2007 Version

History Department AS History: Unit 1

Year 12 Boom and Bust: USA 1917-33

History Department AS History: Unit 1

The Economic Boom

Year 12

2007 Version


A mass of statistical information supports the view that the USA entered a period of unrivalled prosperity in the 1920s: • • • Gross National Product, which in 1919 stood at $72.4 billion, had risen to $104 billion by 1929. Throughout American industry, real wages rose by 26 per cent in the 1920s Low levels of taxation. This increased spending power for the American people. The money was spent on new consumer goods- cars, typewriters, vacuum cleaners, washing machines, cookers and refrigerators. Unemployment fell from 11.9 per cent to 3.2 per cent. Hours of work declined as new production techniques were introduced. For example, International Harvesters, who made agricultural machines electrified their plant and introduced a two-week paid holiday. Output per worker in manufacturing increased by 43 per cent between 1919 and 1929, whilst wages, salaries and prices did not rise at anything like the same rate. With labour costs falling, profits increased and business continued to expand. Millions of Americans enjoyed the benefits of new levels of consumerism. o The production of refrigerators, which stood at 5,000 in 1921, rose to 1 million by 1930. o Washing machine and vacuum cleaner sales rose at a similar rate. o In 1912, 16 per cent of Americans lived in electrically-lit dwellings; by 1927, the figure had reached 63 per cent. o Buying on credit enabled a large percentage of working-class families to own a car.

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The prosperity of the working classes can also be measured in terms of increased leisure time. For example, an estimated 80 to 100 million Americans went to the movies every week by the end of the decade. They also listened to their own radios, read magazines and shopped in mail order catalogues from their increasingly comfortable homes. Leisure industries boomed. Sports became popular. The car made visits to sports stadia possible. Baseball, college football and boxing all became popular and so became big business. The radio stations carried sports coverage. Movies became equally popular. 20,000 movie theatres were built in the 1920s. In 1923, 40 million tickets were sold per week. By 1930, it was 100 million. Radio grew throughout the period. New acts, radio stations and personalities appeared every year. The level of prosperity is also indicated by evidence of improvement in health and life expectancy. In 1900, average life expectancy was 47 years; by 1930, this had risen to 60 years. And whereas in 1900 there were 7 million Americans aged 55 years and over, by 1930 there were 15 million in the same age range. New products emerged. America produced light metals in great quantities. Petroleum products such as synthetic rubber became common. Pyrex, cigarette lighters, wrist watches and books of matches were all popular products in the 1920s that had hardly existed in 1914. Chemicals became a boom industry. Synthetic materials were used more widely. Cellophane, rayon, plastic laminates etc all became fashionable materials. The 1920s was the growth of the suburbs as families moved into new housing developments on the edge of cities and towns. Cities grew both outwards and upwards. In 1910 people were amazed at 20 story buildings. In 1930 they stood awestruck in front of the 102-story Empire State building. Cities buzzed with building work. The growing urban population used canned vegetables and fruit. Frozen food was also popular for the first time. Tastes changed and melon, cherries, lettuce and peaches were all luxury goods that became more widely available. Shares could be bought ‘on the margin’. The buyer paid a small percentage of the cost of the shares in cash, usually 10%. The remainder was covered by loans provided by ‘brokers’ who had borrowed money from the banks to do so. Between 1926 and 1929, brokers’ loans jumped from $3.5 billions to $8.5 billions.

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1) The Great War The Great War helped create prosperity in a number of ways: The USA leant money to the Europeans so they could fight the war. They made huge profits on these loans. The banks that made the loans were able to lend money to US companies at a cheap rate. The European powers were so damaged by the war that the USA was left with few trade rivals. The First World War gave American businesses the opportunity to maximise their profits by supplying the Allies with food and weapons and supplying markets previously supplied by Britain and Germany. 2) Government Policies According to Calvin Coolidge, ‘The chief business of the American people is business’. It was the policy of his government to let business operate as far as possible free of regulation. Both he and his Treasury Secretary, Andrew Mellon, believed firmly in the free market. Mellon, a Pittsburgh banker and industrialist, was one of the richest men in the USA. He believed that wealth filtered down naturally to all classes in society; that the best way to ensure increased living standards for all was to do everything possible to enable the rich to continue to make money to invest in industrial development. There appeared to be much sense to this argument. Industrial expansion meant more job opportunities which in turn meant more employment, more wage earners, more consumption, more industrial expansion and so on. During the 1920s this policy seemed to work and Mellon had few critics at the time. The Rich make money and become richer. Industry grows and creates jobs and higher wages. This leads to greater profits for the rich The governments of the period also ensured that the people who were supposed to regulate business were sympathetic to business interests. They invest money in industry that leads to industrial growth. The wage earners spend their money and create demand.


The Federal Commissions that were supposed to control mergers, trade and transport were all staffed by men who disliked government regulation. In trade union matters the government also helped business. The government supported businessmen in strikes and court cases. Federal troops were used to break up miners strikes in 1921 and the Attorney General used his power to ban picketing during a large railway strike. The basic government policy was laissez-faire. Strictly speaking, this means that the economy was left to run itself. However, the picture was not quite as simple as that, and the government did intervene to support business with benevolent policies in three main ways.

i) High Tariffs
The 1921 Emergency Tariff Act and the Fordney—McCumber Act, passed in 1922, raised tariffs to increase the price of foreign goods so that domestic products were more attractive to consumers. Throughout the 1920s the general level of tariffs was upwards. The level of foreign trade was obviously reduced by this – but demand for goods at home remained high. American industry stood to make huge profits from the high tariff policy because they could win business protected by the tariffs. Tariffs meant Americans bought comparatively few foreign goods.

How Tariffs Work
1919: Price of European fertiliser Price of US fertiliser $5 per tonne $8 per tonne

A sensible farmer would clearly buy European fertiliser.

Tariffs are introduced in 1921 and 1922. All European products have a tax placed on them. 1922: Price of European fertiliser Price of US fertiliser $5 per tonne plus $4 tariff $8 per tonne

A sensible farmer would clearly now buy US fertiliser.

This is also good for the US economy because the tariffs raise money for the government so they do not have to raise taxes on the US people. The Acts gave the President the power to raise and lower tariffs. The usual pattern was to raise them. Only a few products ever had their tariffs lowered – including quails and paintbrush handles!


The US government also ran a fleet of merchant ships at a loss so that US products could be shipped abroad cheaply.

ii) Tax Reductions
The government reduced federal taxes significantly in 1924, 1926 and 1928. These reductions mainly benefited the wealthy. In 1920 the highest tax stood at 65 per cent; in 1928 this was down to 25 per cent. During his eight years of office, Mellon handed out tax reductions equalling $3.5 billion to large-scale industrialists and corporations. Tax cuts gave money back to people and this meant they could spend more money on the products of US industry. These tax cuts helped fuel the boom. Despite these cuts, Coolidge’s government actually operated on budget surplus – it had more money coming in than going out. In 1925, this was $677 million and in 1927, $607 million. However, of course, federal tax cuts meant little to people who were too poor to pay taxes in the first place.

iii) Fewer Regulations
There were fewer regulations and fewer people to enforce them. This trend meant that businesses were often left unhindered to carry on their affairs as they saw fit. Laws concerning sharp business practice, such as price fixing, were often ignored. Where the government did prosecute, the offenders usually won on appeal. Coolidge was careful to make sure that laws regulation businesses were not enforced. When businesses were prosecuted for breaking a regulation the fines were small and the impact on business minimal. On one occasion a government lawyer was keen to prosecute a company for price fixing – Coolidge promoted him to the Supreme Court so that he could not cause problems! This lack of regulation was an important contributor to a company’s profits. While many people welcomed less government, it should also be remembered that there was, for example, no body with the authority to stop child labour in the textile mills of the South, where a 56-hour week was common and wages rarely rose to more than 18 cents an hour. 3) Technical Advances During this period great technical advances in industrial production made possible huge increases both in the quantity and in the variety of products on sale. While this is true of almost every type of commodity, the motor vehicle industry and electrical consumer goods will be considered as being particularly typical examples.

