The Anglo-American Adventure
Chapter 4: Industrial America, Part V
1861 to 1933
This paper is divided into five parts, which cover the following topics:
The Age of Normalcy Begins
Americans rejected the Versailles Treaty and the League of Nations because they were tired of Europe. In scarcely more than a century and a half, thirteen underpopulated, contentious colonies on North America's Atlantic seaboard had become the world's most powerful nation. It was also the richest; between 1914 and 1920, the nation's wealth had increased by 250 percent. But great power comes with great responsibility. Five of the world's empires (the Chinese, Russian, Austrian, German and Ottoman) had collapsed in the past decade, and many of the people in those lands expected the Americans to step in and solve their problems. The Americans, on the other hand, looked back to the "good old days" when the president was usually a Republican who didn't make waves (e.g., Grant, Hayes, Arthur, B. Harrison and McKinley), tariffs were the only political issue that generated much controversy, and the United States could count on the Atlantic and Pacific Oceans, to serve as a first line of defense and to keep Americans out of foreign entanglements. Now that the country had climbed to the top, it was time to take a vacation.(88)
Eighteen Republican candidates ran for president in 1920; among them were ten senators, three governors, and two generals (Pershing and Leonard Wood, the commander of the Rough Riders). They all agreed that Wilson and his ideas must go, but could not agree on who should replace him. It took ten ballots and a deal in a smoke-filled room by Harry Daugherty, the campaign manager for Ohio Senator Warren Gamaliel Harding, to get the delegates to agree on a ticket that had Harding as the presidential candidate. For the vice-presidential candidate, they chose Massachusetts Governor John Calvin Coolidge. Just a year earlier, Coolidge had broken up a police strike in Boston, and his telegram to AFL President Samuel Gompers had made him an instant hero: "There is no right to strike against the public safety by anyone, anywhere, anytime." Even President Wilson congratulated Coolidge for acting so decisively.(89)
Harding was a true dark horse, virtually unknown outside his home state. He had only thrown his hat in the ring to make himself more popular with other Ohio politicians; he never expected to have the grand prize handed to him. Nevertheless, Republicans found him easy to accept for four reasons:
1. He had almost no enemies, and couldn't think of any "skeletons in the closet" that might be used against him. However he forgot to mention a mistress, Carrie Fulton Phillips, who blackmailed the Republican Party later.
2. In the Senate, he was only present a third of the time, and none of the bills he introduced were controversial, so party leaders had no reason to think he would rock the boat, the way Roosevelt had.
3. He looked impressive. When Harry Daugherty first met Harding in 1898, he said, "Gee, what a president he'd make!" After that, he steadily pushed Harding toward the White House, though Harding never wanted the job. Since most women were voting for the first time in 1920, Republicans felt that looks would matter.
4. (The most important) He was very un-Wilsonian in character. Americans were just as tired of headline-making presidents as they were of Europe; they wanted a chief executive who would put the Big Stick away. He coined the word "normalcy" to describe a return to quieter times, in his most important speech: "America's present need is not heroics but healing, not nostrums but normalcy, not revolution but restoration, not agitation but adjustment, not surgery but serenity, not the dramatic but the dispassionate, not experiment but equipoise, not submergence in internationality but sustainment in triumphant nationality."
Wilson tried to run again, feeling that being elected to a third term would vindicate the Versailles Treaty, the League of Nations, and himself. But because he had not recovered much, nobody else wanted him to run, and at the Democratic convention, his name wasn't even submitted for the nomination. Instead, when the Democrats deadlocked, they did the same thing as the Republicans, and turned to a little-known Ohioan, Governor James Cox. For his running mate, they chose thirty-eight-year-old Franklin Delano Roosevelt (see footnotes #55 and #86).
Cox promised to continue the Wilson policies, but as we saw, that was what the voters didn't want. Thanks to the Nineteenth Amendment, the 1920 presidential election had nearly 27 million voters, compared with 18.5 million in 1916, and Harding carried them by a landslide; he was the first president to win 60 percent of the popular vote, and every state outside of the South went for him.(90) Irish and German-Americans, who had voted overwhelmingly for Wilson in 1916, felt they had been betrayed over the last four years, and went to the Republicans in droves. Even a rumor spread by Wilson, that Harding had some black ancestors in his family tree, did not make a difference in the outcome. Wilson left the White House a defeated man.
However, Harding was scarcely any happier. To a friend he confided, "I have lost my freedom. I am a man of limited talents from a small town. I don't seem to grasp that I am president." Seeing himself in a figurehead role, Harding appointed strong men to the Cabinet, to make most of the decisions for him. Charles Evans Hughes became his Secretary of State, Andrew Mellon (see footnote #23) became Secretary of the Treasury, Henry C. Wallace became Secretary of Agriculture, and Herbert Hoover became Secretary of Commerce. Those four were very competent, but most of his other appointments, the so-called "Ohio Gang," got there because they were old friends of the new president. These included Harry Daugherty, who became Attorney General, and New Mexico Senator Albert B. Fall, who became Secretary of the Interior. Soon they blackened the administration with their crimes.
