treaty of Versailles, and never joined the League of Nations

The majority of people in the 1920’s were Conservatives including many Democratic
politicians and voter, and such was the success of the Republicans as being the more
Conservative party.

o It was the result of America expressing a desire to return to ‘Normalcy’, WWI and the
tumultuous economic and social changes brought upon by Progressive Politics in the
previous 30 years
o Warren Harding, a Senator from Ohio, won 37 states and 404 electoral votes
with 60.3% of the National popular vote, against his Democratic opponent
James Cox
o The War, the Red Scare, post-war inflation and unemployment, ‘In a word
the national had had enough of Wilsonism’ (Leuchtenburg)

The 1920 Presidential election was a massive victory for the Republicans and Conservatism,
and the Republicans dominated US politics until 1933 and the Depression totally removed
them from power. This was because the Republicans were seen as responsible for the
1920’s prosperity, and thus as long as the prosperity continued, Republicans and
Conservatism was entrenched as the ruling political party and dominant political philosophy.

 Conservative political stance was anti-progressive, ‘we have torn up Wilsonism by

the roots’ Republican Senator Henry Cabot Lodge
  ‘Harding and his friends set about dismantling or neutralising as many of the social
and economic components of progressivism as they could’ (Tindall and Shi America
a Narrative History 1999)

However, directly as a result of the Great Depression, and the public perception that the
Republicans were directly responsible for it, the Republicans and Conservatism lost power
and influence as a political philosophy.

o Republicans lost control of the House of Representatives and Senate in the

1930 midterm elections, the first Federal election since the 1929 Wall Street
Crash and the beginning of the Great Depression
o Republican Herbert Hoover lost re-election in 1932 Presidential election
o Republicans were in the minority for the rest of the 1930’s

Progressivism
Progressivism was the dominant Political Philosophy from 1892-1920, yet it declined in
influence, and was irrelevant, with the exception of rural states in the Midwest and Plains
because of Progressive support for farm price intervention and anti-monopolist views.

Main Progressive Politicians

o Woodrow Wilson, President of the United States 1912-1920

o Robert La Follette, Senator for Wisconsin 1906-1925
o Fiorello La Guardia, Congressman from New York, 1922-1933

Main principles of Progressivism

 Economic principles
o Favours Government intervention in the economy to achieve desired
outcomes
o Anti-Trust (anti-monopoly)
o Supports Unions and the 8-Hour Day
o Support restrictions on bad labour practises such as Child labour
o Supports assistance for farmers through price controls
o Anti-business/industrialist, against the concentration of Income and Wealth
o Supports Progressive/High taxes
 Social principles
o Against prohibition
o Not anti-immigration or foreigner
 Foreign Policy
 o Mainly ‘Wilsonism’, the use of American economic and military power to
spread democracy and democratic values in the world, drove the US entry
into WWI
o Supports the League of Nations and the Treaty of Versailles

Progressivism could not recover its terminal decline following the massive defeat of the
1920 presidential election.

The Progressive party ran a National Presidential ticket, with Senator Robert La Follette as
its candidate. It won 17% of the national vote and carried La Follette’s home state of
Wisconsin. Yet as William Leuchtenburg notes;

o ‘In the post-war years, noted one writer, an attack on the trusts seems as
outdated as the tandem bicycle, and “trust-buster” was a term as lost in the
mists of the past as “free-soiler”

Socialism/Communism
Socialism, defined by Wikipedia:

o The economic and political system that aims to socially or collectively own
the means of production (capital) through the state, and abolish the
economic/social hierarchical system called ‘class’

Socialism was of limited popularity, most so in America. Socialism was the aim of the British
Labour Party, which won power in 1929-1932.

Communism is a more radical form of socialism, defined by Wikipedia

o The economic and political system that aims to totally abolish private
property and all of the goods and services produced in a communist society
would be equitably distributed according to a person’s need.

In America, in the 1920’s it was the fear of communism that influenced the nation more
than communism itself

o In 1917 the Communist Bolsheviks seized power in the November Revolution

in Russia, creating the first communist state
o In 1918/19 the Spartacus revolution almost turned Germany into a
communist state.
o In 1919/20, the ‘Red Scare’ gripped American society, thousands of
foreigners were deported
 ‘by the autumn of 1919, millions of old-stock Americans had come to
believe that the country was faced by the menace of alien
revolutionaries’ (Leuchtenburg)
 Only 7% of the American Communist Party could speak or understand
American English, so this fear and association of foreigners with
communists and vice-versa was quite justified
o See Anti-Communism notes

Economic Issues
Republican Economic Policies
Tax Policies
 The Republicans aimed to reduce Federal taxes and spending by a significant amount

 Andrew Mellon, Secretary of the Treasury 1921-1933

o Previously a very wealthy Financier before becoming Secretary, during the

1920’s he was the third wealthiest man in America

o Commonly called ‘the Greatest Secretary of the Treasury since Alexander

Hamilton’ during the 1920’s

 Cutting taxes to bring in more money into the US Economy, cut taxes on the top
income from 65% to 20%, also cuts in low income tax brackets, estate tax, surtax and
profits tax

 Revenue Act of 1921 was introduced stopped the war time excess profits tax and
reduced the surtax

 Revenue Act of 1924 raised exemptions in the lower tax brackets reduced normal tax
rates and permitted rebates on investment income

 By 1929, only 2% of workers were paying the Federal income tax, because the rates
were so low and applied to incomes on a very high level

 Further tax cuts were introduced in the Revenue Act of 1926, 1928 and 1929

 Federal Debt reduced from 24 billion in 1920 to 16 billion 1930

  Government expenditures per annum fell from $6.4 billion in 1921 to $2.9 billion in
1928

Tariffs
 The Republicans favoured high tariffs for manufactured Goods. This is because many
industrial and manufacturing industries developed in the United States during the
First World War, since the industrial capacity of the European nations was entirely
focused on producing war materials, and not consumption goods for the US market.
US manufacturing also benefitted from the European countries buying war materials
and other essential goods from the United States.

 These industries became exposed after WWI, so the Republicans passed the
Emergency Tariff Bill which protected the infant industries, but Wilson vetoed the bill
saying ‘If we wish to have Europe settle her debts, governmental or commercial, we
must be prepared to buy from her’

 WWI saw the growth of a number of infant industries; since the European countries
were in a war, these industries were automatically protected.

 Republican President Warren Harding signed the Emergency tariff act

 Introduced tariffs on foreign textiles, chemicals, minerals and manufactured goods,

but failed to introduce tariffs on agricultural goods.

 Before WWI, the Underwood Tariff reduced tariffs and encouraged free trade

 The US became a creditor nation during the First World War because the European
nations borrowed from the US to fight the war, the US lost much foreign investment
and Europe was still economically weakened by the war

 The tariffs made it difficult for the European countries to sell their goods in the
United States, which kept the European nations economically weakened, thus
making it more difficult to raise the revenue to pay back the US for the loans that
were given to Europe during the War.

 Republicans cut immigration quotas, the Immigration Act 1924, the population
growth reduced the number of consumers in the United States, thus farmers
suffered.

 When the First World War ended, the ‘infant’ industries that had developed during
the First World War came under threat from the revering European manufacturing
industries, and threatened to outcompete them in the US domestic market,
potentially ruining the industries.
  In response to this, the Republican Congress passed the Emergency Tariff Act in
1921, which increased the tariff on foreign agricultural products.

 In 1922 Congress passed the Fordney-McCumber Act, which increased the tariff rates
on foreign goods. They achieved this through two methods:

o Scientific Tariff: This was a tariff based on the average wages paid in a foreign
country; if France paid its workers an average lower wage then this tariff
would increase the cost of the imported goods which negated to saving in the
cost of production caused by the lower wage
o American Selling Price: This tariff linked the price of the imported goods to
the cost of the same American good, the tariff deliberately increase the price
of the imported good above the cost of the same American good, which
meant that the American good was always cheaper.
 The impact of these tariffs was that farmers was that farmers were exposed to
foreign agricultural products in the American market, which decreased the prices
received by farmers for their products

 The tariffs influenced developments in that it caused farmers income to decrease,

which weakened the US agricultural sector as well as farmers and rural communities.

 The tariffs influenced developments in that it caused the manufacturing industries of

the United States to grow enormously, which helped the companies in the
manufacturing industries, as well as the communities in which they set up their
operations. This contributed to the increased urbanisation, because factories were
constructed in industrial cities such as Pittsburg which contributed to their growth.

 The tariffs influenced developments in that is caused the Economy’s of Europe to fail
to totally recover, the tariffs made it almost impossible for European businesses to
sell their goods in the United States, so the European economies were unable to
totally recover. This also influenced developments in that is weakened Europe’s
ability to pay back the United States the loans that they borrowed.

Republican Business Policies

 The Republicans supported a Laissez-Faire approach to business, meaning ‘leave it

be’, the Republican attitude was to leave the business sector alone and it would
produce better outcomes for society.

 The Republicans stopped prosecuting companies that were merging, that would
have been illegal under restrictions put in place by the Sherman Anti-trust act. The
result of this was that from 1919-1929 4000 mergers took place in manufacturing
 and mining, and the US Economy began to become dominated by a few large
corporations. US Steel Corporation controlled ½ to 2/3 of iron ore during this period.

 The Republicans also supported the business community during strikes; the Herrin
Massacre and the Great Railroad Strike of 1922 are examples of how the
government supported the employers against Union workers on strike during this
period.

 This influenced developments because it allowed the growth of monopolies,

business mergers increased, profits also increased 61%, it influenced the
development of large corporations.

Industrialisation
Industrialisation is the process by which there is growth in the industrial sector of the
economy that causes it to eclipse the other sector of the economy, characterised by
increased use of machines, electrification and large increases in productivity, as well as the
development of an urban workforce and urban society.

The effect was a significant increase in the size and output of the manufacturing sector, and
the production of consumer goods. Combined with this was an increase in economic
productivity as a result of industrialisation, lowering the cost of production for goods, and
increasing the real wages of workers.