The electric motor revolutionised production. Steam power became less and less popular. In 1914 70% of factories were run on steam, by 1929 70% were run on electricity.

Motor Vehicle industry
In 1930, 26.5 million cars were on American roads. The motorcar was the product of the 1920s. It had a great impact on American society and the economy. Henry Ford: Of all those associated with the American boom years, Henry Ford is perhaps the best known. In 1903, he founded the Ford Motor Company in Detroit, which, by 1908, was producing a hundred cars a day at its Highland Park factory. This output was achieved by simple mass production methods. These were already established in some industries, for example, in the manufacture of firearms, sewing machines and railway engines. They were later extended to the production of clocks, typewriters and bicycles. Invariably, this form of mass production was achieved by the trolley system in which interchangeable parts were moved around the factory to the place where the product was actually being made. Such methods demanded less skill of the workers involved and tended to produce a semi-skilled workforce who were not eligible for membership of craft trade unions. Techniques of mass production were also sufficiently adaptable to be transferred to the production of radios, refrigerators and vacuum cleaners. This was the basis for the consumer boom of the 1920s. Previously, cars had been only for the wealthy, but Ford wanted anyone earning a reasonable income to be able to afford one. When he introduced his moving line assembly in 1914, the cost of the Model T came down from $950 to $500. By 1920 Ford could produce 1,250,000 cars per year, or one every 60 seconds. By 1925, when the price had fallen to $290, his factory could produce one every 10 seconds. By this time, Ford was facing increasing competition from General Motors and Chrysler. These ‘Big Three’ firms dominated the American motor industry and it was very difficult for independent companies to survive unless they produced specialist vehicles for the wealthy. Whilst Ford, his shareholders and associates were delighted with the progress made and the profits that followed, his workers were less happy. As early as 1914, the unpleasant monotony of assembly-line work and repeated increases in production quotas led to a monthly labour turnover at Ford’s factory of between 40 and 60 per cent.

In 1914, Ford introduced a number of changes to counteract the discontent of his workers and the rapid labour turnover. • • • He reduced the length of the working day to 8 hours and introduced a third shift. This increased the demand for workers who often came from immigrant communities. He doubled the daily wage to $5 and introduced a scheme of profitsharing. These changes resulted in the increased stability of his workforce.

These factors, together with the enormous growth in output, led to an increase in company profits from $30 million in 1914 to $60 million in 1916. Whilst Ford paid his workers relatively well, they were tightly disciplined and their work was closely supervised. Within his factories, Ford’s Protection Department employed strong-armed security men who watched over union organisers, intimidating and assaulting them. It was not until 1941 that any labour union was recognised by the Ford Company to represent employees in bargaining for wages. Clearly, Henry Ford took a paternalistic approach — he was a ‘father figure’ who knew what was best for his workers. Consequently, in his view, there was no need for unions in any of his plants. When, in 1927, Ford noticeably began to lose his share of the market, he closed down his factory, laying off 60,000 workers. During this layoff, the factory was retooled for the new Model A vehicle. Car design had to stay ahead of the market and customers had to want to buy the new model rather than keep the old one if the market was to remain buoyant. The growth of the motor industry had major social and economic effects: • • • • • • • • Families could go out on drives and visit new places in their leisure time. Courting couples had new freedom to stray away from their parents’ gaze. Family outings started to take the place of church attendance. Road deaths would stand at 20,000 per year by the later 1920s New production line industrial organisation stimulated the trade unionism. In economic terms, by 1929, the industry employed 7 per cent of all workers and paid them 9 per cent of all wages. By far the largest industry in the USA, it also stimulated many others. 80% of all rubber, 70% of plate glass, 60% of upholstery, 20% of hardwood and 18% of copper in the USA went into car manufacture. The government spent huge sums of money on road building, which in turn created jobs and demand for other products. 10,000 miles of road were built each year under the 1921 Highways Act which replaced


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old roads that were only suited to horses. These new roads were soon worn out by the vast numbers of new motor vehicles. Motor vehicles also created the growth of new service industries such as garages, motels, petrol stations, and used car sale-rooms. They gradually changed the landscape alongside the highways of the USA. Improved transportation also afforded new opportunities for industry. For example, goods could be much more easily moved from factories to their markets. The number of truck registrations increased from less than 1 million in 1919 to 3.5 million by 1929, when 15 billion gallons of petrol were used and 4.5 million new cars were sold. Cities such as Detroit boomed and grew rapidly as they became the centre of the new industry.

Electrical Consumer Goods
New technologies facilitated the development of labour-saving devices on a large scale. In 1912, 2.4 million items of electrical goods were sold; in 1929 the figure was 160 million. However, one should beware exaggerating this trend. Much of rural America was still without electricity in the 1920s. Even where electrical power was available, many items we take for granted today were not widely in use. In 1925, for example, Clarence Birdseye patented his freezing process but in 1928 there were only 20,000 refrigerators in the whole country. 4) New Business Methods This was a period that saw the growth of huge corporations, of scientific methods of management, and of advertising, which through the exploitation of the new mass media, gained an influence previously unimagined.

Growth of Huge Corporations
Smaller businesses started to merge. Larger companies swallowed up the smaller ones. Between 1918 and 1930, 8000 businesses disappeared in this way. Electricity companies were especially fond of mergers. The number of utility companies fell dramatically as larger companies were formed. Banking was another merger-prone sector. Along with this trend came the growth of the department store – another large corporate organisation. Woolworths is perhaps the most famous. Large corporations could invest in and exploit the plentiful raw materials of the USA on a vast scale. By 1929 the largest 200 corporations possessed 20 per cent of the nation’s wealth and 40 per cent of the business wealth.


Mergers in manufacturing and mining concerns trebled to over 1,200 during the decade. Large corporations could dominate an industry in various ways. They could operate a cartel to fix prices. Although this was technically illegal, the government tended to turn a blind eye. They could, as in the case of the petroleum companies, control the entire industrial process from the exploitation of the raw materials, manufacture of the product, distribution to wholesale and retail outlets, to the sale of products to the consumer. Some concerns, for example US Steel, were so huge that they could dictate output and price levels throughout the industry. They could create holding companies. One huge company would obtain a controlling interest in smaller companies to control the market. For example, Samuel Insull built up a vast empire based on electrical supply. Eventually he controlled 111 different companies with as many as 24 layers between him and the company actually distributing the electricity. The chain became so complex that even he lost an overall understanding of it. Many businessmen turned up on the boards of directors of numerous companies, with the effect that firms ostensibly competing with each other were in effect one and the same, with the power to fix output and prices. It is important to remember that government policies made these developments possible and that they acted against the interests of small businesses. However, at the time many people saw businessmen as heroes who had made possible the great boom period they were enjoying. There was even a prayer especially for businessmen.

Management Science
The increased complexity of business management led to the development of different tasks done by different people in administration. Entrepreneurs like Henry Ford who tried to control all management operations were increasingly old fashioned. Specialisms developed in production, design, marketing, accounts and finance in ways that had been unheard of in the previous century. The men who owned the companies realise that they needed specialist managers who knew about running large companies. One noticeable aspect of these developments was the growth of business schools — in 1928 there were 89 of them, with 67,000 students. The fact that management science became a respectable occupation for members of the upper middle classes was also an indication that it was becoming increasingly difficult to start one’s own company. To rise up the ladder of an established giant offered greater career opportunities than to compete with them. Many new ‘scientific’ management theories were put into operation, particularly the ‘time and motion’ work of Frederick W. Taylor and his followers. Levels of production undoubtedly increased, but in extreme cases all initiative was removed from the labour force, which tended to become simply extensions of the machine — this development was satirised

memorably in Charlie Chaplin’s 1936 film, Modern Times. However, it should be remembered that these developments applied almost exclusively to large business concerns. Outside the big cities most manufacturers still worked in small workshops.