Andrew Mellon got the economy off to a good start, by establishing a single budget for the entire federal government (previously each department had its own budget and sent out requests to have it funded), by getting the wartime tax on excess profits repealed, and by lowering income taxes. During World War I, the highest income tax rate had climbed from 7 percent to a whopping 73 percent. Mellon thought this tax rate damaged the economy, and because it encouraged the rich to put their money in tax-free bonds, instead of investing it in the private sector, it was actually reducing the amount of revenue the government could have. He got the highest rate lowered to 40 percent, and eventually to 25 percent; many lower income families saw their tax bill eliminated completely. Sure enough, the tax cuts led to a bull market that lasted for most of the 1920s. And there was a job for anybody who wanted one; unemployment dropped until it reached an incredible low point of 1 percent in 1926. On the other hand, a mood favoring isolationism, and fears that Europe would compete with American business when it recovered from World War I, encouraged the raising of tariffs to their highest level yet.
Harding remained popular as president, because the full story of the scandals committed by the "Ohio Gang" was not known until years after his death. Though no evidence was ever found to suggest that Harding took part in their activities, they showed that he had poor judgment when it came to friends, and for a while he seems to have been blind to the idea that his friends could be stealing. The first scandal was revealed in early 1923, when Charles Forbes, the head of the Veterans' Bureau, resigned and left the country. A Senate investigation revealed that he and his accomplices had embezzled $200 million from that branch of the government; he was eventually extradited and sent to prison. Thomas Miller, the custodian of the Office of Alien Property, also got a prison sentence, for illegally taking $50,000 from agency funds and for selling valuable German patents to friends of the "Ohio Gang" for almost nothing. Attorney General Daugherty was caught selling presidential pardons and liquor permits; he was forced to resign, but because of two hung juries, escaped conviction. When Harding confronted Jesse Smith, about his role as Daugherty's henchman, Smith destroyed many papers and shot himself.(91)
The most notorious scandal, however, was the Teapot Dome affair. The Navy owned two oilfields, at Elk Hills, CA and Teapot Dome, WY, which were being held in reserve to use at a future date. Once he became Secretary of the Interior, Albert Fall got ownership of the two fields transferred to his department, and then leased them out to private oil companies. In return, Fall received $105,000 as an interest-free "loan" for Elk Hills, and $304,000 in cash and bonds for Teapot Dome. This allowed Fall to resign and retire to his ranch before the end of 1922, where he spent so much money on improvements that the neighbors got suspicious. In October 1923, two months after Harding died, the Senate began an investigation of the oil reserves leases; but it took until 1927 to cancel the leases, and it wasn't until 1929 that Fall was convicted (he did a year in prison and paid $100,000 in fines, making him the first member of the US Cabinet to go to jail).
When he learned he had been betrayed by those he had trusted, Harding's health deteriorated rapidly. In June 1923, he and his wife took a vacation in Alaska. However, he further weakened himself by making speeches along the way, and rumors of what was going on in Washington followed him. On the way back, he suffered from food poisoning, and after a speech in Seattle, he was so exhausted that his next stop, in Portland, OR, was canceled, and he went directly to a hotel in San Francisco, where he died four days later (August 2, 1923). The exact cause of death wasn't clear; Mrs. Harding refused to allow an autopsy, and the attending physician declared that the president had succumbed to a heart attack, stroke or embolism. This inspired Gaston Means to write a book, The Strange Death of President Harding, which accused Mrs. Harding of poisoning her husband. However, Means was a friend of Daugherty and a notorious liar, so the book wasn't taken very seriously.
Vice-President Calvin Coolidge was also on vacation, at his father's home in Vermont, when word arrived that Harding had died. The vice-president was woken up at 2:30 AM, and because John Calvin Coolidge Sr. was a notary public, he swore in his son as the 30th president, by the light of an oil lamp (the home did not have electricity or a telephone). Then he returned to bed, and went to Washington the next day for a more proper swearing-in ceremony.
For the 1924 presidential election, the Republicans found it easy to nominate Coolidge for a full term of his own. The Harding scandals should have given the Democrats ammunition for their own campaign, but because the economy was doing great and there were no crises abroad, corruption quickly became a national bore; the big newspapers actually attacked the Senate investigators more than they did the criminals that were caught. This left the country feeling that the real sinners were the ones who had exposed the crimes.
Twenty-five Democrats threw their hats in the ring, of which the two most popular were William G. McAdoo, Woodrow Wilson's Secretary of the Treasury, and New York Governor Alfred E. Smith. They were sharply divided by two issues, prohibition and what to do about the Ku Klux Klan (Klan strength was at an all-time high, with 6 million members in the mid-1920s). Smith and the "wets" were against both prohibition and the Klan, while McAdoo's "drys" were inclined to be for both. The Democratic convention in New York City was the longest in US history, lasting sixteen days and holding 103 ballots to nominate a candidate.(94) Because it took a two-thirds majority vote to nominate somebody back then, the two factions were hopelessly deadlocked, with neither Smith's or McAdoo's backers willing to support the other candidate, should he get the nomination. Finally both sides compromised on John W. Davis, an obscure West Virginia lawyer whose qualifications were that he had been a former congressman and a former ambassador to Britain. Charles W. Bryan, brother of William Jennings Bryan and the governor of Nebraska, became Davis' running mate, in a move to please the prairie Populists.