‘Industrial production almost doubled during the decade... without any expansion of the
labour force; Manufacturing employed precisely the same number in 1929 as in 1919’
(Leuchtenburg)

o The United States had already been industrialising since the end of the Civil
War

o By 1900 already the World’s largest economy, and largest industrial output

o Manufacturing output up 264% from 1899 to 1929

o Boom in the:

 Iron and Coal industry

 Steel, Aluminium

 Synthetic chemicals and plastics

 Automobile sector, in 1909 annual output was 4000 cars, by 1927 it

was 7,000,000
  Electricity sector

The Automobile industry massively affected the US economy in these ways

‘Without the Automobile industry, the prosperity of the 1920’s would scarcely be possible’
(Leuchtenburg)

o Stimulated growth and employment, in the Midwest where the Major US car
manufacturer plants were located, as well as surrounding car parts
manufacturers

o Increased growth in accompanying industries of Steel, Glass, Rubber

o ‘There was scarcely a corner of the economy that the automobile industry did
not touch... created dozens of new enterprises from hotdog stands to
billboards’

o By 1925, a Ford rolled off an assembly line every ten seconds

o In the USA there were one automobile per five citizen compared to

 1 to 43 for Britain

 1 to 345 for Italy

 1 to 7,000 for Russia

Consumerism, including entertainment

Consumerism, defined as the social idea that individuals purchase goods and services for
consumption that is not required for sustaining basic needs; rather for enjoyment,
entertainment and to save labour.

The 1920s was a period of a realisation of the American Dream by ordinary Americans, the
American dream defined as economic prosperity and opportunity for Americans in material
terms. Characterised by an improvement in the comfort, security and overall prosperity of
ordinary life. This was due to the development of methods of mass production which
enabled higher economic output, lower prices, higher wages and a far wider range of
consumer goods available for sale.

Consumerism grew in the United States because of increased demand from ordinary
workers, real wages grew 22% in 7 years, and this gave workers a much greater disposable
income that could be spent on consumer goods and services.
 Mass consumerism was mobilised by ‘Big Business’
o As characterised by an emergence of oligopolies and consequent demise of small
family-operated business
o Prompted improvements in efficiency, productivity, and growth of inequality in the
distribution of income, wealth
 Spurred by the development of technology and a consequent decline in the
demand for workers in manufacturing industries, incline in demand for workers
in booming industries such as services
 Spurred by the development of business strategy, such as:
 The assembly line approach to production ‘Fordism’, as introduced in
1913-14
 A ‘Welfare capitalism’ approach to industrial relations
o A system under which companies provide employees w stock
bonuses, profit sharing plans, life insurance, old age pensions
intending to maintain industrial contentment. Such as the
Combine harvester company giving a 2 week paid vacation in
1925, unheard of at that time.
 Spurred by the movement of production operations abroad as encouraged by
Republican economic policy
 Eg General Electric factories established in Latin America, China, Japan ,
Australia, effecting a reduction to labour, resource costs and an
improved access to raw materials

o Encouraged an increase in the rate of education retention

 There was an increase in the prestige of the image of the educated
businessman and an increase in employment opportunities and access to
education services
o Encouraged a decline in trade unionism
 Primarily the Growth of prosperity, and welfare capitalism meant that Unions
were becoming less attractive and relevant, Unionism dropped to its lowest
levels in the 1920’s
 Due to: growth of ‘welfare capitalism’; prevalence ‘yellow dog contracts’; use
of intimidation by major firms; adverse social, political opinion of unions;
government efforts to deter unionist activity (eg Gov banned strikes by railroad
workers, miners in 1922, 1923)
 Led to a decline in union membership from 5m (1920) to 3.5m (1929)
 Mass consumption signalled a variety of social trends
o Encouragement to spend elicited by persuasive advertisement, mass production,
supply of a wide range of goods
o Encouraged conformity in dress, diet, house, as the development of oligarchies
inhibited industrial competition and advertisement became national
o Advertisement was heavily influential of consumer spending patterns
 Eg Edward Bernays, Bruce Barton
 Appealed to the social aspirations and insecurities of ordinary Americans to sell
luxury goods
 Spending became item of pleasure
o Increase in spending gave rise to increase in credit
  Lending to purchasers was 10th largest business by 1929

The Major of Characteristics of an increasingly consumerist society that was being developed in the
1920’s
o Introduction of new products (eg gossip magazines, sodas, hot dogs)
o Introduction of new leisure activities (eg live sport, music on the radio or gramophone,
‘window shopping’, long distance car trips, trips to the theatre)
o Emergence of business magnates (eg Henry Ford [automobiles], James Duke [tobacco],
George Eastman [cameras])

Consumerism became a result of;

o Widespread economic prosperity

 Due to growth in disposable incomes and the middle class
 Resulting in an increased demand for goods and better standard of life
 Access to electricity increased the amount of goods a typical home
could use, without access to electricity they could not use many of the
new consumer goods that were being produced during this period,
electricity enabled Consumerism

o Loss of self-identity
 Due to rapid social, economic change embedded in industrialisation and
urbanisation, an increasing disparity between rural and urban culture and a
post-war influx of immigrants
 Consumerism created ‘a form of identity and compensatory satisfaction’ Peter
Stearns
 ‘Some immigrants also hoped to demonstrate their long journey had been
worthwhile’ Peter Stearns
 ‘African American interest reflected a desire to... fight stereotypes of
inferiority’ Peter Stearns

Consumerism became an important component of the US capitalist economy because modern

Industrialised economies rely on consumers purchasing consumer goods to drive production and
prosperity

o ‘The capitalist achievement does not typically consist in providing more silk stockings
for queens but in bringing them within the reach of the factory girls in return for
steadily decreasing amounts of effort’ Joseph A. Schumpeter

Consumer Goods

New consumer products appeared which encouraged more consumption, and more
production.

 Automobiles
  Refrigerators

 Radios- developed before the war, exploded in popularity, in October 1920 the first
radio station began, covered the Presidential/Congressional elections later that
year. By 1922 3 million households had radios, by the end of the decade 3 out of 4
were sold on credit

 Electric Toaster, by 1929 one in five owned one

 Vacuum Cleaners, by 1929 one in four owned one

 Cigarette lighters

 Wrist watches

 Matches

 Cooking utensils.

Many of these new products were associated with the Automobile industry, antifreeze fluids
for car radiators, paint sprayers for car chassis and reinforced concrete for highways.

 Americans also consumed a more varied diet, since there were fresh vegetables
available all year round and higher incomes increased the demand for more luxury
foods.

o In 1905 41 million cases of food were shipped, in 1930 it had increased to 200
million. As urbanisation increased; consumption of canned fruits increased,
also canned vegetables, milk and other canned food products.

 In 1916 the grocery store was invented, it rapidly expanded during this period, it
allowed consumers to choose from a wider variety of goods that could be purchased
from a single store, rather than going to many smaller specialty stores to purchase
everyday goods, this created economies of scale in consumer goods and brought
down the price, enabling more consumption by consumers.

 Between 1917 and 1927 sales jumped

 124% in drugstores
 287% in groceries
 425% in clothing

Leisure and Entertainment in the 1920’s

  Higher disposable incomes and an inclining quality of life prompted the growth of consumerist
activities as a means of leisure
o Sport and physical activity

 The 1920’s was also a period of the expansion in spectator sports, this
was because of the radio that was owned by 3 million households
broadcasted sports and higher incomes gave people the ability to pay
to attend sporting events.

 Prompted increasing sales of sport equipment, the introduction of spectator

sports such as baseball (1870-), football (1900-), horseracing (1860-), boxing
(1860-) and the emergence of new sports heroes (eg Gene Tunney, Babe Ruth,
Red Grange, Bobby Jones)
 Baseball drew about 10m fans per year to games
 By the end of the 1920’s American football had gate takings of
$21 million each year

 Entertainment- During the 1920’s

o Music
 Prompted increasing sales of sheet music, phonographs and phonograph
recordings, and an increasing volume of spectators of musical acts (eg
vaudeville and jazz concerts)
o Cinema
 Over 20,000 movie theatres were constructed during the 1920’s, in
1922 40 million movie tickets were sold each week, this increased to
100 million in 1930

 23,000+ movie theatres across America in by late 1930’s

 Introduction of new holidays supported increasing sales, consumer demand

o Eg proclamation of Mother’s Day by President Wilson in 1914 to support inclining
consumerism and promote significant women’s issues
o
The Department Store and Mail-Order Catalogues

 The introduction of the department store actively promoted consumerism

o Goods, novelty items put on display; introduction of new luxury goods; promoted
fashions and trends
 Mail-order catalogues provided consumers w an opportunity to buy from home
o Eg Sears and Roebuck mail-order catalogues
o Popular products included toy soldiers, dolls, cuddly animal toys (eg ‘Teddy bears’),
bicycles, snack foods, pianos
African Americans and Consumerism

 Consumerist opportunities made available to AA in the 1920s w the Great Migration, inclining
employment opportunities, rates of education and levels of skill
o Eg cosmetics were used to ‘make African Americans look less African’ Peter Stearns
o Believed by some to drive AA into poverty
o Provided AA w a chance to demonstrate newfound sense of national identity, culture,
price
 Eg AA participation in vaudeville and the introduction and development of
blues and jazz
 Eg AA participation in professional sports leagues (AA boxer Jack Johnson
reigned as the national heavy weight champion between 1908 and 1915)

Conspicuous Consumption

 Suggested by economist Thostein Veblen in The Theory of the Leisure Class (1898)
o Reached wide American audience by the 1920s and became colloquially known as
‘keeping up with the Jones’’
o Analysed psychology of American consumption

Evidence of conspicuous consumption in 1920s America can be seen in a substantial rise in the
purchase of non-necessities
o Eg Radio
 First public radio station aired from Wisconsin State University in 1920
 First commercial radio station, KDKA aired in Pittsburgh in 1920
 The National Broadcasting Company was established in 1927 (first national
radio network)
 Programs featured sport, news, entertainment shows, advertisements
 A source of national unity, providing a common source of information and
entertainment, and promoting certain trends or fads in popular culture
 By 1922, 3m American households had a radio
o Motion pictures
 Highly influential force in shaping popular culture having encouraged
consumerism and new patterns of leisure, and promoted national trends in
clothing and hair
 One of the 10th largest industries in the 1920s
 40m tickets sold each week in 1922 (this increased to 100m in 1929 and 115m
by 1930)
o New electrical appliances
 Guaranteed a better quality of life for middle class American housewives
 New products included: vacuum cleaners, dishwashers, washing machines,
refrigerators

Ford and the Automobile

The automobile became available to American society as a consumer good in 1897 w the
development of new technologies such as petrol refining and electronics

 ‘Without the new Automobile industry, the prosperity of the Roaring Twenties would
scarcely have been possible’ (Leuchtenburg)

Mass consumerism was heavily promoted by the introduction of the car

o Considerably impacted upon ordinary America, as it created:

 A greater access to remote and rural communities thereby benefiting farmers
 The processes of urbanisation and suburbanisation, and its consequent positive
and negative effects
 Growth in employment opportunities for the middle and working classes
 An increase in range of recreational activities available to ordinary Americans
 Pollution and other adverse environmental trends
 The growth of conspicuous consumption, defined as leisure consumption,
buying goods and services for the primary reason of showing them off and
deriving status from these goods.