The Media Advertising and Salesmanship
The new mass media, principally cinema and radio, caused a revolution in advertising. By 1928 there were 17,000 cinemas in the USA. Few areas were out of the reach of the ‘movies’. A 10 cent ticket could buy admission and the darkened auditorium enabled people to forget their troubles for a few hours and to enter into a world of beauty and glamour where seemingly no one had to work or pay the mortgage. With millions of cinema-goers aching to copy the appearances and lifestyles of the stars, the potential for advertising was enormous. The big producers were not slow to exploit this, and the time between the features was soon filled with commercials. The radio business effectively began when the KDKA station in Pittsburgh announced the results of the 1920 presidential election. As other stations started to broadcast, a demand for radio sets was created. These began to be mass produced in 1920 after the end of a dispute over patents between the main producers. By 1929 there were 618 radio stations throughout the USA, some of them broadcasting from coast to coast. The vast majority of them were controlled by two companies, the National Broadcasting Company and Columbia Broadcasting System. The potential audience was vast. In 1922 WEAF in New York began the most important trend when it broadcast the first sponsored programme, advertising the delights of Jackson Heights, a housing development. As more advertisers began to sponsor programmes, radio networks began to poll listeners to see what sort of programmes they wanted. With more and more programmes catering to mass appeal which was based firmly in the areas of light music and humour, there was considerable criticism from those who felt radio should be uplifting and enlightening. However, they were firmly in the minority. By the end of the decade, radio costs were generally covered by advertising and many programmes were firmly linked in people’s minds with the name of the sponsor. The growth in industrial production needed a continuous market. It was no longer enough, as Ford had done with his Model T, to sell a durable unchanging product so that one item might last the purchaser for life. Now, to fuel the boom, it was necessary for people to buy new things frequently. They had to be convinced that they could not do without the latest model of an electrical appliance or the new design in clothing. This necessitated far11

reaching developments in advertising and salesmanship. Indeed with most types of different goods virtually the same in quality, these often became the variables in the market. A successful advertising campaign might well be the only difference between huge profit and huge loss. Possibly the most important aspect of a campaign was to find some way to differentiate between one’s product and that of one’s competitors — to promote a unique selling point. One of the pioneers of high-pressure salesmanship was Bruce Barton who tried to show that consumer society and the accumulation of wealth was in no way incompatible with Christian teaching. In a series of books such as A Young Man’s Jesus (1914) and The Man Nobody Knew (1926), Barton tried to show that Christ himself was a high-pressure salesman. 5) Banking and Investment

Surplus Capital:
The USA made money from the Great War and continued to do so into the 1920s. The US banks had leant money to Europe to fund the war and these loans led to high profits being made by the banks. The banks were therefore able to lend money for industrial development and consumer spending.

Easy Credit:
The massive consumer boom was financed largely by easy credit facilities. By 1929 almost $7 billion worth of goods were sold on credit; this included 75 per cent of cars and half of major household appliances. The point is, of course, that while credit facilities enabled consumers to buy goods they otherwise could not have afforded, there were potential problems if they over-committed themselves or if their financial circumstances altered. Companies, as well as individuals, used easy credit facilities to finance many of their operations. It seemed that almost everyone was in debt but there was little concern over this. It was assumed that everyone’s credit must be good. Banks and loan companies seemed to be falling over backwards to lend money, often with few questions asked. It seemed in the 1920s that with almost full employment, low inflation, high tariffs keeping foreign goods out of the USA, benevolent government policies and a consumer boom, the prosperity would go on forever. The period was a time of great optimism. It wore a happy face. However, one did not have to delve very far beneath the surface to discover real problems within the system.


The banks were also able to lend money to the American people to buy shares in the expanding industries. The Stock Exchange was making money so people wanted to buy shares and cash in. They borrowed money to buy shares and then used the profits to buy consumer goods.

Geographical Inequality:
The and The also first wave of 19th Century industrialization took place in the North East Midwest, especially in the states of Illinois, Michigan and Pennsylvania. new industries such as the motor vehicle and electrical industries were drawn to these regions.

The North East and Far West enjoyed the highest per capita incomes; in 1929 these were $921 and $881 respectively. In comparison, the figure for the South East was $365. To paint an even gloomier picture, in South Carolina, while the per capita income for the non-agricultural sectors of the economy averaged $412, that of farmers was only $129. Other regions of the USA, notably the West and the South, had only sparse industrial development. Things had not, in other words, altered in much of the USA since the previous century, and for much of the country the major occupation was still agriculture.

Industrial Inequality:
Old industries were generally experiencing hard times. Coal, for example, suffered from competition from newly discovered energy sources, notably oil. The introduction of synthetic fibres had adverse effects on the demand for cotton. Moreover, this was at a time when changes, particularly in young women’s fashions, dramatically reduced the quantity of material required. Railways faced competition from motor transport — although it must be said that due to the expansion of the economy, rail freight traffic increased 10 per cent during the decade. Farmers fared particularly badly during this period.

Income Inequality:
One major effect of this disparity in industrial development was that income was distributed very unevenly throughout the country.16 million families received less that $2,000 a year (amount needed to supply basic needs). 70 million people were living below the poverty line. They were immigrants,

African Americans, the elderly, disabled and sick who could not work and farmers In addition, employment was often transitory. Research found that, during the first 9 months of 1924, of 165 families they surveyed, 72 per cent had lost time through unemployment. Of these 43 per cent had been jobless for over a month. This was at a time when there was very little welfare or unemployment benefit and most relief was supplied by charitable organisations.

Gender Inequality:
Women did not on the whole enjoy improved career opportunities during this period. By 1930, for example, there were only 150 women dentists and less than 100 female accountants in the whole of the USA. Women tended to remain in comparatively low-paid and often menial jobs; 700,000 women were domestic servants. There were few female industrialists or managing directors. The number of women receiving a college education actually fell by 5 per cent during the decade. Even when women worked in the same job as men, they normally received less money. Despite the image of ‘the flapper’, women were generally expected to concentrate on marriage and homemaking. The ‘emancipation of women’ in terms of employment opportunities during this period is largely a myth.

Racial Inequality:
At the bottom of the pile were Native Americans and African-Americans. Native Americans often eked out a miserable existence on infertile reservations. African-Americans made up 10 per cent of the total population, but 85 per cent still lived in the South, itself the poorest region in the USA. There was considerable migration north, particularly to the large cities, but here too African-Americans faced discrimination in housing and employment. Increasingly too they were concentrated in ‘ghetto’ areas such as Harlem in New York, whose African-Americans population had swelled from 50,000 in 1914 to 165,000 in 1930. Here overcrowding and poor living conditions added to their problems in the mainstream economy. In Pittsburgh AfricanAmericans were kept unskilled and forced to operate in the casual labour market. This left them more exposed to joblessness and fears of destitution than before they had begun their migration north.

• The years preceding the 1920s had been relatively good ones for farmers. During the war years prices had risen 25 per cent, and more and more land had been taken into cultivation. However, after the war falling demand led to falling prices. For example, wheat fell from $2.5 to $1 per bushel.

o There were several reasons for this. Prohibition cut the demand for grain previously used in the manufacture of alcohol, and higher living standards meant Americans ate more meat and fewer cereals. o The growth of synthetic fibres lessened the market for natural ones, such as cotton. At the same time, technical advances meant that more could be produced on the same or even a reduced acreage. o During the l920s, 13 million acres were taken out of production and the farm population fell by 5 per cent — yet farm output grew by 9 per cent. o Greater use of tractors meant fewer horses were necessary and this in turn meant less demand for animal food. o Ironically, because many farmers became more efficient through mechanisation and new techniques such as the use of improved fertilisers and better animal husbandry, they simply produced too much. As a result, possibly as many as 66 per cent of farms operated at a loss. Wage labourers, tenant farmers, and share croppers — in the South, these were mainly African-Americans — fared particularly badly. • Many farmers blamed the government for their plight. During the war, it had urged them to produce more but now it did little to compensate them for their losses. Many farmers were particularly angered by the fact that tariffs protected industry but not agriculture. However, although the farm lobby was very powerful, it was inevitable that if the USA was to continue to develop as an industrial nation, manpower and resources would have to be shifted from agriculture. The concept of the small-scale, self-reliant farmer had already largely become a myth. The 1920s saw the growth of ‘agricultural businesses’ — highly capitalised cereal cultivation, ranching and fruit production enterprises — using the techniques of mass production. They required comparatively little labour, except possibly in the case of fruit production at harvest time. It was mainly the small-scale farmers who went bankrupt. These often asked the state for help, as they thought of big business and the banks as being in league against them. Government policy was to encourage farms to co-operate together to market their produce. To this end the Agricultural Credits Act of 1923 funded 12 Intermediate Credit Banks to offer loans to co-operatives. However, the measure was of little benefit to small farmers. The last thing they needed was more debt. But agribusinesses did take advantage of them, thus squeezing the small farmers even more.