Dismayed that both major parties had nominated conservatives, Robert LaFollette had one more fling, running as the Progressive candidate. He got 16.6 percent of the popular vote (mainly from old Progressives like himself, socialists, and activists for the farms and labor unions) and won his home state, Wisconsin. Davis got 28.8 percent of the popular vote and carried twelve Southern states (all of the former Confederacy plus Oklahoma). But the remaining 54 percent chose to "keep cool with Coolidge," so Coolidge won the other thirty-five states--and the election--easily.
Any discussion of the 1920s would not be complete without mentioning prohibition, and any discussion of prohibition is likely to include the sentence "it seemed like a good idea at the time." The idea of banning the production and sale of alcohol had been around since the colonial era. Abraham Lincoln once said that intoxicating liquor was "used by everybody, repudiated by nobody" and that it came forth in society "like the Egyptian angel of death, commissioned to slay if not the first, the fairest born in every family." Conservatives, especially church leaders, saw drunkenness as a national curse, and saloons as the greatest threat to the family; progressives saw alcohol as a source of crime, poverty and violence, especially for blacks; advocates for womens' rights didn't like alcohol because drunken husbands became abusive, and dependent on their wives to earn enough money to support the family. In the first two decades of the twentieth century, all of these groups agreed that drinking was a social evil that had to be stopped, so they showed an unusual amount of solidarity in passing the Eighteenth (prohibition) Amendment to the Constitution.
Prohibition did reduce the amount of liquor available, but instead of cutting down on crime, it turned hundreds of thousands of law-abiding citizens into criminals. As one contemporary humorist explained it, "Then prohibition came along and everybody started to drink." Some tried to apply what they learned in high school chemistry classes, by making bathtub gin; others went to "speakeasies," illegal drinking clubs that smuggled in liquor from Canada or Europe. The state of Rhode Island never ratified the 18th Amendment, either because Rhode Islanders weren't willing to give up their liquor, or because they felt the law was unenforceable. Treasury Department agents found themselves faced with a nearly impossible task; for every bottle of bootleg whisky or smuggled wine they found and destroyed, so many others got past that a lot of Americans weren't afraid to drink openly. Even President Harding had allowed liquor to flow freely at White House poker parties, until those favoring prohibition protested, making him restrict his drinking to the family bedrooms.
America at play; contraband liquor is disposed of during the prohibition era.
Because illegal liquor was now a big business, a new type of entrepreneur took advantage of it--the gangster. Organized crime made a huge profit from making or delivering booze, infiltrating labor unions, bribing politicians, gambling, prostitution, and simple extortion. They proved to be just as efficient as the Wall Street barons of previous generations, and a good deal more ruthless; instead of just buying out their competitors or forcing them to close shop, they would shoot them or weigh them down with concrete before throwing them into rivers.
The most powerful gang leader was Al "Scarface" Capone. Starting out as a bartender and bouncer in Brooklyn, Capone was sent to Chicago in 1919 by the leader of the gang he was in, Frankie Yale, to protect him from a rival. There another Brooklyn native, Giovanni "Johnny" Torrio, recognized his talent and made Capone his second in command. Torrio retired in 1925, and over the next few years Capone rubbed out his opponents, replacing several small "kingdoms" with a syndicate that generated as much as $110 million a year. More than 500 killings, most of them unsolved, were related to Capone's rise to power. The most notorious of these incidents was the St. Valentine's Day Massacre of 1929, when seven members of a rival gang were lined up in a garage and machine-gunned to death. With an armored limousine, his influence, and well-paid lawyers to keep him out of jail, Capone came to be seen as the real ruler of Chicago. When the authorities finally locked him up in 1931, the charge wasn't bootlegging or murder, but income tax evasion!
We noted already that Harding and Coolidge were popular because Americans were in a mood for non-interventionist presidents; in the 1920s, most Americans cared little about politics and even less about what was happening abroad. The idealism of the Wilson era was replaced with the attitude that it was now time to live it up. Besides the speakeasies and gangsters mentioned previously, there was much more to make the 1920s an interesting decade. This was the time of art-deco architecture, when many buildings were designed in a style that one critic described as "Spanish-Moorish-Romanesque-Gothic-Renaissance-Bull Market-Damn the Expense." In literature, this was the time of F. Scott Fitzgerald and Ernest Hemingway. This also was the time of new dances like the Charleston; the "Harlem Renaissance," a golden age in black American culture; the John Scopes "Monkey Trial"; and the Florida real estate boom, when advertisements proclaiming Miami as a tropical paradise caused land prices in south Florida to jump--and collapse even more quickly after a killer hurricane struck in 1926.