Henry Ford founded the Ford Motor Company in Detroit in 1903, which produced 100 cars per day in
1908
 Ford served as an innovative force in the automobile industry
o Eg utilised vanadium steel from 1906
 Ford cars were thus made stronger and faster
o Eg introduced the assembly line approach to mass production or ‘Fordism’ in 1913-14
 This signifies a system in which each worker is assigned a specific task along a
conveyor belt
 This effected an increase in industrial efficiency
 Eg decrease in the time taken to produce 1 car, from 12.5 hrs in 1913 to
1.5 hrs in 1920, or from, 1 car produced every 3 mins in 1913 to 1 car
produced every 10 secs in 1920
 This effected a reduction in the cost of production and an increase in supply
 Cost of a Model T reduced from $1,290 in 1909 to $290 in 1928
 Increase in total cars registered from 8m in 1920 to 23m in 1929
o Utilised ‘instalment buying’ to extend demand
 Enabled consumers to purchase cars through the payment of periodic
‘instalments’
Modernisation of industrial relations

Ford employed an increasing amount of AA, largely due to the unskilled nature of assembly line work
 Eg AA employed under Ford increased from 50 in 1916 to >2,500 in
1920m to >10,000 in 1926
Ford employed an increasing amount of unskilled workers, rising to 22% of his workforce by mid
1920s
Ford revolutionised working practices
 May be considered fair in some respects
o Working week reduced from 48hrs, 6 days in 1920 to 40hrs, 5 days in 1926
 ‘Ford’s original labour policies made him the American god to employees... in
1914 the national wage was $2.40 a day. Ford paid a minimum of $5... By
1926... he had quadrupled the average wage to nearly $10’ (Alistair Cooke)
 Ford Sociological Department ensured that employees were healthy and that
employee’s houses were sanitary through spot checks
 Leisure activities such as dances organised for workers
o May be considered poor in some respects
 Eg employee of River Rouge plant Mike Widman recalls;
 Opening gates locked at 8am
 Workers under constant surveillance by plain-clothes inspectors
 Permission had to be asked to be able to go to the toilet
 Eg employee of Highland Park plant Jim Sullivan recalls;
 ‘If you were on that line and you had a certain job to do... and you
didn’t get your pat in there, you were in trouble’
 The automobile industry significantly impacted upon American society
o Positive impacts include:
 Increasing car sales prompted economic prosperity
 Contributed >10% to manufacturing production and employed 4m
workers in 1930
 Car manufacturing led to development of various other industries such
as:
o Oil (95% used by car industry)
o Rubber (80% used by car industry)
o Plate glass (75% used by car industry)
o Leather (65% used by car industry)
 Encouraged suburbanisation and a subsequent incline in the quality of life of
the middle class
 Prompted the construction of infrastructure such as new roads, state/national
highways
 Prompted a change in leisure patterns, enabling road trips
 Assisted rural workers
 Eg the Model T or ‘Tin Lizzy’ (introduced in 1980) was highly practical
and popular
o Suspension enable travel over dirt tracks and unmade roads
o Could be connected to farm machinery
o Easy to repair
o 15m mass produced between 1908 and 1927 such that it was 1
in every 2 cars sold by the mid-1920s
o ‘Your car has lifted us out of the mud. It has brought joy to our
lives’ wrote a farmer’s wife to Henry Ford in 1918
 Prompted the development of shopping centres and a consequent ship in
shopping patterns
 o Negative impacts include:
 Increasing levels of borrowing and debt, stimulating speculation and giving rise
to the Great Depression
 60% of Automobiles were bought on instalment, 3 out of 4 radios also
 Fuelled real estate speculation
 Changing patterns of crime w the mobilisation of gangsters through use of the
getaway car’

Useful Quotes on Consumerism

‘Ten years after the war, conspicuous consumption became a national obsession’
(Leuchtenburg)

‘The growth in popular culture and consumerism reflected economic changes that had
important consequences for class structure and lifestyle. Within the decade, the radio and
the movie nationalised popular culture’ (Leuchtenburg)

‘Old time values of Thrift and saving gave way to a new economic ethic that made
spending a virtue’ (Tindal and Shi)

‘Inventions in communications and transportation, such as motion pictures, radio,

telephones and automobiles not only fuelled the boom but brought transformation in
society’ (Tindal and Shi)

‘Workers were paid the highest wages of any time in history’ (Leuchtenburg)

‘The key to economic prosperity is the organized creation of dissatisfaction’ Charles

Kettering, executive at General Motors 1929.

How did Consumerism influence developments in the USA 1919-1941?

 As with all of these essays, there will be a rapid change in the information and tone
of the essay when explaining the effects after October 1929 and throughout the
Great Depression.

Consumerism, defined as the social idea that individuals purchase goods and services for
consumption that is not required for sustaining basic needs; rather for enjoyment,
entertainment and to save labour. Consumerism, both its causes and effects was a major
influence on developments in the US Economy and Society from 1919-1941, however
Consumerism’s nature changed rapidly after the Wall Street Crash 1929 and throughout the
Great Depression of the 1930’s.

Influences on US Economy

 Industrialisation- During the period there was the final period of the industrialisation
of the US economy
 o Large increases in productivity and output in the manufacturing sector
producing consumer goods, needed to be complemented by increasing levels
of consumption of consumer goods
 Leads to growth in Advertising, with the aim of increasing
consumption by increasing the desire for consumers to obtain the
goods being advertised
 ‘The key to economic prosperity is the organized creation of
dissatisfaction’ Charles Kettering, executive at General Motors 1929.
o Real Income increases- Real incomes grew 22% in 7 years from 1922-1929,
due to declines in the cost of consumer goods because of industrialisation,
increasing productivity and mass production.
 Reduction in cost of goods meant that ordinary people were now able
to buy luxuries such as cars, radios, which drove a consumerist
economy
 ‘The capitalist achievement does not typically consist in providing more silk
stockings for Queens but in bringing them within the reach of the factory girls
in return for steadily decreasing amounts of effort’ Joseph A. Schumpeter
 Credit-Culture- However accompanying this increase in consumerism was the
expansion in the use and availability of credit to buy consumer goods. This was due
to the desire of ordinary people to ‘buy now, pay later’, which increased the level of
debt in the economy
o 60% of Automobiles were bought on instalment, 3 out of 4 radios also
o Increased the level of debt in the economy, in the long term weakened the
economy and helped bring about the Great Depression
o Described by Tindall and Shi ‘Old time values of Thrift and saving gave way
to a new economic ethic that made spending a virtue’
o ‘This was the first great economic boom: its impetus and direction came from the
mass consumer market... American has a lot of money to lend and Americans were
anxious to borrow’ J. Roberts

After the Wall Street Crash

 Consumption and consumer spending massively declined

o This caused businesses to lower production, lay off workers and further
entrenched the downward economic spiral
 Thus it can be said that consumerism helped create the economic
prosperity of the 1920’s and the end of consumerism brought the
Depression of the 1930’s
o Significant decrease in the ‘consumerist’ ideals, primarily since most families
were no longer able to afford to buy luxuries or sustain the consumerist
lifestyle.
US Society

Most of the influences on US Society that consumerism made was in the period of 1919-
1929.

Major changes were changes in Lifestyle of the average American:

 Increasing urbanisation coupled with technological developments changed the

lifestyle of the Average American
o More likely to live in a house in a major city with the following things
o Automobiles
o Refrigerators
 Changes in Diet of the average American a more varied diet,
o Fresh vegetables available all year round
o Higher incomes increased the demand for more luxury foods.

 In 1905 41 million cases of food were shipped, in 1930 it had

increased to 200 million.

 As urbanisation increased; consumption of canned fruits increased,

also canned vegetables, milk and other canned food products.

 In 1916 the grocery store was invented, it rapidly expanded during this period, it
allowed consumers to choose from a wider variety of goods that could be purchased
from a single store, rather than going to many smaller specialty stores to purchase
everyday goods.

 Entertainment and popular culture

 Popular culture became nationalised, because of fast communication and
dissemination of entertainment meant that trends, fashions were spread across the
country
 Modes of entertainment changed, from books and newspapers to:

o The 1920’s was also a period of the expansion in spectator sports, this was
because of the radio that was owned by 3 million households broadcasted
sports and higher incomes gave people the ability to pay to attend sporting
events.

o Prompted increasing sales of sport equipment, the introduction of spectator sports

such as baseball (1870-), football (1900-), horseracing (1860-), boxing (1860-) and the
emergence of new sports heroes
 Gene Tunney
 Babe Ruth
 Red Grange
 Bobby Jones
  Baseball drew about 10m fans per year to games
 By the end of the 1920’s American football had gate takings of $21
million each year

o Music
 Prompted increasing sales of sheet music, phonographs and phonograph
recordings, and an increasing volume of spectators of musical acts (eg
vaudeville and jazz concerts)
o Cinema
 Over 20,000 movie theatres were constructed during the 1920’s, in
1922 40 million movie tickets were sold each week, this increased to
100 million in 1930

 23,000+ movie theatres across America in by late 1930’s

Consumerism through the Automobile had the effects on lifestyle

The Automobile resulted in:

 A greater access to remote and rural communities thereby benefiting farmers

 The processes of urbanisation and suburbanisation, and its consequent positive and negative
effects
 Growth in employment opportunities for the middle and working classes in the automobile
and related industries
 An increase in range of recreational activities available to ordinary Americans
 Air Pollution and other adverse environmental trends
 The growth of conspicuous consumption, defined as leisure consumption, buying goods and
services for the primary reason of showing them off and deriving status from these goods.