Two measures of the early 1920s did in theory protect farmers from foreign competition: the 1921 Emergency Tariff Act and the 1922 Fordney—McCumber Act placed high tariffs on food imports. However, because foreigners retaliated by placing similar tariffs on American foodstuffs, farmers could not export their surpluses. The biggest problem for farmers was overproduction. Too much food meant prices were too low. Farmers would not voluntarily underproduce because they could not trust their neighbours to do the same.

Trade Unions:
• • • Trade Union membership had doubled during the Great War and stood at just over 5 million by 1920. During the 1920s it fell to 3.6 million. The Red Scare and Palmer Raids made union membership less attractive. Some employers set up what became known as the “American Plan”. They pledged welfare benefits, redundancy schemes, better working conditions, profit sharing and pension plans for their workers so long as they did not join unions. This was seen as much more patriotic by the workers than the left-wing unions. Big Business used the legal system and political connections to make sure that court cases and judgments went their way. They used their wealth and power to keep Unions under control. Court injunctions, strike breakers and protection by state and federal officials all limited union power. Two major supreme court judgments limited the right to strike. Workers were made to sign contracts that stopped them from striking. Unions were limited because of the supply of cheap immigrant labour.

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The Great War: Government Policies: Laissez faire Tariffs Tax reductions Fewer regulations Technical Advances: Motor industry Consumer goods Electricity Chemicals

New Business Methods: Huge Corporations Management science Advertising Banking & Investment: Foreign Loans Easy Credit Shares


2007 Version

History Department AS History: Unit 1

Year 12

Society in the 1920s


Many people in the countryside and in small towns associated new ideas, particularly in the cities, with vice and immorality: • • • • There was widespread distrust of cinema, jazz music and its associated dances, particularly the Charleston and the Black Bottom. Women who wore short skirts, smoked in public and frequented speakeasies were regarded as shameless. High profile scandals such as that which destroyed the career of ‘Fatty’ Arbuckle, a very popular comedy star, made many fear the influence of Hollywood. There was concern with the growth of crime and fear that it might spread into rural and small-town areas.

People in these small towns wanted to keep the USA White, Anglo-Saxon Protestant (WASP). They feared immigrants would shift the racial balance, introduce foreign ideas such as Communism, and overthrow the existing order. Even Roman Catholicism was distrusted, being seen somehow as a threat to American religious practices. They feared alcohol had led to sinfulness and sexual licence in cities, which they saw as hotbeds of vice. They feared African-Americans and the influence of their culture on the young. Above all, they feared change. They believed in a largely imagined past time of hard work, high moral standards of behaviour and unquestioning belief in the literal truth of the Bible.

In 1859, Charles Darwin had published his theory of evolution. It started off a scientific revolution in which old ideas were challenged. In particular, the idea that humans evolved from apes took hold in the scientific communities. This had led to much debate in religious circles generally, but by the 1920s in America, Protestant groups were divided on their views. A significant proportion of Protestants were either Baptists or Methodists. Some believed firmly in the description of the creation of the world exactly as it is in the Old Testament of the Bible. In 1919, these people set up the World’s Christian Fundamentals Association and consequently became known as the Fundamentalists. They wanted to make it illegal to

teach or discuss Darwin’s theories. In 1921—2, fundamentalist politicians led by William Jennings Bryan, succeeded in passing laws banning the teaching of evolution in schools. Six southern states implemented the laws (The Butler Act), including the state government of Tennessee. The supporters of the CFA were not all country dwelling yokels. Indeed many of their members were learned theologians and educated men and women.

Why did they do this?
They believed the Protestant faith was the true basis of America’s success and society – if you undermine it, you undermine America. Many people were convinced by the charismatic Bryan – he was a popular figure. Progressive religious ideas were seen as being European and foreign. In particular they became associated with Germany. The War had made American fear “foreigners” and their ideas. Equally, it had created a climate of fear in terms of spy scares. There had been a series of high profile murder cases – including one where two New York rich kids had killed a 14 year old boy just to prove they could – and they felt that any decline in the Bible would lead to even more actions of this kind. Many Protestant leaders were concerned that America was being seduced by science. Radio waves, electricity, calories, vitamins, radioactivity, blood groups were all marvels of the age. How could religion cope with such real miracles as these? They wanted to scotch the idea that science was the new religion. The progressive era of the pre-war years had upset many protestants – they wanted to put an end to these ideas. There was already concern about social progressivism – women getting the vote, women smoking in public, courting couples in cars etc. Reactions to the Butler Act: The ban was seen as an infringement of individual liberty and the American Civil Liberties Union (ACLU) offered to defend anyone who wished to test the law. They argued that academic freedom was vital if scientific and moral knowledge was to be enhanced and they also felt it was against the First Amendment to the Constitution.

John T. Scopes, a biology teacher in Dayton, Tennessee, rose to the challenge. He
read out a description of Darwin’s theory to his biology class, for which he was arrested and charged. His trial in Dayton reflects the impact of the media boom of the 1920s. Press, photographers and film crews descended on Dayton to witness and report the clash between one of America’s leading criminal lawyers, Clarence Darrow (hired by the ACLU) and the champion of fundamentalism, William Jennings Bryan.


The media certainly got what it came for. In cross-examination, Darrow challenged Bryan’s views on biblical accuracy. His literal belief in the description of Creation, the story of Noah and the Flood and other biblical ‘miracles’ was completely ridiculed by the press who also exposed his ignorance of scientific interpretation, so much so, that the presiding judge stopped this humiliating cross-examination. Scopes was found guilty and fined $100, but the real point had been made. Outcomes of the Scopes Trial Support for fundamentalism declined after the Scopes Trial However, it did not disappear altogether. It survived in many of the new revivalist churches that sprang up during the twenties often with mass support. Aimee Semple McPherson’s Angelus Temple, for example, in Los Angeles, seated 5,200 people. She broadcast regularly to thousands more on the radio. When she died in 1944, her Church of the Foursquare Gospel had more than 600 branches. The gap between attitudes in the countryside and towns became starker. The people in rural areas tended to take a more fundamentalist approach whereas the towns found the idea of the Bible as literal truth as absurd. Some textbook writers removed all references to evolution. Three other states introduced anti-Evolution laws in the wake of the Scopes Trial – it is worth noting that Tennessee did repeal its law until 1967!

The USA prided itself on being a land born of immigrants. However, the truth was that the USA basically welcomed white immigrants, preferably from northwestern Europe. Immigration was running at about 1 million people per year for the first 15 years of the century. This was stopped by the war, but it increased again in the post war period. Ellis Island, the point of entry for Immigrants became jammed with the 800,000 immigrants who entered the USA in 1920. There were millions more waiting in Southern Europe to gain entry to the USA. By the early part of the 1920s, there was a growing Anti-Immigrant feeling in the USA. Why was there anti-Immigrant feeling? The Great War: Foreigners were blamed for dragging the USA into War America feared foreigners. Americans started to see the rest of the world as a potential burden. Deaths in the war had made many Americans feel it was best to adopt an Isolationist stance – this included not welcoming foreign immigrants.