The most admired heroes of the 1920s were not explorers, soldiers or statesmen, but actors, athletes and musicians--entertainers. Baseball was dominated by George Herman "Babe" Ruth, the "Sultan of Swat"; Jack Dempsey was the biggest star in boxing; the recent invention of radio brought their exploits to the whole nation. The Hollywood film industry really came into its own, with stars like Douglas Fairbanks, Greta Garbo, Charlie Chaplin and Rudolph Valentino. And it was in the 1920s that entertainers like these became the highest paid Americans as well. If you're one of those who deplores the obsession our society has with celebrities, well, it was in the 1920s that modern celebrity worship began.(95)
The 1920s is also seen as the beginning of the "Jazz Era," when New Orleans musicians like Jelly Roll Morton, Kid Ory, King Oliver and Louis Armstrong moved north, and spread the peppy form of ragtime they had been working on to the rest of the country. The new style, soon to be called jazz, quickly caught on--soon white orchestras were playing it as well--though it gained a reputation for being immoral because both whites and blacks flocked to the speakeasies to hear it (in 1922, the Atlantic Monthly defined jazz as "An unloosing of instincts that nature has wisely taught us to hold well in check."). When Hollywood produced the first "talkie," a film with a soundtrack, it should surprise nobody that it covered an appropriate topic for the time: it was "The Jazz Singer," starring Al Jolson (1927).
Coolidge probably could have won a third term in the 1928 presidential election, but while on vacation during the previous summer, in the Black Hills of South Dakota, he told his secretary, Everett Sanders, "Now--I am not going to run for president. If I should serve as president again, I should serve almost ten years, which is too long for a president in this country." Then for the press, he issued a statement that simply said,"I do not choose to run for President in 1928." Not until he wrote his memoirs did he give the real reason; the presidency (and the death of his son from blood poisoning) had taken its toll on him, and he did not expect to be able to handle the job much longer. True to his prediction, he died on January 5, 1933, two months before the next term ended.(96)
For the Democrats, their prospects hadn't improved since 1924; Teapot Dome was only a memory, and the economy was still booming. Alfred E. Smith, nicknamed the "Happy Warrior" by another New York politician, Franklin D. Roosevelt, ran again, and because his rivals stayed out of the race, this time Smith got the nomination on the first ballot. The Republicans went with a candidate who was called the "Great Engineer," because he had a reputation for working wonders: Herbert Hoover. We already saw how he had persuaded Americans to conserve food during World War I, without resorting to rationing. More recently, he had gotten much of the credit for the recent good times; the full garage replaced the full dinner pail as a symbol of prosperity. At his acceptance speech, Hoover predicted that poverty would soon be eradicated, and Republicans promised "a chicken in every pot and a car in every backyard."
The 1928 campaign was the noisiest in quite some time, mainly because of Al Smith's powerful personality. In addition, both Smith and Hoover traveled extensively to meet the voters, and this was the first election that used radio commercials and the new medium of "talking motion pictures" to promote the candidates.(97) In the end, Hoover won by a landslide because Smith had three fatal flaws:
In the decades since the Great Depression, there has been a lot of discussion about what caused it. Those opposed to capitalism call it the result of what happens when the free market system spins out of control, while capitalists have blamed it on efforts by the government to put the economy under complete government control (e.g., the Federal Reserve System). However, there is general agreement that two important factors were underconsumption and overconfidence.
1. Underconsumption: Not everyone got rich during the 1920s; in fact, farmers missed out on the economic boom altogether. They had increased food and textile production during the war years, only to see the prices of their crops fall when the war ended and European farmers went back to work. Congress tried to help by passing a bill in 1927 that established a government agency to buy farm surpluses, but President Coolidge vetoed it, and another bill like it in 1928. Then in April 1929 Herbert Hoover established the Federal Farm Board, to buy crops like wheat and cotton at above-market value, and provide loans to farm cooperatives. That delivered more money to the farmers, but they had no incentive to grow less, so the surplus problem continued, causing market prices to fall further.
Most workers in the cities weren't much better off than the farmers. Their wages hadn't risen to match higher prices and production, so many of them couldn't afford the new consumer goods, either. Between 1923 and 1929, manufacturing output per person-hour increased by 32 percent, and factory profits rose by 65 percent, but workers' wages grew by only 8 percent. And those who could afford what the factories produced were reaching a saturation level. The number of cars on American roads, for example, had increased from 2.5 million in 1915 to 27 million in 1927. This was largely due to the price of automobiles coming down, after Henry Ford introduced mass production on the assembly line; now most families had one, and thus didn't need to buy many more. The combination of new farming techniques (tractors and harvester combines replacing horses), new manufacturing practices and new scientific discoveries had created more goods than the public could consume.
Abroad, Europe had ceased to be the banker and the workshop of the world; during World War I, the United States had taken over in both areas. Now the Allies found that they owed the Americans money, and the only way they could pay these loans was to borrow more money, or confiscate it from Germany. That, and high tariffs, meant that foreigners couldn't afford to buy many American-made goods, so international commerce began to slack off before the market crashed.