Political

As a result of consumerism, it became necessary to merge Business and Government

interests together, since businesses were the providers of goods and jobs to Americans,
with the interest of maintaining the consumerism of the period. The Government had an
interest in maintaining the prosperity of the 1920’s, partially brought on by a consumerist
attitude thus the two ambitions became merged, and thus the government and business
worked together

o Promoted the integration of Government and Business interests, becoming

almost identical
 An example of this is the quote provided by Charles Wilson, former
CEO of General Motor and later Secretary of Defence, ‘I thought what
was good for the country was good for General Motors and vice versa’
 Can be seen later in the NRA, in which the Government and major
businesses co-operated in order to maintain higher wages, prices and
 employment to stimulate consumption, a return to consumerism and
economic growth.

American Capitalism
There was a short yet severe recession from 1921-22, but by 1923 that was behind the
nation. The Roaring 1920’s was a period of unparallel economic prosperity.

American prosperity at the time was centred on what Herbert Hoover called ‘rugged
individualism’, believing in the success and power of the individual to change society and
achieve prosperity through their own individual merit and success.

A key component of this 1920’s American capitalism was the relationship between US
Society and the Businessman, in which the Businessman achieved even greater prominence
and status, which was accompanied with the perceived prosperity brought by the
Businessman throughout the 1920’s.

o ‘a climate of prosperity and optimism, the businessman began to look upon

himself as the Lord’s anointed’ (American Heritage, 1970)
o ‘The man who builds a factory builds a temple, The man who works there
worships there’ (Calvin Coolidge)
o ‘Ford personified the legend of the resourceful American, who by making it
to the top on his own, benefits mankind... he was in short the Good
Businessman’ (Leuchtenburg)

Welfare Capitalism

Welfare Capitalism was a common belief in the 1920’s, that the businessmen and
industrialists would provide benefits and welfare-like services to employees.

o Paid Holiday Leave

 1926 International Harvester created the two week annual
vacation with pay for its employees
o High pay, 1914 Henry Ford’s $5 a day at a time when most industrial
workers were paid $11 a week
o Reasonable working hours and the 5 day week
o Life Insurance
o Old-age Pensions
o Employee stock or profit sharing systems
o Education and social clubs
o Sports teams
o Housing
 o Childcare

There were two reasons for this:

 Satisfy employees, as to discourage unionisation

 Retain good employees, reduce turnover in staff which would increase productivity
 Henry Ford, the aim was more Paternalistic:
o Discourage ‘unhealthy and antisocial vices’, such as alcohol
o Encouraged dance classes and other productive and pleasant activities

Another component was the Republican economic policies and the relationship between
Big Business and Government

Throughout the 1920’s the Republican administration increasingly set their agenda in line
with that of Big Business. This was the ‘Hamiltonian’ approach, named after Alexander
Hamilton the first Secretary of the Treasury, that the government and business would work
together, through tariffs and favourable treatment to promote economic growth and
prosperity.

This was done in a number of ways:

 Taxes were lowered on businesses

 Tariffs were raised, protecting industrial sector businesses from foreign competition
 The Federal Government supported Business in strikes

o In September 1919 the Boston Police went on strike and violence broke out
in the city, The Governor of Massachusetts Calvin Coolidge sent a telegram to
Samuel Gompers, the leader of the strike saying ‘There is no right to strike
against the public safety by anyone, anywhere, anytime’

o There were major strikes by steel workers and coal miners, in September
1919, organised by William Foster 340,000 steelworkers, factory and dock
workers went on strike.

o 1920 Alabama Coal Strike, National Guard helped end the strike by arresting
a Union Leader

o 1921, Battle of Blair Mountain, President orders the US Army to intervene to

end strike by 15,000 coal miners in West Virginia, fierce gun battle breaks
out, dozens killed and hundreds wounded

o Great Railroad Strike 1922, President Harding reached a compromise that

heavily favoured the government and railroad companies, National Guard
actively patrols and prevents further strikes and pickets by railroad workers.
  The Republicans appointed Conservatives to the Federal Trade Commission and
Federal Courts
o Lenient on Anti-trust prosecutions
o Bailey v. Drexel Furniture Co, Supreme Court Ruled that the 1919 Child
Labour Federal ban was unconstitutional
 In Foreign Policy the Republicans supported the ‘Banana wars’, wars in Central
America during this period to maintain American security and business interests :
o The operation of the Panama canal by the United States
o US Business interests
 The repeated interventions of the USA in Honduras and Nicaragua, to
protect the interests of the United Fruit Company
 US Marine Corps General Smedley Butler, who fought in the Banana
wars said in his 1935 book War is a Racket ‘I spent 33 years and four
months in active military service and during that period I spent most of
my time as a high class muscle man for Big Business, for Wall Street
and the bankers. In short, I was a racketeer, a gangster for capitalism

Could also be said that it was Hamiltonianism, named after the first Secretary of the
Treasury Alexander Hamilton, believed in government policies that most favoured big
business

 ‘A president’s only function was to see that the government interfered with industry
as little as possible’ (Leuchtenburg, talking about Coolidge)
 ‘Calvin Coolidge... aspired to be the least President the country had ever had; he
attained his desire’ (Irving Stone, quoted in Leuchtenburg)
 ‘By allying Government with Business, the Republicans believed that they were
benefiting the entire nation’
 ‘Government looked only to the single interest of business’ (Leuchtenburg)
 ‘The Chief Business of the American people is Business’, Calvin Coolidge
 ‘Coolidge’s prescription for government was simple. All prosperity rested on business
leadership’ (Leuchtenburg)
 ‘the Republican right wing was determined to call to a halt the social welfare
measures and to push legislation favourable to big business’ (Leuchtenburg)
 ‘No political party, no national administration, could conceivably have been more co-
operative with big business’ (Leuchtenburg)

During the 1920’s it became necessary to merge Business and Government interests
together, since businesses were the providers of goods and jobs to Americans, with the
interest of maintaining the consumerism of the period.
The Government had an interest in maintaining the prosperity of the 1920’s, partially
brought on by a consumerist attitude thus the two ambitions became merged, and thus the
government and business worked together to maintain the prosperity of the USA, whilst
serving corporate interests.

‘Detroit became the Mecca of the Modern world’ (Leuchtenburg), of course now it is a
shithole

‘the chief index of a man’s worth was his income’ (Leuchtenburg)

Agriculture
The US Agricultural sector experienced a ‘golden age’ from about 1900-1914. This became a
reference for rural politicians, hoping to enact legislation to return farm prices and profits to
the golden age era.

The Agriculture sector of the US economy struggled in the 1920’s; most farmers did not
share in the general prosperity of the 1920’s.

Prices for agricultural goods fell consistently throughout the 1920’s for a number of reasons,
generally related to an excess of supply, which was the thesis behind the New Deal’s
attempts to improve the agricultural sector by decreasing output.

 Developments in farm technology increases output, creating an excess of supply and

falling prices, this technology included:
o Tractors
o Automated Harvesters
o Better fertilisers and seeds
 The US government encouraged farmers to increase production during WWI, to
compensate for lost European production and to provide exports to European
markets, once again creating a post-war glut of agricultural capacity and output
leading to low prices
 Agricultural prices during the War were high
o Thus relative to WWI conditions, American farmers were doing poorly
o Many farmers took on large amounts of debt during the war, after the war
and as farm incomes declined, leaving farmers severely strained to pay back
debts

As a result, farm incomes declined during the 1920’s ‘

Effects
  600,000 farmers went bankrupt in the 1920’s
 Number of farms declined from 6.4 million to 6.2 million from 1920-1930
 Farm acreage fell by 13 million acres
 ‘Many farmers simply gave up’ (Freeman, 1990)
 Massive internal migration from rural areas to urban areas
o In 1920, 11.39 million Americans were employed on farms, 27% of the total
workforce
o By 1930 it was 10.32 million Americans, 21.2% of the labour force

Political Responses

Farming communities banded together to increase their political clout.

o The Progressive party was popular among farmers due to their policies of
government intervention to increase agricultural prices
o The ‘Farm block’ of rural Republicans was formed, many were conservative
Republicans including Arthur Capper and William S. Kenyon

Legislation was enacted to improve the situation in rural communities.

o War Finance Corporation, 1921- Revived to support the export of farm surpluses
o Packers Stockyard Act, 1921- Gave the Secretary of Agriculture to act against the
manipulation of farm prices
o Emergency Tariff Act 1921- Imposed higher tariffs on imported corn, meat, wheat,
wool and sugar, initially sought to be for only 6 months, then extended
o The Farm Co-Operatives Act 1922- Allowed farm produce to be sold through
Farmers collectives (a Union for Farmers), with stores buying at current prices and
stockholder farmers sharing the profits from their own purchases. These Co-
operatives were exempted from Anti-Trust legislation and became major businesses,
for example the California Fruit Growers’ Exchange controlled almost 90% of
California’s citrus fruit trade

However, one bill that was not enacted, vetoed several times by Republican Calvin Coolidge
in 1924, 1927 and 1928 was the McNary-Haugen Bill. This bill would have made the Federal
government purchase farm surpluses at agreed prices and export these surpluses abroad at
lower prices. This bill sought to increase farm prices to the 1900-1920 period of prosperity
where farm prices and profits had been high. Coolidge vetoed it on the basis that it was
special interest cronyism.
THE GREAT DEPRESSION
TO WHAT EXTENT WERE REPUBLICAN ECONOMIC POLICIES THE CAUSE OF THE GREAT
DEPRESSION

The Great Depression began in Octobe r1929 folowing the Wall Street Crash,

Republican Tax policies encouraged excess savings and over-investment

Andrew Mellon Secretary of the Treasury enacted a policy of reducing the level of taxation
in the US economy. Form 1921-1929 Top tax rate was reduced from 65% to 20%, 80% of
individuals no longer paid income tax, ended the excess profits tax and reduced the surtax.