Failure of the Melting Pot: In 1782, a Frenchman living in New York called Jean de Crèvecoeur, put forward the idea of the American ‘melting pot’. According to him, men and women could arrive in America from any part of the world and, as a result of the experience of settlement, would receive a new nationality. They would be miraculously transformed into Americans. By the 1920s, it was abundantly clear that the ‘melting pot’ was not working. As thousands of immigrants poured into the USA during the nineteenth and early twentieth centuries, they not only brought with them the language, religion and culture of their origins, but they also clung to them. In the large cities, they congregated together in clearly identifiable districts — Italian, Polish, Greek, etc. There was, therefore, less possibility of these immigrants integrating into US society. The Politics of Immigrants: There was, strong opposition to the war, emanating from some immigrant minorities, particularly Italian-Americans. Immigrant organisations had been involved before the War in organising strikes and demands for higher wages and were quickly dubbed ‘socialists’ and ‘anarchists’. One particularly influential anarchist Italian publication was Cronaca Sovversiva, edited by Luigi Galleani. The authorities were especially apprehensive of this because it accepted violence and revolution as means to securing its ends and had taken up an aggressively anti-war position. Economic Issues: After the war, the closing of the munitions factories, the fall in demand for food and the effects of large numbers of soldiers returning to the workforce adversely affected large proportions of the rural and urban working population. White Americans believed that they were either being deprived of work or forced to accept lower wages because of the abundant availability of cheap immigrant and black labour. Hatred and intolerance of immigrants of Eastern European or Asian origin were accelerated by economic considerations such as these. Russian Revolution: The post-war years also saw the birth of international communism. The Bolshevik Revolution of 1917 and its subsequently stated intention to spread communism abroad caused fear and alarm in all the democratic states of the western world but nowhere more so than in America. Unrest and criticism, common in all those countries whose economies had been dislocated by the war, were quickly dubbed communist and subversive. Fear of Foreign Cultures: The large-scale waves of immigration from southern and eastern Europe in the latter part of the nineteenth and early twentieth centuries led to racist concerns about the survival of the ‘Anglo-Saxon’ race. Figures in 1920 showed that 58.5 per cent of the population had native white parents but there was nevertheless considerable racist concern that the AngloSaxons were being swamped by ‘inferior’ races which bred much more quickly. Racism: Racist tracts such as ‘The Passing of the Great Race’ by Madison Grant became best sellers. These tracts were written by serious academics (including a professor from Harvard) who used pseudo-science to prove their point. They said that immigrants were “parasites” who set out to “steal” women from the


“true Americans”. The immigrants from southern Europe were described as “good-for-nothing mongrels”. This would clearly inflame anti-immigrant feelings. Pseudo-Science: There were dubious tests that seemed to suggest ‘AngloSaxons’ were superior to other races; these seemed to give credence to the ideas promoted by Grant. During the First World War, for example, the Army began to administer intelligence tests to new recruits to identify potential officers. However, most of the questions demanded good knowledge of American history and geography, which recent immigrants from southern and eastern Europe tended not to have. The result was that they came out seeming less intelligent than the northern Europeans who tended to have lived in the USA longer and were, therefore, more knowledgeable about its history and geography. Nevertheless, all this was fuel to the racist fire.

In 1921 Congress passed an Emergency Immigration Law. This imposed an annual ceiling on immigration from any European country, limiting it to 3 per cent of the nationals from that country living in the USA in 1911. This allowed around 357,000 immigrants per year. It was clearly aimed at stopping new immigrants who were not from Northern Europe. In 1924 this was stiffened by the Johnson—Reed Immigration Act (National Origins Act). This Act: Banned any immigration from Japan — other Asian groups having been barred earlier. Set an absolute ceiling of immigration at 150,000 per annum, apportioned according to the native origins of the existing white population. This clearly favoured those from north-western Europe. 85% of permitted immigration was to be from Northern Europe. Interestingly, this law did not apply to Mexicans, whom Californian farmers traditionally used as a supply of cheap labour at harvest time. Thus, immigration from Europe fell from 2,477,853 in the 1920s to 348,289 by the 1930s. The total number was reduced from 4,107,200 in the 1920s to 528,400 by the 1930s. This quota system continued to systematically reduce the numbers of people who were allowed into the USA until the 1960s.

In the period following the First World War and in the wake of the Russian Revolution there was a ‘Red Scare’ that saw 6,000 arrests. These were known as the ‘Palmer Raids’, named after the then Attorney General, Mitchell Palmer. Palmer had become

very popular through his exposure of ‘communist activity’ in the USA. In August 1919, Palmer had created the General Intelligence Division to investigate revolutionary activities. Under its head, J Edgar Hoover, this was the forerunner of the Federal Bureau of Investigation (FBI) and Mitchell had relied heavily on its information for his targets. Elected Members of the New York Legislature were arrested and prevented from taking their seats. Other states started to seek out socialists and communists in their administrations. These were no more than witch hunts. Magazines, newspapers and other organisations were raided and documents seized. Some were closed down. In 1920, a known anarchist, Andrea Salsedo, was arrested in New York City. He was denied his rights to receive a fair trial and to be represented by legal counsel, supposedly guaranteed by the 5th Amendment. He was imprisoned for eight weeks without contact with his family or a lawyer before his crushed body was found, on the ground, 14 floors below where he was being held by the FBI. The official explanation was that he had committed suicide. However, most of the detainees had to be released within a few days due to a complete lack of evidence against them. The sweep netted no more than three pistols, while most of those arrested were long-standing US citizens of impeccable respectability. Palmer announced there was to be a huge Communist demonstration in New York on 20 May 1920. When this failed to materialise he increasingly looked ridiculous and the Red Scare died away. With it went his hopes of nomination for the presidency. The ‘red scare’ resulted in a virtual witch hunt in US political circles. It created an atmosphere of fear and suspicion that not only pervaded most of the decade but was also responsible for actions that were uncharacteristic of a nation pledged to liberty and freedom. Why Did the “Red Scare” Start? After the First World War, high inflation caused much industrial unrest. Workers were taking industrial action in order to get higher wages to keep pave with inflation. It was estimated that during 1919 4,000,000 workers (or 1 in 5 of the labour force) went on strike. Many people believed strikers were led by Communists who sought revolution in the USA in the same way that it had been achieved in the USSR. Fears grew as a general strike brought the city of Seattle to a halt and even policemen struck in Boston. 340,000 steel workers went on strike. Their leader, William Z Foster was believed to be a Communist.


Recent immigrants from Eastern and Southern Europe came, in particular, to be identified with Communism and attempts to overthrow the American system of government. There were, in addition, various assassination attempts on high profile Americans such as John D Rockefeller, the billionaire and the Attorney General, Palmer. Men like Palmer wanted to make a name for themselves. Palmer hoped he could use this as a springboard for Democratic nomination for the presidency in 1920. There was a fear of all things “foreign” – socialism and communism included.

Few events of the twenties in America have caused the same interest and heated debate as the trial of these two Italian-Americans. Amongst other things, it is seen as illustrating, more than any other event of the time, the deep divisions and prejudices in American society. It also has other implications. On 15 April 1920 two men were robbed and murdered near the Slater and Morrill Shoe Factory in South Braintree, Massachusetts. They were carrying a $15,776 payroll. This kind of robbery was quite common in the years of hardship following the end of the war. This particular one, however, gained national attention because the two men, Sacco abd Vanzetti, who were eventually charged with the murders were known anarchists who had opposed the war, avoided military service and supported strikes. Their arrest also coincided with the high point of Palmer’s onslaught on communists and anarchists. The fairness of the trial of Sacco and Vanzetti was highly questionable. The judge, Webster Thayer, was a conservative Republican who was clearly prejudiced against the two men because they were Italian immigrants and political activists. He had already tried Vanzetti on a lesser crime of robbery at Bridgewater, not far from South Braintree. On that occasion, very few concessions had been made to the fact that Vanzetti himself, and also many of the Italian witnesses in the case could not speak very good English. When the Braintree murder trial was held, Thayer presided over that also, contrary to the usual practice. He made adverse comments about the men privately, confirming the suspicion that he was determined to see them convicted and executed. On flimsy, circumstantial evidence, the men were convicted and sentenced to death. There followed a lengthy, seven-year struggle to prove the men’s innocence and secure, at least, a re-trial. In spite of the fact that there was huge international support for the movement to free Sacco and Vanzetti, including that of many eminent literary figures of the day, the convictions and sentences were upheld. Sacco and Vanzetti went


to the electric chair in 1927. News of the executions prompted riots in Paris, Geneva, Berlin, Bremen, Hamburg and Stuttgart. By 1927, they had become martyrs in a huge, left-wing, propaganda exercise. Their case had become an international cause célèbre which makes it difficult now to extricate the truth. The trial and the evidence surrounding it remain the subject of academic interest and debate today. There is still much speculation but the following points are significant: • • As Italian immigrants, they were the victims of racial discrimination. They were denied the rights to which they were entitled. They were also the victims of the political mood of the time. At the end of the day, this may be considered to be the real significance of their case. Vanzetti had refused to take the stand to give evidence in his own defence at his trial in Bridgewater. He was afraid that his political activities would become a major focus and that, in reality, he would be tried for this rather than for robbery. In fact, he was sentenced to 15 years in the Charlestown State Penitentiary. This was an excessive punishment for robbery at this time. The evidence that condemned them to death was highly circumstantial. Their supporters claimed that vital evidence had been disregarded. Subsequent research has suggested that Sacco may well have been guilty but it remains a matter for debate.