2. Overconfidence: Those with extra money tried to get a piece of the American dream by investing it in the stock market. Normally there isn't anything wrong with this, so long as the investors know about the risk. This time, however, so many bought shares that the prices of stocks were driven well beyond their real value, but the typical investor believed that in this market, he couldn't lose because prices would keep on rising indefinitely. After all, most of them were too young to know what a real depression was like; the last one had happened more than thirty years ago, and while there had been recessions in 1907 and 1921, the economy bounced back from them in less than a year.
Most disturbing was the practice of "buying on margin," where investors bought stocks by paying only one tenth of their value in cash, in effect borrowing the money needed to cover the other nine tenths. This meant the investor could lose more than what he spent, if the stock's value dropped. Even before becoming president, Hoover worried that such speculation was getting out of hand, and tried unsuccessfully to get Andrew Mellon, still the Secretary of the Treasury, to persuade the public to buy bonds instead of stocks.(98) Likewise, the Federal Reserve Board tried to apply some brakes on the brokers by raising interest rates, but that had the opposite effect; banks were encouraged to make even more loans. Overall the general mood remained optimistic; a month before the stock market crashed, John J. Raskob, the vice-chairman of General Motors, wrote an article for the Ladies Home Journal entitled "Everybody Ought to be Rich." Around the same time Irving Fisher, a professor of economics at Yale University, made what would later be remembered as one of the dumbest predictions of all time: "Stocks have reached what looks like a permanently high plateau."
On the morning of Thursday, October 24, 1929, Wall Street began its session with some unusually large sales: 20,000 shares of Kennecott Copper at $78 per share, 20,000 shares of General Motors at $56 ½, etc. Nobody knew who was selling those blocks, or why, so brokers started calling their customers to find out what to do. Most customers chose to sell, and as sales outnumbered purchases, prices plummeted, and panic set in, causing a stampede to sell at any price. In the early afternoon J. P. Morgan & Company stopped the free fall by making some emergency purchases worth millions. Still, by the end of the day 13 million shares had been sold, twice the previous record for a day's trading, and the whole market had lost $11 billion.
Prices fell again the following Monday, and this time nobody tried to stop it. The next day (October 29) is called "Black Tuesday" because it was the worst day of all: 16,410,000 shares were sold, and the average price dropped by $40-$60 a share. By mid-November, most of the gains of the previous two years had been wiped out, with losses estimated at $30 billion; the New York Times index of industrial stocks had fallen from 469 to 220, more than half.
Hoover thought that putting confidence back in the consumers would restore the economy. As early as October 25, he reassuringly said, "The fundamental business of the country...is on a sound and prosperous basis." In January 1930 he said there were "definite signs" that the nation had "turned the corner." In March he predicted that the highest levels of unemployment would be passed in sixty days. Then in May he announced, "We have now passed the worst and with continued unity of effort we shall rapidly recover." Instead, the market rallied briefly in early 1930, and then prices began spiraling downward again. The stock market reached its lowest point on July 8, 1932, when the Dow Jones Industrial Average closed at 41.22. By this time the typical share was worth only 20 percent of what it had been before the crash.(99) This table gives some idea of how much individual stocks dropped in three years:
The stock market was only the most visible symptom of what became a prolonged economic implosion. Businesses stopped expanding because investors no longer poured money into them; production was cut back because sales slowed down. Five thousand banks went out of business because too many account holders withdrew their money (100); one fourth of the nation's farms were sold; 85,000 businesses failed; the Gross National Product dropped by a third. Unemployment rose from 1.5 million in 1929 to 15 million in 1933, or 25 percent. And that's worse than it sounds today because the 25 percent figure counts mainly men; most women did not participate in the job market back then. Able-bodied men selling apples on the street became a symbol of rugged individualism at its worst. Those who lost their homes and farms because they could not pay their mortgages built shantytowns of shacks and hand-dug latrines, which were nicknamed "Hoovervilles"; newspapers used by the homeless, when sleeping on benches, became "Hoover blankets"; in the South, those who could not afford meat would catch and cook armadillos, calling them "Hoover hogs."
Perhaps the worst aspect of the Depression was that it was not confined to the United States. Because international commerce had declined by more than half, and American bankers withdrew their funds from banks abroad, every country practicing free-market capitalism was in a slump before long. If anyone still doubted that the United States was a world power, this proved it; when a cold wind chilled the American economy, the rest of the world shivered as well. About the only nations to escape the effects of the Depression were the Soviet Union, which had shut its doors to trade when it embraced communism, and places that were already poor before the Depression started, like Turkey. Eventually many countries, especially Japan and Germany, would turn to dictators to get them out of the Depression, but that's a subject for another history paper.