The reduction in Tax income had three effects

1. It created excess savings, which was used for investment, high income earners have a
lower marginal propensity to consume that low income earners, thus save more as a
percentage of their income than low income earners, by 1929 the top 0.1% had 34% of all of
the US’s savings. These savings contributed to the 1928-1929 stock market bubble ‘surplus
capital (of which there was a great deal in the wake of the Mellon Tax cuts and rebates’
often found lending money on Wall Street’ (McElvaine 1993)

2. It reduced the level government spending, and therefore control over the economy,
reduced the government’s ability to expand or contract demand

3. It reduced the redistributive power of the government, the government allowed the
wealthy to increase their wealth, doing nothing to redistribute the wealth to low income
earners. This created growing inequality, and the purchasing power of low income earners
did not keep pace with that of high income earners, ‘purchasing power of workers and
farmers was not enough to sustain prosperity’ (Leuchtenburg, The Perils of Prosperity 1955).
The declining relative purchasing power was not enough to keep demand at a level
sufficient to keep the economy growing, thus a slowdown in consumption and production
occurred, thus causing the Great Depression.
Republican business and tariff policies weakened the US economy to the crisis that
occurred in 1929.

The Republican policies favoured big business and high tariffs, the policies they enacted
benefitted big business, but places the US economy in a position where it was weak in 1929,
thus prone to the downturn that occurred.

1. The Republicans policies favoured businesses because ‘by allying the government with
business, the Republicans believed that they were benefiting the entire nation’
(Leuchtenburg, The Perils of Prosperity, page 103), Republicans believed benefitting
businesses would increase production and commerce, thus growing the economy. The
Republicans were unable to remove anti-trust legislation because of progressive opposition
in Congress, so Republican President Harding, Coolidge and Hoover appointed Conservatives
to the Supreme Court, Department of Justice and Federal Trade Commission who would not
prosecute businesses for breaches of Anti-trust legislation. The result of this policy was a
growing monopolisation of industry in the US; by 1929 200 corporations owned more than
49% of America’s corporate wealth. This caused a lack of competition, which led to
increasing prices and inflexibility in responding to demand. The result of this was after
spending slowed in 1929, corporations did not decrease prices, but decreased production,
resulting in increasing unemployment and a decrease in demand. This increasing
unemployment and decreasing demand continued which made the Great Depression worse
after the crash of 1929. Thus the Republican policies in regards to businesses did contribute
to the causes of the Great Depression

Republican Tariff and International Business policies

Republican tariff and international business policies helped cause the Great Depression.

 Republicans pursued a policy ‘to be the world’s banker, food producer and
manufacturer, but to buy as little from the world in return’ (McElvaine), however
‘these ‘beggar they neighbour tactics were suicidal’ (McElvaine).

 The Republican created high tariffs on imported goods, reducing the volume of
European goods sold in the US, which meant European economies were unable to
gain sufficient income from sales in the United States, and they were unable to
rebuild capital that was destroyed in WWI.

 This situation was summed up by historian Robert McElvaine ‘If the United States
would not buy from other countries, there was no way for other countries to buy
from Americans, or to meet interest payments on American loans’.

 After the downturn of 1929, US businesses were unable to find sufficient export
markets in Europe to supplement the decrease in demand in the United States, as
said by Historian Robert Edsforth ‘In retrospect... if the United States had been able
 to find or create growing markets for American farm produce and industrial goods
overseas, the Great Depression may have been avoided’.

 The Smoot-Hawley Tariff Act 1930 made this situation worse, by raising tariffs
further on foreign goods, causing retaliatory tariff increases from Europe, which
made it impossible for US business to be competitive in Europe Markets. This caused
retaliatory tariff increases in foreign nations, significantly decreasing global trade.

 Thus the Republican tariff and international business policies helped cause the Great
Depression, and after the crash of 1929, they made them worse.

OTHER CAUSES OF THE GREAT DEPRESSION

Wall Street Crash caused by Speculation

 The Over speculation in the Stock market was a cause of the Great Depression.
 The stock market boom began in 1928, and it attracted large amounts of capital at a
time where production and consumption in the US economy was beginning to slow.
Yet the Dow Jones Industrial Average increased from 191 in early 1928 to 381 in
September 1929, doubling in less than two years.
 The increase in the stock market was fuelled by speculation and ‘the stock market
had entered a fantasy world’ (Tindal and Shi). Credit was provided by Banks to
investors to fund the purchase of stock, margin lending increased from $5 billion in
the middle of 1928 to $8.5 billion in September 1929, and as a result US Banks were
exposed to any losses made on the stock market.
 This allowed the boom of the 1920’s to extend for another two years ‘by 1928 the
Stock Market was carrying the whole economy’ (Leuchtenburg), and thus the crash of
October 1929 inevitably dragged down the entire US economy as well.
 Compounding this was that the crash of 1929 caused the Dow to halve by November
1929, causing the wealth of the United States to fall by billions, individuals and
businesses that purchased stocks on margin were left with depreciating assets and
massive unpayable debts.
 As a result the Major US Banks were ‘loaded with dubious assets’ (Leuchtenburg)
which was a major factor in the massive bank losses and collapses that occurred
from 1930-33. The Bank collapses destroyed 15% of all bank deposits in the USA, and
described by Historian William Leuchtenburg ‘Nothing did more to turn the stock
market crash of 1929 into a prolonged depression than the destruction of business
and public morale by the collapse of the banks’, which dragged the US economy
further into Depression.
 Thus the Wall Street Crash and Over speculation were causes of the Great
Depression
Production-Consumption Gap caused by the misdistribution of income

 During the 1920’s manufacturing and consumption increased rapidly, Manufacturing

output increased by 42% between 1919 and 1929, because of increasing productivity
and new industries such as the automobile industry.
 However during the 1920’s, an extreme Misdistribution of Income developed, in
which the ‘purchasing power of workers and farmers was not enough to sustain
prosperity’ (Leuchtenburg).
 Whilst real wages increased 22% from 1922-29, ‘Profits got the lion’s share of the
rewards’ (Sparks), showing that developing in the 1920’s was an extremely unequal
distribution of income in the, in which the wealthiest 10% of individuals in the USA
had the same amount of wealth as the bottom 70%.
 Despite real wages growth workers ‘received wage increases disproportionate to the
increases in profits’ (Leuchtenburg), resulting in declining relative purchasing power,
meaning that there was not enough income received by the average worker to keep
demand for goods and services growing.

 Therefore the higher levels of production and productivity were not complemented
by an equal increase in real wages, which would have enabled American workers to
increase their consumption of manufactured goods. The lower relative purchasing
power meant that the supply of goods and services exceeded the demand for them,
thus there was overproduction.

 The gap that formed between consumption and production meant that businesses
were discourages from investing or producing new stock. This overproduction forced
businesses to cut back on production, which forced them to lay off workers, which
decreased the demand for goods and services, thus beginning the downward
economic cycle that caused the Great Depression. Thus the Overproduction Gap
between production and consumption was a cause of the Great Depression

Excess savings and investment generated by Republican economic policies

One of the Major Republican economic policies was the reduction, achieved under the
Republican appointed Secretary of the Treasury Andrew Mellon.

 Mellon enacted the policy of reducing the level of taxation in the US economy, form
1921-1929 Top tax rate was reduced from 65% to 20%, ended the excess profits tax,
gift tax and estate tax.
 The effect of this policy was that effectively a large amount of income was
transferred from the Federal Government to Wealthy Americans and this created
excess savings, which was used for investment, high income earners have a lower
marginal propensity to consume that low income earners, thus save more as a
 percentage of their income than low income earners, by 1929 the top 0.1% had 34%
of all of the US’s savings.
 These savings contributed to the 1928-1929 stock market bubble ‘surplus capital (of
which there was a great deal in the wake of the Mellon Tax cuts and rebates’ often
found lending money on Wall Street’ (McElvaine 1993).
 This savings was also used for capital investment, particularly in the Automobile and
the manufacturing sectors ‘the prosperity of the 1920s had been sustained in very
large part by two great industries(Automobiles and their related industries) which
provided millions of jobs and absorbed huge quantities of investment capital’
(Leuchtenburg).

 By 1927, the vast quantity of automobiles in the USA indicated that all consumers
who had the means of purchasing an automobile had purchased one, the market
was saturated and sales were declining, which was also the case for many other
consumer goods in America.

 In 1929 the investment in these sectors was saturated, whilst consumption was
declining, the industries of the American economy ‘the automobile industry- and
satellites like the rubber-tire business-were badly overbuilt’ (Leuchtenburg) by over
investment and savings.

 Since large amounts of capital and labour was employed in the Automobile sector,
when it declined due to overproduction and a saturated market, thousands would
become unemployed and the value of the investments and assets would decline.

 This decline of the Automobile and Manufacturing sector was significant because
millions of Americans were relied on the these industries for their income, the
decline of industry was contagious, spreading to other sectors of the US economy,
plunging American into the Great Depression.