However, the case of Sacco and Vanzetti is perhaps more important for what it tells us about American society at this time rather than for itself. The allegedly subversive activities of some immigrants and the economic effects of the ‘open door’ policy finally convinced politicians that immigration had to be controlled. This was backed up by pressure from the rural and small town communities that were overwhelmingly white Protestant American. President Coolidge undoubtedly spoke for them when he affirmed that, ‘America must be kept American’.

The First World War had boosted the US economy. America’s wheat fields produced food for the warring Allies. Its wartime munitions factories created jobs for women but especially for immigrant workers and African-Americans who were being drawn increasingly into urban areas by the opportunity of work. This migration from the southern rural areas had begun in the 1890s but reached its peak in the war years when an estimated 500,000 African-Americans moved into the big cities of New York, Philadelphia, Boston, Chicago, Detroit, Cleveland and St Louis. This aggravated longestablished racial tension between blacks and whites. Incidences of race riots increased between 1917 and 1919.


Immigration control can be seen as a passive expression of racism. The influx of foreigners combined with the existing racial tension between African-Americans and white Americans and led to more violent forms of protest. At a more extreme level, it led to the reappearance on the scene of the Ku Klux Klan. Following the abolition of slavery, African-Americans had been guaranteed their civil rights by the 14th and 15th Amendments to the Constitution. The first of these gave them equality before the law and the second gave them the right to vote. Both of these had been disregarded. The southern states evaded the law and excluded blacks by imposing literacy and tax qualifications to obtain the vote. They continued to be persecuted throughout the last three decades of the nineteenth century. Almost 2,000 were killed in the south during this time by lynch mobs who hanged their victims and sometimes even burned them alive. The accelerated movement of African-Americans into the cities during the First World War years extended and increased these tensions. Their arrival resulted in serious housing shortages that adversely affected the white population. In parts of St Louis and Chicago, there was violence from time to time during 1917. In July 1919 violence once again erupted in Chicago. A teenage black boy had accidentally drifted towards a ‘whites only’ beach on Lake Michigan. The people on the white beach began to stone him until he disappeared under the water. His death began a week of horrific violence that left 23 black people and 15 whites dead and 537 people wounded. This incident clearly indicates the depth and extent of the hatred and prejudice. There were similar, but smaller riots in at least 20 other cities where AfricanAmericans were tending to cluster in ghetto areas.

There is a fundamental irony that the most characteristic feature of the twenties in America — jazz — should have largely emerged from the place that perhaps best exemplifie the other side of the American dream — Harlem. This once highly fashionable corner of New York, populated by comfortably-off Americans had received the largest proportion of the migrant African-Americans coming from the South, gradually displacing its original inhabitants. By the 1920s, 87,417 blacks had arrived. Their numbers had been swelled by 45,000 Puerto Ricans and immigrants from the West Indies. The arrival of the latter increased racial tension. They were hard-working and entrepreneurial. As such they were resented by the rest of the ghetto population, leading to inter-racial violence that, by 1925, had risen by 60 per cent.


By the end of the 1920s, Harlem had become a slum. Its dense population (336 to the acre) led to a high demand for the available housing and this, in turn, to extortionately high rents and overcrowding. Standards of health and hygiene were very poor. Yet this ghetto area produced what came to be known as the ‘Harlem Renaissance’. Poets, writers and musicians attracted the attention of white patrons who admired the talent of the few whilst ignoring the poverty and suffering of the masses. The ultimate irony is that when black jazz musicians entertained in the Harlem jazz clubs, negroes were banned from the audiences. Their only source of escape from relentless persecution and hardship was either through membership and support for the National Association for the Advancement of Coloured People (NAACP) or through the propaganda of Marcus Garvey and the concept of ‘Black is beautiful’. The glitz and glamour that attracted the attention of the rest of the world to the USA in the 1920s was superficial. For a short time, it hid the reality of the experience of the mass of the people, especially those who had gone there in the belief that life would be better, only to be disappointed. Freedom and equality were limited to the few. Soon the bubble would burst and, when that happened, its dark and empty heart would be fully revealed.

The cause of white Protestant American supremacy was taken up by the Ku Klux Klan. This formidable racist organisation had died out in the l870s but re-formed in 1915 in Georgia.

Why was the Klan able to re-emerge? Wider Appeal:
o This time the targets were Catholics and Jews as well as AfricanAmericans, trade union members and anyone else that could be described as ‘subversive’. o The War had created a mistrust of foreigners – this made the Klan appealing. o The economic and social tensions caused by migration and immigration made the Klan’s ideas more popular. o It attacked new ideas such as evolution and working on the Sabbath. o The Klan opposed the perceived immorality and progressivism of the towns – this made them popular in some rural areas. o It also opposed any borrowing from non-‘Anglo-Saxon’ cultures. o Undoubtedly the Klan met a need among many Americans. It gave them a sense of importance — particularly those who held local office — belonging and power. With its secretive language, hoods and robes, burning crosses and propensity to violence, it added purpose and glamour


to the humdrum lives of the farmers, artisans and shopkeepers who were the mainstay of its membership. o Undoubtedly, it also appealed to the bullying and sadistic instincts in many. Victims could be tarred and feathered, branded and even killed. o Plain living, prohibition and church attendance could now be upheld by terror. o Just like the gangsters, the Klan had control of influential politicians. It has been alleged, for example, that in 1924 it helped elect governors in Maine, Ohio, Colorado and Louisiana. At one point both Georgia senators were Klansmen. Certainly it helped destroy the campaign of Al Smith — a Catholic New Yorker — to be nominated for President in 1924, and fought energetically against him again in 1928. Evans claimed there were 5,000,000 members of the Klan in 1923.

Better Organisation:

o By 1920, a huge recruiting campaign was underway. o Using modern business and salesmanship techniques were used. o Members were told to play on whatever prejudices were most common in their particular area, it had attracted 100,000 followers by 1921. o Two of its leaders, Edgar Clark and Elizabeth Tyler, were professional fundraisers and publicity agents. o They divided the country into eight ‘domains’, each under a ‘Grand Goblin’. Domains were subdivided into ‘realms’, each under a ‘Grand Dragon’, with a bewildering array of minor posts under him — such as Kludds and Kleagles. o Recruits were charged $10, most of which went to local Klan officials, and were paid on a commission basis for signing up further new members. o The robes, which cost $3.28 to make and sold for $6.50, were manufactured by a Klan-owned clothing company. o All printed material was published at vast profit by the Searchlight Publishing Company, again owned by the Klan. o It even moved into land sales through the Clark Realtor Company. All in all, the Klan made a large amount of money out of its members.

However, the Klan rapidly collapsed as a mass organization:


In Indiana, David Stevenson had built the Klan into a powerful political machine. His downfall was sudden and shocking; this followed the suicide of a woman he had raped. He was convicted of second degree murder. Stevenson’s wickedness helped kill off large-scale support of the Klan. The Klan Was Too Negative: The ideas and aims of the Klan offered no positive ways forward – it was based on hate. This meant that its appeal was limited and its message depressing.