Today most people think Hoover simply stood by and said, "Prosperity is just around the corner," but the truth of the matter is that recovery might have come sooner if Hoover had been a do-nothing president. Whereas Andrew Mellon thought that lower wages and shorter working days would be the quickest way to turn the economy around (that had worked in the past), and cause everyone to act more responsibly than they had in the "Roaring Twenties," Hoover pleaded with business leaders to keep wages high, so that their workers could afford to buy more goods (e.g., Henry Ford actually agreed to increase the pay of his workers, from six to seven dollars a day). But because prices were falling elsewhere, companies that complied with this request could not afford to hire more people, so instead unemployment increased. Hoover also ordered the federal government to speed up construction projects, and contacted all state governors with a message to do the same, so that at least construction workers would have jobs.(101) Then, to balance the budget, tariffs were raised 59 percent in 1930, and in 1932, the maximum income tax rate was raised from 25 to 63 percent. Ironically, Mellon supported the income tax increase (remember he had called for lower taxes a decade earlier), and because this meant less money to invest in the private sector, it only made the problem worse. Where Hoover drew the line was unlike the politicians who came after him, he wasn't going to simply give money to the needy, because it would get rid of their self-reliance: "I am opposed to any direct or indirect government dole."
If anyone was glad to see the death of the Republican-era bull market, it was the Democrats; the Wall Street nightmare guaranteed they would make gains in the 1930 congressional elections, for a start. When somebody in the House of Representatives called Andrew Mellon the "greatest Secretary of the Treasury since Alexander Hamilton," the chamber rocked with laughter. As one of the richest Cabinet members in American history, Mellon made millions from his investments when the market was good, and still did all right when the market was bad. There is a law which forbids a Secretary of the Treasury from engaging in business, and in February 1932 the Democrats threatened to impeach Mellon for this; before it could happen, Hoover appointed Mellon ambassador to Britain, transferring him to a job that was still important, but far less powerful and profitable.
The closest thing to a rebellion during the Depression years was the "Bonus March." Back in 1924, Congress had promised it would pay a $1,000 bonus to each World War I veteran. Payment was scheduled for 1945, but the ex-doughboys were desperate; they needed the money now. In May 1932 they formed the Bonus Expedition (BEF, also known as the Bonus Army), and marched on Washington to demand immediate payment. When they arrived, now 17,000 strong, they spent June camped in tents and hovels, most of them at Anacostia Flats, and met on the steps of the US Capitol to put pressure on Congress. The House agreed to move up the payment date, but the Senate voted against it, so the bonus bill did not pass. Most of the veterans left at that point, except for 2,000. On July 28 the remaining squatters rioted, and President Hoover ordered the Army to evict them and their families. Using cavalry, tanks, and tear gas, and led by two future war heroes, General Douglas MacArthur and Major Dwight David Eisenhower, the federal troops marched from the vicinity of the White House and destroyed the camp. Congress voted an appropriation of $100,000 to cover the cost of sending the Bonus Army home, though the rest of the country remained angry at how the heroes of the last war had been ejected at bayonet point.(102)
By that time, the whole nation was so sick of Hooverism that in 1932 there were stories of hitchhikers holding signs that read, "If you don't give me a ride, I"ll vote for Hoover." At that year's Democratic convention, the delegates nominated Franklin Delano Roosevelt as their presidential candidate, and the Speaker of the House, Texas Congressman John Nance Garner ("Cactus Jack"), as his running mate. In his acceptance speech, Roosevelt promised, "I pledge you, I pledge you myself, to a New Deal for the American people." At this stage, though, he had not made up his mind what the New Deal would be like--except that it would not mean waiting for the economy to get better on its own. As he explained in another speech, "It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something."
Roosevelt had much in common with Al Smith: both were New Yorkers to the core, both promised to repeal prohibition if elected, and they even looked a little like each other. But while Smith had lost by a landslide last time, the voters were so desperate that they flocked to hear what Roosevelt had to offer. They found Roosevelt charming, due to his family wealth and his distant relation to the great Teddy, made closer by his marriage to Anna Eleanor Roosevelt, Teddy's niece.(103) Because he had been a vice presidential candidate in 1920, the public already knew him well, but one year later he had caught polio while on vacation in Canada, and it looked like his political career was over. Though he needed a wheelchair and leg braces for the rest of his life, he desired action too much to stay idle, and in 1928 he succeeded Al Smith as governor of New York. During the next four years, he gained a reputation for being an active, progressive governor. Most important was the fact that he was full of confidence, the characteristic Hoover failed to inspire in the American people. As Roosevelt put it in his most famous 1932 speech, "The only thing we have to fear is fear itself."
The Republicans nominated Hoover again, and he was horrified at the activist role for government that Roosevelt was proposing. While Roosevelt clearly enjoyed the campaign, Hoover glumly predicted that the New Deal would be the end of America as we know it: "The grass will grow in the streets of a hundred cities, a thousand towns; the weeds will overrun the fields . . . churches and schoolhouses will decay." The 1932 presidential election showed that you can catch more flies with honey than you can with vinegar; 6 states and nearly 16 million voters chose Hoover's message of despair, but 42 states and nearly 23 million voters chose Roosevelt's message of hope.