Weak US Banking Sector

 A key factor that turned a normal recession into the Great Depression was the
Weakness of the US Banking Sector. During the 1920’s ‘no other industrial nation in
the world had as unstable or as irresponsible a banking system’ (Leuchtenburg)
 This was a result of most states in the USA had ‘unit banking laws’, that prohibited
the expansion of banks through branches. This meant that most of the Banks in
America were small banks, limited to one branch operating in one city or community,
relying on a small collection of deposits for solvency and venerable to problems if a
small group of debtors is unable to pay.
 The result was that from 1929-1933, as unemployment increased and farm income
decreased, small banks were unable to collect their debts causing them to collapse.
From 1929 to 1933 5000 Banks in the United States collapsed, along with their
 depositor’s money, further reducing the income of individuals and compounding the
downward economic spiral of the Great Depression.
 States without unit banking laws suffered comparatively little small and medium
sized Bank closures.
 As a result the Major US Banks were ‘loaded with dubious assets’ (Leuchtenburg)
which was a major factor in the massive bank losses and collapses that occurred
from 1930-33. The Bank collapses destroyed 15% of all bank deposits in the USA, and
described by Historian William Leuchtenburg ‘Nothing did more to turn the stock
market crash of 1929 into a prolonged depression than the destruction of business
and public morale by the collapse of the banks’, which dragged the US economy
further into Depression.
 Thus the Wall Street Crash and Over speculation were causes of the Great
Depression

Failures of US Monetary Policy

 Failures of US Monetary Policy, both before and after the crash caused a normal
recession to turn into the Great Depression. Prior to the Crash, the US Federal
Reserve held their discount rate (the Rate the Reserve charges US Banks) low,
reducing interest rates creating cheap credit and increased consumption which
created the economic boom of the Roaring 1920’s. However a large amount of the
investment was ‘malinvested’, particularly in the Automobile sector, and Real Estate
and Stock market speculation.
 During 1928 and 1929 the Federal Reserve raised their discount rate from 3.5% to
6%, causing an increase in borrowing costs for investors, making profitable
investments unprofitable.
 The effect of this was a removal of money from the Stock market in October 1929,
causing the Wall Street Crash, and the beginning of the Great Depression.
 However what turned ‘a normal run of the mill recession into a Depression’
(Friedman) was further failures of US Monetary Policy by the Federal Reserve. This
was explained by Nobel Prize Winning economist Milton Friedman, that the Federal
Reserve that it allowed the quantity of Money in America to decline by a third,
because one third of US Banks failed. The Federal Reserve failed, instead of
increasing the quantity of money to prevent deflation and a downward economic
spiral, the Federal Reserve did nothing.
 Deflation in the US economy resulted in lower agricultural and consumer prices,
resulting in a decrease in industrial production, and farm income which created
massive increases in unemployment that reached 24.9% in 1933.
 Thus the mismanagement and failures of the Federal Reserve resulted the Great
Depression

Republican Tariff and International Business policies

Republican Tariff and international business policies helped cause the Great Depression.

 The Republicans aimed to maximise exports and minimise imports through a tariff
and trade policy ‘to be the world’s banker, food producer and manufacturer, but to
buy as little from the world in return’ (McElvaine).

 The Republican created high tariffs on imported goods, reducing the volume of
European goods sold in the US, which meant European economies were unable to
gain sufficient income from sales in the United States, and they were unable to
rebuild capital that was destroyed in WWI.

 This situation was summed up by historian Robert McElvaine ‘If the United States
would not buy from other countries, there was no way for other countries to buy
from Americans, or to meet interest payments on American loans’ and ‘these
‘beggar they neighbour tactics were suicidal’.

 Because of these policies, after the downturn of 1929 US businesses were unable to
find sufficient export markets in Europe to supplement the decrease in demand in
the United States, as said by Historian Robert Edsforth ‘In retrospect... if the United
States had been able to find or create growing markets for American farm produce
and industrial goods overseas, the Great Depression may have been avoided’.

 The Smoot-Hawley Tariff Act 1930 made this situation worse, by raising tariffs
further on foreign goods, causing retaliatory tariff increases from Europe, which
made it impossible for US business to be competitive in Europe Markets. This caused
retaliatory tariff increases in foreign nations, significantly decreasing global trade.

 The Republican foreign economic policies, whilst did not cause the Great Depression,
prevented the development of international prosperity which would have allowed
US businesses to develop new markets in the case of a severe downturn in America

(3) Social tensions: immigration restrictions, religious

fundamentalism, Prohibition, crime, racial conflict, anti-communism
and anti-unionism
Immigration restrictions

 Rationale
o Reaction to communism/anarchism
 Migrants, being impoverished, were susceptible to socialist ideas
o ‘Alien slackers’
o War demanded cultural homogenisation and nationalism
o Targeted Catholic and Jewish immigrants from south-western Europe
 Legislative Process
o 1917 literacy test – over Wilson’s veto
 o Emergency Quota/Johnson Act 1921
 Quota of 3% of each nationality counted in 1910 census
o National Origins/Immigration Act of 1924
 Quota of 2% of each nationality counted in 1890 census
 In 1927 top limit was dropped from 164000-150000
 Ambiguous ‘national origin’ terminology
 Administrative horror- D. Shannon
 65,721 (GB) vs 6,524 Poland or 5,802 (Italy)
 Did not prevent immigration from ‘Catholic’ Mexico, Cuba, French
Canada
 Key bodies
o American Legion
 Quotes
o America must be kept American- Coolidge

Religious fundamentalism

 John Scopes trial (monkey trial)) – Dayton 1925

o Clarence Darrow & the ACLU v W Jennings Bryan
o HL Mencken of the Baltimore Sun, and The American Mercury
o Fined $100, paid by Baltimore Sun
o Overturned by Tennessee Supreme Court on a technicality
 Anti-Evolution League
o Teaching of evolution banned in Oklaholma, Florida, Tennesee and North
Carolina, Arkansas, Mississipi
o T. T Martin – ‘Keep Hell out of the High Schools’
 Revivalism
o Aimee Semple McPherson – ‘Four-Square Gospel’
 Al Smith lost 1928 election because of his Catholicism
 Ku Klux Klan
o Led by William J Simmons, Hiram W Evans
o Significant clout in Texas legislature
o Virtually owned Illinois

Prohibition

 Precedent in Britain, France and Maine

 Women’s Christian Temperance Union
 Temperance Society of the Methodist Episcopal Church
 Anti-Saloon League
 Rural people, middle-class reformers
 Volstead Act/the 18th Amendment
o Private stock not allowed to be confiscated
 Hoover’s clout with the Belgian embassy
 ‘Mississippi would vote dry and drink wet while ever it could stagger to the polls’ –
Will Rodgers
 Rationale
 o Poverty
o Class Conflict
o Racial agendas (blacks and immigrants targeted)
 Legislative Process
o Webb-Kenyon Act 1913 – prohibited the transport of liquor into dry areas,
over Taft’s veto
o Lever Act 1917 – prohibited liquor production to conserve grain during the
war
o Eighteenth Amendment adopted Dec 1, 1917
 Ratified January 1919
o Volstead Act 1919 – after New Years 1920, illegalised beverages with over
0.5% alcohol
o Baby Volstead Acts – state legislation, repealed by some
 Ineffectiveness
o High degree of corruption in federal Prohibition Bureau
o Porous borders with Canada, Carribean
o ‘low capital requirements of bootleggers’ – David Shannon
 Impact
o Increased American contempt for law
o Fuelled crime/corruption
o Denaturants, methale/wood alcohol

Crime

 Fuelled by prohibition

Racial Conflict

 Black Americans
o Prohibition was thought to apply to immigrants and blacks
o Jim Crow/segregation laws
o Grandfather clauses in voting
o Poll taxes
o Detroit race riots
o Jazz culture
o 1 million blacks left in Great Migration (1910-1930)
o Marcus Garvey – Back to Africa Movement, United Negro Improvement
Association
 6 million members by 1923
o Booker T Washington, WEB Dubois
o NAACP- National Association for the Advancement of Coloured People
o Niagara Movement
o Anti-lynching bill filibustered out of Congress
o Ku Klux Klan
 Used consumer tactics, professional recruitment
 Zeniths in 1924
 Stephenson charged with manslaughter
 o Bill against lynching gets filibustered out of Congress
o Unions denied membership
o Segregation in the armed forces
o Segregated accommodation
o Discrimination by Federal Housing Authority
 If a neighbourhood is to retain its stability, it is necessary that
properties continue to be occupied by the same social and racial
classes.
 Central and Southern European Migrant groups
 Native Americans (Indians)
o Largely on reservations, which were marginal lands
o Segreation in armed services
o Dawes Act 1887
 Asian Americans esp Japanese
o Race riots

Anti-communism

 Mail bombs/ Palmer bomb – April/June

 Palmer raids
o Habeus corpus suspended
o 250 members of Union of Russian Workers arrested and beaten
o Labor Department deported 249 aliens to Russia
o 6000 people arrested, 600 deported
 Sacco-Vanzetti Case
o Electrocouted in 1927
 Socialist party
 Communist Party of America
o John Reed
 Communist Labor party
 Combined comprised <0.5% of population
 Mayor Ole Hanson’s suppression of the Seattle Central Labor Council generals strike
Feb 1919
 League of Nations branded as Red internationalism
 Five socialists expelled from NY legislature, despite Charles Evans Hughes
 Constitutional rights violated, states enacted sedition laws

Anti-unionism

 American Plan of employment, yellow dog contact, open shop, liberty of contract
 Red Scare, strikes of 1919 led to linking unionism and subversion
 Kill the unions with kindness, industrial democracy, welfare capitalism
o Profit sharing, bonuses, pension, recreation, health programs
 Clayton anti-trust act limited to injunctions against individual workers
THE EFFECTS OF THE GREAT DEPRESSION
(2) Effects of the Depression on different groups in society: workers, women,
farmers, Afro-Americans

Workers

 25% unemployment nationally in America

 65%in Detroit, 80% in Toledo and Cleveland
 1/3 of banks failed, resulting in 15% of deposits being lost
 25% wage cuts
 reliance on state handouts, had to swallow pride
 bonus army perceived as a quasi-communist revolution
o douglas marcarthur – ‘mob … animated by the essence of revolution’
 psychological impact – men felt inadequate (something wrong with a man who can’t
support his family)
 monopoly board game became popular-get rich quick in your imagination
 mining families in the mountains of Appalachia reduced to berries and dandelions
 looked to cinema for distractions/ cinemas encouraged to produce ‘happy films’ by
New York Mayor
o cinema key propaganda tool for NRA
 National Mine Wroerks Union (communist)
 Communism ‘gaining a foothold’ – Theodore Bilbo (Gov- MSS)
 However party membership never rose above 100 000
 Hunger marches