Narrow Base:

The Klan had very little influence in big cities. It was overwhelmingly a movement of small towns and rural areas. 40% of its membership came from three states. Its base was mainly in the old Confederacy and it had few followers in the North, Midwest or Pacific Coast. Newspaper Criticism: The Klan was subjected to severe criticism in the newspapers and this made them less appealing. Attacks on their ideas, methods and general style became common in the press. The Klan was made to appear crude. Fraud: The organisation was also hurt by revelations of financial mismanagement in Pennsylvania. By 1929, its membership had fallen to 200,000. Discontent From Members: Evans tried to turn the Klan into more of a social club by emphasising outdoor activities such as camping expeditions as opposed to its political role and attraction to violence. This angered the extremists who felt it had gone soft. By 1930 the power and influence of the Klan was broken on the national stage, although its terrorism continued at local levels.

The Roaring ‘20s: A Decade Of Opportunity? On the surface, the freedom and affluence that characterise this period would seem to make it potentially a golden age of opportunity for women. Flappers saw liberation as the freedom to dress and behave as they chose. They were distinguishable by bobbed hair, loose, shorter length clothes, bare, sometimes made-up legs and outrageous behaviour. They smoked, partied, drank and danced the Charleston until the early hours. There were hints of sexual permissiveness in their lifestyles. They loved the popular music of the twenties – jazz. They saw themselves as ‘modern’ – a new breed of feminists, a product of the 1920s. Ads for automobiles, cigarettes, electrical gadgets and home furnishings helped to create a fantasy world of grace and pleasure. Images of beautiful women in Model T Fords and fashionable clothes made these a must for the emancipated woman. Methods of mass production both increased job opportunities for women and provided the labour-saving devices that promised liberation from time-consuming domestic work.


However, these images are misleading. The true picture is difficult to define because it is clear that American women in the inter-war period continued to hold different and often conflicting views of their role in society and of their ambitions. This undoubtedly limited the extent of change. Men had definite expectations of women, although these also varied. The struggle for female emancipation in the 1920s During the 1920s, feminist groups struggled for female emancipation. This had begun in the nineteenth century over issues such as the right to higher education and access to the professions such as medicine and the law. By 1900, many groups were campaigning for women’s rights. Although women were now accepted as fully qualified doctors and lawyers, the campaign for equal rights continued particularly over wages and working conditions. In 1917, Jeanette Rankin (Montana) became the first woman to be elected to Congress and The National Woman’s Party led by Alice Paul began a more aggressive campaign to secure the vote. In January 1917, in freezing temperatures, women picketed the White House. Later the same year, 168 women made US history by becoming its first political prisoners when they were arrested for peaceful picketing. In prison, they went on hunger strike and were force-fed. During the First World War, with many men away, women took over their work in heavy industry, manufacturing, driving transport vehicles and delivering mail. In 1919, Congress passed the 19th Amendment to the US Constitution which became law on 26th August 1920. Women were allowed to vote for the first time in the presidential election of that year. Women in the western states had had the vote for some time, mainly because in the west, women vastly outnumbered men. Did the vote make much difference to women? In 1924, Nellie Tayloe Ross of Wyoming became the first woman to be elected state governor and in 1926, Bertha Knight Landes became the first female mayor of a city (Seattle). Carrie Chapman Catt and The National League of Women Voters (1920) tried to raise the awareness of women to the opportunities opening up to them but most appeared


more interested in mass produced labour saving devices. They seemed happy to stay at home rather than developing their careers at work. In the 1920s medical schools allocated only 5% of their places to women and the number of women doctors declined over the period. In 1920, 47.3% of college students were women. Over the decade, the percentage declined. There were growing opportunities for higher education in the late 19th Century. The American workforce remained mainly male. Although the number of women at work rose by 2 million in the 1920s, the figure was only 24% of the population. Discrimination in wages continued. The feminist movement splintered. The older followers rejected the materialism and mass consumption of the 1920s. In doing so, they lost the support of younger women who were attracted by it. Why were the achievements of women limited? Many women were not generally interested in politics. In the nineteenth century, they had supported the abolition of slavery. In the 1920s, middle class women supported the temperance movement and Prohibition. American women had different views of their role in society. There was still a strong belief that their domestic role was of the greatest importance. Women who had worked during the First World War were content to return to the domestic scene after 1918. African American women were not allowed to vote in elections even after the law changed. Middle class women took up the anti-lynching cause and later supported the cause of equal rights for men and women. Others became involved in social campaigns against poverty and poor living and working conditions. Large numbers of working-class women were already in the workplace. Many of these were young immigrant workers who worked long hours in ‘sweatshop’ conditions for very low wages.

‘The thoroughly-modern woman’
What did this mean? That was the burning question in the 1920s. No one really knew the answer. Certainly, a different lifestyle separated the young and perhaps more affluent women from the rest.


The flappers, who have come to characterise the jazz age, were only united in their determination to rebel and to reject the accepted norms of the day when it came to dress, hair, correct behaviour and sex. These were young, well-off, middle-class girls who lived in towns; they were therefore unrepresentative of women in general. Educated African-American women, however, tended to be more conservative. They needed to avoid controversy in order to win the struggle for respect and equality in a fundamentally racist society. It is probably true to say that the younger and more rebellious female was more certain about what she was not, rather than what she aspired to be. She rejected the moral values and expectations of her mother and grandmothers. She was not interested in the social reform issues that were providing a platform for the older female generation. Education, however, continued to be important to women and opportunities expanded especially for middle-class women. They increasingly undertook higher degrees, including doctorates, even though these tended to lead to traditionally female occupations, such as teaching and library work. The legal and medical professions continued to discriminate and to limit the opportunities that were available for women. Consequently, middle-class educated women came to focus increasingly on campaigning for the accessibility of the professions to their own kind as opposed to working for greater freedom and equality of opportunity for all women.

Women and work.
The consumer boom of the 1920s and especially the availability on credit of laboursaving devices created not only jobs but also the opportunity for all women and especially for married women. By 1928, sales of vacuum cleaners, irons, refrigerators and washing machines had risen phenomenally. Married women entering the workforce rose in the period from 22.8 per cent of working women to 28.8 per cent. But jobs, like the goods that they were producing, were not accessible to all women and, in the workplace, women faced discrimination in wages. They also faced the hostility of male trade unionists who argued that if women needed special legislation to protect them in the workplace, perhaps they should not be there.


2007 Version

History Department AS History: Unit 1

Year 12

Prohibition & Organised Crime


The power to ban (prohibit) the production, export, import, transportation or sale of alcoholic beverages was given by the 18th Amendment to the Constitution, which was passed in 1917. It was gradually adopted by state governments across America and was followed up in 1919 by the National Prohibition or Volstead Act that defined liquor as drink containing 0.5 per cent of alcohol and prescribed penalties for breaking the law. By 1919, three-quarters of the states of America had approved Prohibition. It finally applied to the whole of the USA in 1920. It was an amazing law partly because the legal liquor industry was the seventh largest industry in a country where, even in the latter part of the nineteenth century, ‘big business’ was established and respected as the creator of the nation’s wealth. More importantly, Prohibition appeared to be a violation of the rights and freedom of the individual so cherished by the US Constitution and the Bill of Rights.

Prohibition was favoured by a variety of interests: Many women’s groups saw alcohol as a means by which men oppressed them. Big business saw drunkenness as leading to danger and inefficiency in the workplace — particularly in large factories. Many religious groups believed alcohol was the work of the devil and was overwhelmingly responsible for sin and wrongdoing. Supporters tended to be overwhelmingly Protestant, live in small towns in the South and West and, except in the former region, vote Republican. Opponents were likely to be urban, of non-northern European ethnic origin, Roman Catholic and vote Democrat.

Historical Context
There had long been a temperance movement in the USA. As far back as the Revolution in the 18th century there had been campaigns to ban the consumption of


alcohol. Some states banned alcohol in the early part of the 20th century. Feminists and liberals saw alcohol as a social evil that was stopping the eradication of poverty and other social ills such as wife beating and child abuse.

The Impact of the Great War
The First World War gave several boosts to prohibition: Grain was needed for food. As a result, many people felt it patriotic to do without a drink. It was felt that alcohol led young soldiers away from home for the first time, into temptation and sinful ways — so best to remove it from their grasp. Many people believed sobriety would be part of the ‘brave new world’ created after the war. Many of the largest brewers, such as Ruppert, Pabst and Leiber, were of German origin and their businesses had helped finance the National German-American Alliance that had supported German interests before the war. The anti-German feeling that was growing in America by the time the legislation went before Congress lent support to its actions.