The psychological impact of the Depression was just as damaging as the physical impact. Because many Americans believed that success and prosperity went to those who deserved it, the unemployment of the Depression era was a crushing blow. Naturally many thought losing their jobs or their investments was their own fault; we have reports of investors jumping off high places in response to "Black Tuesday." Having to ask for assistance was humiliating for many men, who had thought of themselves as competent breadwinners for their families. A major paradigm shift was the result of the 1932 election; not only would the Democrats become the majority party for the rest of the twentieth century, but those who lived through the Depression were determined to keep it from happening again. That marked the birth of today's welfare state, and on that note, we will end the narrative here, to be continued in the next chapter of this work. This chapter will finish as the previous one did, with a look at how demographics changed as the United States matured.
The United States also became more urban. During the Industrial Revolution, cities were the place to go for jobs, and most immigrants stayed in the same city where they stepped off the boat, unless persuaded to move elsewhere. The number of Americans living in communities of 10,000 or more surged from 6 million in the 1860 census (19.3 percent of the total population) to 69 million in the 1930 census (56.2 percent). The crossover point of 50 percent was reached during World War I, so after that you can say the United States was no longer a predominantly agricultural nation. Big cities got bigger, too: Chicago tripled in size between 1880 and 1900. Whereas the largest American city in 1860, New York, had 800,000 people, in 1930, five cities had a population exceeding a million: New York (6.9 million), Chicago (3.3 million), Philadelphia (2 million), Detroit (1.6 million), and Los Angeles (1.2 million).
It sounds like the nation was getting more crowded, and it was, but only early environmentalists like John Muir had reason to be concerned at this point. Divide the 1933 population by the area of the 48 states, and you get a density of just 15.9 people per square mile. And most of that was still concentrated in the northeastern states, so elsewhere there was plenty of room for more. Only in Illinois and in the "Northeast Corridor" area (the east coast from Washington D.C. to Boston) did you have more than 100 people per square mile. The most crowded spot of all was New York City, where population density exceeded 23,000 per square mile.
If anyone felt "psychological overcrowding," it was because he lived in a big city. This suggests an obvious solution, but if your job was in the city, moving to the country was easier said than done. For most of history, it made sense to live and work in the same place, sometimes even in the same building. That began to change when the common people acquired automobiles; then it became feasible to have your home in one community and your workplace in another. With that change in lifestyle, the suburb was born.
In Chapter 3, most of the growth had been the result of the American population's fertility. But in the period covered by this chapter, growth would have been a lot less if it had depended on that. As in industrial Europe, industrial America's birthrate declined for many reasons, from late marriages to crowded living conditions to the cost of raising children. However, there were now plenty of immigrants to take up the demographic slack.
This immigration surge peaked between 1900 and 1910, when six million came across the Atlantic. We noted in Chapter 3 that the numbers making the crossing increased, when the journey grew safer and the cost of a ticket decreased. Now a ticket on a westbound ship also included meals, eliminating the need for passengers to bring their own, and it helped that steamships had replaced sailing ships, reducing travel time to a week. Still, conditions for those not traveling first class could hardly be called comfortable, and the would-be immigrants had to satisfy the bureaucrats in the old country before they were allowed to leave. Because they usually had to wait weeks to make sure all their paperwork (mainly identity cards and records of taxes paid and military service) was in order, before an exit visa was issued, boardinghouse owners in ports like Genoa, Liverpool and Riga could make an American fortune without ever leaving home.
Three quarters of European immigrants arrived in New York, where the Statue of Liberty was usually the first part of the country they saw. After that, most went to Ellis Island, where they would stay until they had been processed by another set of bureaucrats. But if they made it this far, they weren't out of the woods yet. Those who had communicable diseases, or otherwise failed to convince the authorities that they were suitable material to become US citizens, would be sent back, forced to undergo their grueling journey in reverse.
Once they knew they could stay, most immigrants wanted to settle in a place where the food, language and faces looked familiar, allowing an easier transition into a strange land. Consequently, ethnic enclaves sprang up in various parts of the nation. For example, Irish immigrants preferred to be in Massachusetts, because other Irishmen had settled there already. Asians found California and Hawaii the most attractive places for them, Germans and Scandinavians went to the Great Lakes states and the northern Great Plains, Dutch went to western Michigan, Poles gravitated to Midwestern cities like Chicago, and Canadians chose Michigan or New England. Italians and Jews both concentrated themselves in New York.
This didn't mean the immigrants were very welcome, though. One characteristic of American history is that for most of it, the dominant class was prejudiced against those who settled American lands before they did (meaning the Indians), and against those who arrived after they did.(104) As far back as 1751, Benjamin Franklin spoke out against the "swarm" of Germans coming into Pennsylvania; he called them "Palatine boors," and accused them of "herding together" and turning his home state into a "colony of aliens" who will "never adopt our language or customs, any more than they can acquire our complexion." And when eleven Italian immigrants were lynched in New Orleans in 1891, The New York Times described them as "sneaking and cowardly Sicilians, the descendants of bandits and assassins . . . a pest without mitigation." Can anyone imagine today's Times saying such a thing?