Women

 retained their employment moreso than men (23.2% unemployment vs 39%

northern men)
 women were usually breadwinners (services was stronger than industry)
o shift in domestic power balance, men did not take to this well
 25% of workforce
 federal agencies had anti-women employment policy despite efforts of Frances
Perkins, Eleanor Roosevelt
 unions were also unwilling to admit women
 marriage rate/fertility rate dropped
 o 22% decline in marriages, 15% decline in births
o below replacement rate for first time in US history
 divorce rate fell – divorce fee
 1.5 million women were abandoned by their husbands – 1940 report
 resurgence of conservative attitudes towards family unit
o the new ideas of the twenties – behaviourism/feminism undermined
o flappers ceased to exist as a cultural icon
 Practically every woman, whether she is rich or poor, is facing today a reduction of
income. –Eleanor Roosevelt
 Women who sought relief or paid employment risked public scorn or worse for
supposedly taking jobs and money away from more deserving men.-Susan Ware
 Sweatshops, child labour – exploitation
 Women’s fashion – less makeup, more affordable dresses, lower heels

Farmers

 750 000 farms abandoned

 Penny (forced) Auction
 Foreclosing magistrates threatened with lynching
 Farmers Holiday association (militant)
o Block highways, empty milk cans, attacked deputies
 Iowan governor placed six counties under martial law
 Share Croppers Union
 Pouring milk into the streets, blockading food going to market
 Anti-Okie law in California
 Dustbowl
 43% of farmers were migrated, some of which were expatriated
 keep warm by burning corn


Afro-Americans

 invariably first to be retrenched

 women fared better than men as ‘domestic hands’
o jargon of ‘slave market’
 New Deal programs such as Federal Music Project, Federal Theatre Project, Federal
Writers facilitated Harlem Renaissance
 Harry Hopkins (WPA) worked with NAACP to protect rights of blacks
 Desert Republican Party
 Anti-lynching bill filibustered 1937
 a study in Harlem revealed that 65% of African-American children were
malnourished.
 Stealing jobs from ‘real’ Americans
 Jim Crow laws refused African-Americans accommodation in hotels, motels
 Blacks normally involved in textiles or sharecropping
 9/10 African American women involved in worst hit industries – textiles
 Scottsboro case – Share Croppers Union
RESPONSES TO THE GREAT DEPRESSION
President Hoover
President Hoover was a Republican and believed in laissez-faire capitalism, that the market
must run its course and the crisis would resolve itself. This belief was not without precedent

o The Panic of 1907 was relieved by sudden liquidation of bad loans and assets,
and a combined Bank purchase/Bailout by J.P Morgan and his associated
o Recession of 1921-22, severe recession yet resolved itself without government
intervention, following the recession was the Roaring 1920’s

Both occasions in the recent past did not require government intervention, and thus Hoover
believed that it was not required to end the current crisis.

There was calls from the Financial sector for ‘ruthless deflation’ (Leuchtenburg), a
deflationary monetary policy, Secretary of the Treasury Mellon said ‘liquidate real estate,
liquidate stocks ... the whole system will be stronger in the end’.

However, later on; President Hoover ‘insisted on a more activist role’ (Leuchtenburg).

Hoover 1932-1933

o Met with business leaders in early 1930, secured promises from them to keep
wages high
o Stepped up Federal Construction
o Urged State and local governments to increase their spending
o Reconstruction Finance Corporation, created in January 1932
o Created to lend funds to banks, railroads and financial institutions,
probably saved some banks and railroad companies form collapse

Hoover 1932-1933
o Banks shored up
o Big commercial banks bailed out
o No local bank guarantees
o Reconstruction Finance Corporation (RFC) made loans to railroads, life insurance,
building, farm mortgages, banks
 o Smoot-Hawley passed to protect what remained of American industry
o Government spending cut/taxes increased in order to balance the budget
o Quit buying agricultural surpluses in 1931
o Did not retire gold standard
o Glass-Steagall Banking Act 1932
o Broadened commercial loans that Federal Reserve could support
o Federal Home Loan Bank Act 1932
o Relief for mortgage holders
o Federal Farm Board
o Emergency Relief and Construction Act 1932
o 300 million to state relief, 1.5 billion public works (state/fed)
o offset by state/local cutbacks
o Moratorium on war debts/reparations
o -2.7 bill budget deficit 1932
o vetoed federal relief and Emergency Committee for Employment proposal

However, all of these measures by Hoover were on ‘too small a scale, failed to get the
economy rolling again’ (Leuchtenburg)

THE NEW DEAL, RESPONSE TO THE GREAT DEPRESSION

UNDER ROOSEVELT
 In May 1933, Federal Emergency Relief Act, FERA, direct financial assistance to the
unemployed, unemployment insurance, never been done by the Federal
government before

 May 1933, Agricultural Assistance Act, limited success, payments to farmers to not
farm, 1937 farm income doubles, may have been because of Dust Bowl

 Wagner Act 1935, gave workers the right to form unions and bargain collectively,
employers forbidden to interfere in Union Activity. Total change in American
Capitalism, government intervenes to support workers and Unions.

 Social Security Act August 1935, paid by payroll tax on employers, ‘the most far
reaching of New Deal Initiatives’ (Tindall and Shi)

 Works Program Administration 1935, created work for the dole program, replaced
FEMA, helped 9 million people over 9 years

Was not effective

 The Depression of 1937 showed that the economy was NOT healed by New Deal
policies, the recovery of 1933-1937 was unsustainable, the New Deal helped the
economy recover as long as Government was inplace.

 In 1939, 20% Americans were out of work

  Henry Morgenthau, FDR’s Secretary of the Treasury ‘We have never made good on
our promises. After 8 years we have just as much unemployment as when we
started... and an enormous debt to boot!’

Civilian Conservation Corps (CCC)

 Employed 3 million
 Paid wages of $30, $25 forwarded to families
 Check crime rates
 Racial segregation
 Texas, 5% black because told only whites can apply

Tennessee Valley Authority (TVA)

 Directed by David Lilienthal

 Damming: ‘Great Lakes of the South’
 Hydroelectric infrastructure
o Cheap electricity
o Check utility price-setting power
 Soil conservation, industry, forestry, river navigation, fertiliser
 Exploit productivity of the Tennessee Valley in the long term
 Work-relief, grassroots democracy, won local support

The Agricultural Adjustments Administration:

 Aimed to increase agricultural prices through the destruction of farm surpluses,

excess livestock and paying farmers not to cultivate their farmland

 Did not achieve lasting recovering in the farm sector, did not provide relief to all
farmers, economically questionable to raise prices by constricting supply, $100
million in handouts whilst destroying produce. Politically and socially wrong to be
destroying food whilst people were starving

 The dust bowl may have caused prices to rise because competitor farmers were
destroyed in the states of Oklahoma, Kansas, Texas and others...

 Declared Unconstitutional by Supreme Court in 1936

The NRA:

 The NRA aimed to end ‘ruthless competition’, which was seen by Businessmen,
Unions and government to be driving down prices, wages and deterring investment
and an economic recovery
  The NRA implemented codes which mandated certain prices, wages, quality controls
and regulated business practises to end the ‘ruthless competition’. Also
implemented the first minimum wage and limited working hours

 Does not achieve industrial recovery, the codes increase the cost of business by 40%.

 In the 6 months after the NRA began operating industrial production fell 25% after
increasing 25% in the previous 6 months before the NRA was introduced

 Strike rates increased as workers were unsatisfied with the NRA not assisting them

 Black markets developed as businesses refused to operate under the codes

 Declared Unconstitutional by the Supreme Court in 1936

Works Progress Administration

 Also government program to provide jobs for the Unemployed on public works ect...

 In Kentucky WPA workers catalogued 350 ways to cook spinach, they were paid to
do this, example of waste and mismanagement

 ‘I’ve got 4 million at work, but don’t ask me what they’re doing’ Harry Hopkins, head
of the WPA

Social Security Act 1935

 Created Old Age, Unemployment, Disability insurance/pensions, funded by the

creation of a payroll tax
 Part of ‘The Second New Deal’
 Implemented because:
o High unemployment, millions of American families without income, needed
assistance
o Depression caused total collapse of private charity due to bankruptancies and
declining incomes, Government needed to step in an provide for the needy
o Many elderly people lost their retirement investments and savings in the
Depression, could not go back to work and thus needed an income
o Also believed that it would encourage old workers to retire, freeing up
employment for the young
o Also stimulates Aggregate Demand and the economy
 Two negatives:
o Payroll tax is a tax on employers on the number of employees they have,
directly disincentives employment and hiring, which was desperately needed
during the Depression
 o Removed $2 billion from the economy when it began in 1937, first Social
Security Pension checks were not mailed until 1940, therefore it leaked
income from the economy, possibly contributing to a delayed recovery

Wagner Act 1935

 Also known as the National Labor Relations Act of 1935, known as a part of the
‘Second New Deal’, aimed to strengthen the power of Unions
 The Wagner Act forced businesses to recognised Unions and negotiate with them as
a part of the collective bargaining process
 Union membership increased from 3.6 million in 1930 to 7.2 million in 1937, then 8.9
million in 1939
 Pros-
o Sought to increase wages, which was hoped to increase consumption and
stimulate and economic growth
o Provided protections for workers
o Far reaching institutional change in the economy that secured the rights of
American workers long after the end of the Great Depression
 Cons-
o Directly caused major industrial unrest in 1937
 Committee on Industrial Organisations (CIO), formed to unionise
industrial sector workers, more aggressive than American Federation
of Labor and other Unions
 Some Communists/Socialists were elected to high positions in the
new industrial unions
 Caused strikes in the:
 Automobile- The Flint ‘sit down strike’ of 1936/7 by the United
Auto Workers (UAW), UAW memberships grows from 30k to
50k
 Steel
 Glass
 Rubber
o Deterred business investment in rapidly unionising industrial sectors, possibly
delaying economic recovery

Evaluate the effectiveness of New Deal policies in dealing with the

social and economic problems caused by the Great Depression
Social problem: Poverty

The New Deal was effective at solving the economic problem of the Financial Crisis, and
mostly successful at solving the social problem of poverty. Yet the New Deal was unable to
solve the economic problem of unemployment and unable to bring the United States out of
the Great Depression, which was achieved by World War Two.

The New Deal was only partially effective at solving the social problem of poverty.

Prior to the New Deal, the task of Welfare for the poor and unemployed was left to the
individual States in the USA, as well as private charities. Yet as a result of the Great
Depression, the need for welfare charity rose, and the taxes and private donations that paid
for this assistance decreased significantly, private charities could only replace 1% of the total
wages lost to unemployment from 1929-1933, whilst State and municipal governments
could not provide adequate assistance for the unemployed, and could barely pay their own
employees, for example Chicago’s school teachers were not paid from November 1932 to
March 1933.

The New Deal initially provided income support for the unemployed relief through Federal
agencies, yet the ‘New Dealers wanted to use federal power to more equitably distribute
income, wealth and economic power and provide a minimum of economic security for all
Americans’ (Edsforth, 2000). Thus, the Social Security Act 1935, created old age pensions,
disability and unemployment insurance, funded through a payroll tax implemented in 1937.
This was intended to provide a permanent safety net for Americans from poverty, and was
partially successful in alleviating the poverty caused by the Great Depression. However it
can only be deemed to be partially successful, because the number of Americans in poverty
did not fall because of Federal aid, but rather the end of the depression and growth in
employment. Thus the New Deal partially solved the social problem of poverty, but only the
end of the depression truly ended the poverty crisis.

Economic
Unemployment

The New Deal was unable to solve the problem of high unemployment, which was 24.9% in
1933, despite the fact that providing relief and a permanent recovery from high
unemployment was a top priority for the New Deal.

The New Deal created the Public Works Administration, the Civilian Conservation Corps and
the Tennessee Valley Authority, some of many authorities. These Administrations were
designed to construct public works projects such as roads, dams, railways, levees, canals, all
with the intention to create employment for the millions unemployed in the process of
constructing infrastructure. This is the principle of Keynesian Economics; Government deficit
spending on infrastructure to create employment stimulated the economy, because the
wages paid to men being employed by the government has a ‘multiplier effect’, creating
new jobs as the money flows around the economy. The Public Works Administration had a 2
year budget of $3.3 billion (5.85% of 1933 US GDP), employed 4 million people, whilst the
Civilian Conservation Corps employed 3 million unemployed young men in unskilled labor
planting trees, constructing roads, parks and buildings.

The unemployment rate did begin to decrease, falling 10%, to 14.3% in 1937. However in
1937, New Deal public works spending cut, because it was belied the US economy was able
to fully recover without massive government spending. The US economy entered the
‘recession within a depression’, unemployment jumped to 19%. This showed that the New
Deal was able to reduce unemployment and create what appeared to be an economy
recovery, but the reduction in New Deal spending revealed that the New Deal was
ineffective in creating a genuine, private-sector driven, economic recovery.

In 1939 Unemployment was 17.2%, lower than what it was when Roosevelt came into office
in 1933, but far higher than the 1929, or any level that would show that the US economy has
recovered from the Great Depression. Thus ‘The New Deal failed to generate enough
employment and income to stimulate a real recovery’ (Edsforth 2000). In fact it was WWII
that ended the unemployment crisis and ‘at last put an end to the Depression-something
the New Deal had been unable to do’ (Demarco 1998). This was due to young men entering
the armed forces, which grew to 11.4 million in 1945, up from 370,000 in 1939, which had
the effect of mobilising young men who would have otherwise been unemployed. Also, US
industrial production soared 226%, as American factories and workers were employed
producing War munitions and vehicles, which combined to reduce unemployment to 1.9%
in 1943. Thus the New Deal did not effectively solve the problem of high unemployment, it
was WWII that ended the unemployment problem.

Financial Crisis in US Banks

Following the Wall Street Crash in 1929, there were a number of bank failures in the United
States that had continued until Roosevelt took office. The first failed due to loan exposure to
the collapsing stock prices following the Wall Street crash. From 1930-33 agricultural prices
and farm income fell which ‘forced more farm foreclosures and more bank failures’
(Edsforth, 2000). This financial contagion spread both in the United States and overseas, the
largest bank in Austria Kreditanstalt collapsed in 1931, and the New York Bank of the United
States collapsed, taking with it 400,000 deposits. By early 1933, a major financial crisis
threatened the entire US economy.

Roosevelt’s first legislation of the New Deal, aimed at solving this financial crisis was the
Emergency Banking Act, passed 9th March 1933, which gave the US Treasury the power to
take over failing banks, the president the power to declare a National Emergency to prevent
banks from operating without the President’s Approval. This was designed to restore
confidence and stability in the US banking system, since the US Treasury could step in an
ensure that banks would not fail. The Emergency Banking Relief Act ‘successfully tackled the
financial crisis, the most urgent of the problems FDR faced ... (it) immediately restored the
public’s confidence in the banking system, money began to flow in them’. FDR later signed
the Glass-Steagall Banking Act 1933, which aimed to reduce the level of risky speculative
investment, increase the capital reserves available to banks and set up the Federal Bank
Deposit Insurance Corporate to secure individual deposits. These pieces of New Deal
legislation successfully secured the US Financial system, preventing a major banking collapse
which would have sent the US economy further into depression.

Agriculture

The Agricultural sector was severely depressed throughout the 1920’s, as a result of
overproduction causing low prices, which fell even further as domestic and global demand
fell after the Wall Street Crash and Great Depression began. The New Deal attempted to
solve the problem of Depression in the rural economy, which was believed to be caused by
overproduction causing low prices and farm income. This was done through the Agricultural
Adjustments Agency (AAA), which aimed to increase prices by destroying surplus crops and
livestock as well as paying farmers to leave farmland uncultivated, which was hoped would
decrease supply relative to demand and increase agricultural prices and farm incomes.
Agricultural prices increased steadily from 1934-37, which may be partially attributed to the
AAA. However as the ‘Dust Bowl’ wiped out millions of acres of farmland in Oklahoma,
Texas, Kansas and other rural states, the Dust Bowl decreased agricultural production in
those states, causing prices to rise across the nation as less farm produce was produced, as
well as the US economy and demand recovering steadily from 1934-37, these factors can
also be attributed to the recovery in agricultural prices. However the AAA is seen as a very
controversial government program, since it destroyed otherwise useful produce that would
have been sold to poverty stricken urban workers at low prices, and (not as a result of this
though) the Supreme Court ruled the AAA to be unconstitutional in 1936, and the program
was suspended. The New Deal also subsidised farmers following the 1936 AAA court ruling,
and provided assistance to farmers by delaying the foreclosure of farm mortgages by law.
Thus, the New Deal may have improved the situation in the agricultural sector of the
economy by raising farm prices, yet this is disputed due to other correlating factors.

(4) Nature, aims and strategies of US foreign policy 1919-1941

Nature

 Confused – driven by public opinion

 Monroe Doctrine
 Economic and diplomatic dissonance
 Xenophobia
Aims

 Neutrality and isolationism

 Preserve the Open Door in China
 Reconciliation with South America

Strategies

 Clark Memorandum
 Non-recognition of territorial gains – Stimson Doctrine
 Independence to the Philippines
 Washington Naval Conference and disarmament
 Neutrality Acts
 Ludlow Amendment
 Kellog Briand Pact

Brief Overview of US foreign policy developments

1919

 Rejection of Versailles. ‘The Irreconcilables’

 No league BUT observer status by 1923

1920s

 Influence of the peace movement

Political

 World Court
o American judges serve but voted down
 Washington Naval Conference 1921/22
o 3/5/9 Power agreements
o Role of Charles Evans Hughes/Mellon
o Isolationist/Internationalist or economically motivated
 Kellog-Briand Pact 1928
o Role of France
o 63 Nations sign up
o Escape hatches
o More for US domestic consumption. Does not achieve much.
 Latin America
o Intervention in Nicaragua
o Payment to Colombia of $25mill for canal
o Evacuation of Dominican Republic, Haiti, Nic
o Nationalisation of US assets in Mexico
 o Clark Memorandum
 Informal renunciation of Roosevelt Corollary
 Immigration restrictions

Economic

 Dawes Plan 1924, Young Plan 1929

o US underwrites German/European recovery
 BUT Fordney McCumber 1922, Smooth Hawley 1930
 Abrogation of free trade with the Philippines, Cuba

1930s

Political

 Breakup of League of Nations, militarism in Italy, Japan, Germany

 Nye Committee
o ‘Merchants of death’ explanation for US entry to WWI
 Neutrality Acts
o ‘High water mark’ of US isolationism
o moral embargoes – Spanish Civil 37, Ethopia 35
o not applied to Sino-Japanese War
o BUT by 4th Neutrality Act, the intent is ‘watered down’ for ‘cash and carry’
o ‘the new law… indicated the end of American isolation from world conflicts’ –
Akira Iriye
 Panay incident 1937
o Tests ‘isolationism’
o Apology and indemnity
 Quarantine’ speech 1938 – Chicago
o Shows FDR gravitating towards war
o BUT ‘Two Oceans Navy Bill’ – (defensive)
o BUT ‘cash and carry’, ‘lend lease’, ‘great arsenal of democracy’
o The New Deal’s triple A foreign policy; it will plow under every fourth
American boy – Senator Wheeler
 Ludlow Amendment 1937 – defeated by 209 to 188

Economic

 1932/33 London Economic Conference

o FDR pulls out; wants to devalue
o Does not stabilise world currency
o Unusual because FDR is internationalist
 Johnson Debt Default Act 1934

1940s
  Reintroduction of ‘peacetime’ conscription in US 1940
 ‘undeclared war in the Atlantic’ 1941
o Kerney, Greer sunk
o American aircraft in Greenland
o American destroyers escort convoys as far as Greenland/Iceland
 Placentia Bay conference – The Atlantic Charter
 Exchange of overaged destroyers
 Embargo of oil/metals to Japan
 Pearl Harbour 1941/ entry into Second World War
o Manufacturing aircraft, ammunition for British
o Virtually all Red Army trucks were manufactured in the US

(4) Impact of domestic pressures on US foreign policy 1919-1941

Isolationism

 Charles Lindbergh – America First

Imperialism

 Most opposed to 1890s imperialism

 Mark Twain

Pacifism

 Private boycott of Japan/Germany

Nationalism

 Sinclair Lewis – It could happen here (Fascism)

 Immigration restrictions/xenophobia

Economic provincialism

 Contradictory tariff and internationalist loans scheme

 Exacerbated by the Depression – FDR’s stance on revaluation of the dollar