It's just as well that Franklin didn't see the kind of immigrants that came after his time, because there aren't many differences between Germans and white Anglo-Saxons. Whereas most previous immigrants had come from northern Europe (the British Isles, Germany and Scandinavia), near the end of the nineteenth century the sources for new Americans shifted south and east. Now that life was getting better in the industrialized countries of Europe, it was the downtrodden in places like Italy, Poland, the Balkans and Russia, who looked to make a new beginning in the New World.
Many immigrants earned respect through military service. During the Civil War, one out of every five Union soldiers was an immigrant. There were even all-immigrant units: the 15th Wisconsin Volunteer Infantry was called the Scandinavian Regiment; the 79th New York Volunteers, a Scottish regiment, dressed in kilts and called itself the Cameron Highlanders; the German Division, commanded by General Louis Blenker, was a branch of the Army "where English was hardly spoken."
Among Asians, the Chinese were still the largest group. Japanese immigrants only started coming over in large numbers after passage of the Chinese Exclusion Act, which blocked all Chinese immigrants from 1882 to 1943. Many thought the Japanese would fit better in American society, because they learned Western customs and capitalism quickly, and their home country, unlike China, had been friendly since Commodore Perry opened it up for trade. Around the same time, the "Hermit Kingdom" (Korea) was opened up, and the United States began expanding into the Pacific, so soon Korean, Filipino and Samoan immigrants joined the Japanese. However, Asians remained a tiny fraction of the whole immigrant community until the mid-twentieth century. The Pacific equivalent of Ellis Island was the Angel Island Immigration Station, in San Francisco Bay.
Because there were fewer of them than white immigrants, and they shared no common heritage with other Americans, it was easy to discriminate against Asians. Labor unions were the most hostile, as they saw Asians as a source of non-union labor. When San Francisco ordered Japanese children to attended separate (meaning racially segregated) schools from other Americans, in violation of an 1894 treaty with Japan, Theodore Roosevelt almost declared war on California. It took a so-called "gentlemen's agreement" in 1907 (several exchanges of notes, rather than a formal treaty) to defuse tensions; Japan agreed to allow no more immigrants to come to the continental US, except for the wives and children of those already there, and the United States agreed to let Japanese children attend public schools, thereby sparing Japan the loss of face that had been inflicted on China with the Chinese Exclusion Act. The last detail was considered important, because Japan had just become a world power by beating the Russians. However, Japanese immigrants could still go to Hawaii, since that wasn't a state yet, and once they had permission to be in Hawaii, there wasn't much keeping them from traveling to any other part of the nation. This loophole was removed with the National Origins Act (see below).
The same isolationism that caused the United States to pull back from international affairs in the 1920s, also encouraged the nation to close its doors to immigrants. As in the late 1800s, most of the antiforeign sentiment came from organized labor, which feared the loss of jobs to newcomers, and from patriotic organizations, which feared foreign radicalism. Congress passed the National Origins Act in 1924, which set strict quotas on how many could come in. The quota for immigrants from each country was based on how many people of that nationality were in the 1890 population. This meant the quotas were biased in favor of northern Europeans, because most southern European, eastern European and Asian immigrants came after 1890. The result was that European immigration was cut from 600,000 a year to 60,000 a year, and Japanese immigration, previously at 185 a year, was cut to zero. In 1929 the quotas were revised to reflect nationalities in the 1920 population, but otherwise the number of legal immigrants remained small, at least until a new immigration bill was passed in 1965.
For would-be Americans from Europe, this meant the golden age of immigration was over. However, the law did not apply to Latin Americans, so a surge of Mexicans came across the border between 1910 and 1930. They were motivated either by a wish to flee the Mexican Revolution, or they were attracted by businesses in the Southwestern states that needed agricultural labor. By 1930, there were 1.4 million Americans of Mexican ancestry, compared with the 16.5 million who stayed in Mexico.
When times are bad, people often look for a scapegoat, and the Great Depression was no exception. Ethnic minorities, especially blacks and American Indians, weren't doing well before the Depression started, and when unemployment climbed, they (and immigrants) were often seen as holding jobs that belonged to the white majority. Thus, immigrants and nonwhites found themselves the first to be fired, and the last to be hired. In the Southwest, Mexican-Americans were told to go back to Mexico; 300,000 left or were deported. However, life got better for nonwhites after this. Herbert Hoover's vice-president, Charles Curtis, was half Native American, making him the only nonwhite (so far) to hold the veep position. When Franklin Roosevelt started launching one new government program after another, as part of the New Deal, he made sure discrimination on the basis of race, color or creed would not be permitted. More decades would come before the desegregation of schools and the civil rights era (Dr. Martin Luther King had just been born in 1929), but the seeds for racial equality were sown in the darkest days of the Depression.(105)
This is the End of Chapter 4.
The Anglo-American Adventure
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