Religion and Moral Campaigns
Prohibition originated in rural and small town America. Here the local religious leaders still held sway. Baptists and Methodist ministers spoke out against alcohol and won over people of other denominations. Middle class businessmen were able to convince their employees to give up alcohol and well-established elites were able to influence the behaviour of their social inferiors. It was a crusade against liquor inspired by the misery, poverty, depravity and violence that alcohol was perceived to produce. The campaign for a total ban on alcohol was driven by a pressure group called the Anti-Saloon League whose membership was drawn from middle-class, Protestant, church-going Americans who were especially critical of behaviour and morality in the big, crime-ridden cities such as New York and Chicago. Prohibition was, in the words of one of its supporters, the “pure stream of country sentiment and township morals to flush out the cesspools of cities”. The League enjoyed the support of other middle-class temperance groups such as the Women’s Christian Temperance Union. Collectively, these groups were able to exert a significant influence by voting for politicians who would then support their cause in Congress. By the time the 18th Amendment was discussed and voted on, there was sufficient support to ensure that prohibition of alcohol became law either because these politicians believed in it or


because the moral pressure was so great that they did not want to be seen to oppose it. Several states already had prohibition laws on their statute books and the federal prohibition movement built on this.

Big Business
Prohibition also had the very influential backing of some big business tycoons. For example, John D. Rockefeller gave both his personal support and large sums of money to the Anti-Saloon League. This was not from his own strong moral convictions, but rather because he believed that his workers would be far more productive if their minds and bodies were free from the debilitating influence of alcohol! Men such as Henry Ford, with their new production lines and machinery needed to have sober men in their factories. In the past farmers had ploughed with a bottle of beer in their hand – this was not safe when operating a machine.

Disorganisation of the Opposition
The forces against prohibition were not well organised. Beyond a march and rally in New York City, a parade in Baltimore and a resolution against taking away the working man’s beer by the American Federation of Labor there was little protest.

Once the National Prohibition Act became law nationally, John F. Kramer was appointed as the first Prohibition Commissioner. His task was to drain America dry of alcohol wherever it could be found. However, the job was less than easy.

Poor staffing and Funding:
At the most, 3,000 treasury agents were employed to enforce prohibition. They were paid an average salary of $2,500 to shut down an illegal industry whose profits were estimated at $2 billion annually. It is no wonder that many were corrupt. One federal agent was said to have made $7 million selling illegal licences and pardons to bootleggers. While agents such as ‘Izzy’ Einstein and ‘Moe’ Smith became famous for the ingenuity with which they closed down illegal stills and ‘speakeasies’, it should be remembered that, between 1920 and 1930, about 10 per cent of prohibition agents were fined for corruption. It is very likely that many more escaped prosecution. Their task, however, was made even more impossible since they lacked the scientific and industrial expertise to carry out the work.


Equally, the agents work was unerfunded. The Anti-Saloon League estimated a $5 million of funding would be enough; in the event, Kramer’s department was given $2 million.

The USA has 18,700 miles of coastline and land border; those waters just outside the national limits became known, with good reason, as ‘rum row’. Smuggling was so successful that in 1925, the officer in charge of prohibition enforcement guessed that agents only intercepted about 5 per cent of alcohol coming into the country illegally; in 1924, they seized $40 million worth of alcohol so the actual volume of business must have been immense.

Legal Alcohol
Chemists could still sell alcohol on doctors’ prescriptions; this vas naturally open to widespread abuse. Many people known as ‘bootleggers’ went into business as producers and distributors of illegal alcohol. The ‘King of the Bootleggers’, George Remus bought up Tarious breweries on the eve of prohibition for the manufacture of medicinal alcohol; he then arranged for an army of 3,000 gangsters to highjack his products and divert them to the illegal stills of the big cities. In five years, Remus made $5,000,000. Industrial alcohol was easily diverted and re-distilled. Problems with the suitability of this for consumption can easily be imagined and exotic cocktails were often invented to take away the unpleasant smell and taste of materials intended for industrial manufacture. There is a legend that one sceptical buyer took his bootleg whisky for analysis to a chemist — to be told that his horse had diabetes! Poisoning from wood alcohol, though not common, was known during this period and in one instance, 34 people died in New York City.

Urban Opposition
The towns never supported the Prohibition laws and they opposed them with vigour. They hated what became known as the “yokel contingent” of country do-gooders. Immigrants were not won over by the appeal to stop drinking, especially those from Ireland and Eastern Europe. The influential urban middle classes were also outraged at not being able to have cocktails at their fashionable parties. These groups provided opposition to the law.


Lack of Government Action
Some historians have even argued that Congress did not do more to enforce prohibition because it did not want to alienate rich and influential voters. In addition, this was a period of a reduced role by federal government and most state governments were, at best, lukewarm in enforcement, particularly where cost was concerned. No one in government seemed to be prepared to say openly that prohibition could not be enforced because Americans liked to drink, but this was nevertheless apparent to many people.

Changing Attitudes
As the 1920s progressed, the mood of the nation changed. For many Americans, particularly those living in the cities, their main aim in life became having a good time. Illegal drinking in gangster-run ‘speakeasies’ became popular venues for many fashionable city dwellers.

Divisions in the Anti-Saloon League
The ‘dry’ lobby, while very well organised to achieve prohibition, was ill equipped to help enforce it. The Anti-Saloon League, for example, was bitterly divided between those who sought stricter enforcement laws, believing the League should actually be given power over appointment of officers, and those who emphasised education programmes to deter people from drinking in the first place.

The National Prohibition Act was an experiment in social engineering but it went horribly wrong. It was intended by its authors to promote morality, but it had entirely the opposite effect. Crime. It only proved how imaginative and resourceful people could be in evading the law. It increased the consumption of alcohol enormously. Crime increased catastrophically and amongst those millions of Americans who did not support it, Prohibition engendered a sense of injustice, resentment and, in some cases, rebellion. Growth of soft drinks. The imposition of Prohibition did, however, give a significant boost to the American soft drinks industry. This had been growing during the nineteenth century, especially after John Styth Pemberton developed the ‘secret formula’ that went into making Coca Cola. As early as 1905, it was being marketed as ‘The Grand National Temperance Drink’. Output had been increasing impressively from 17.4 million cases in the 1 880s to 113 million by


1920. During the period when Prohibition was in force (1920—33), this rose to 182 million. By the time of the repeal of the prohibition laws, Coca Cola and its rival, Pepsi Cola, were well established household names and the industry was flourishing. Positive Impact. There was a decline in drunkenness, alcoholism and deaths caused by accidents. The Anti-Saloon League claimed there was less violence against women and children. The illegal liquor business. Notwithstanding the encouragement of the soft drinks industry, generally the impact of Prohibition was negative. Its effects were entirely contrary to the intention of the law. People, deprived of legal liquor and angered by the restriction of their rights, found other sources of alcohol. For those reluctant blatantly to defy the law, there was ‘medicinal’ whiskey. This could be obtained legally on prescription although, undoubtedly, these ‘legal’ prescriptions were dubiously obtained. Widespread Criminal Activity. It is clear that vast numbers of people, especially in the big cities, were prepared to defy the law and buy illegal drink however and wherever it could be obtained. In many instances, they made their own (moonshine) often with devastating effects on health and well-being. This often inexpertly distilled alcohol made from corn could be lethal, causing paralysis, blindness and sometimes death. In the big cities, especially, illegal bars (speakeasies) appeared and multiplied rapidly, far outnumbering their legal counterparts before Prohibition. Nightclubs, restaurants and shops sold bootleg whiskey. Arrests for drunkenness trebled and deaths from alcoholism rose by 600 per cent. Speakeasies were owned and operated by gangs who obtained liquor partly by smuggling it into the USA from Canada, Mexico and the Caribbean (bootlegging) and also by establishing illegal breweries. These city gangs became notorious. Organised crime, including gambling, prostitution and narcotics, developed on a huge scale. Bribery of politicians, judges and law enforcement officials was widespread. Whilst gangland ‘executions’ removed some of the main criminals, ‘big crime’ families and organisations remained a dominant feature of US city life throughout the twentieth century. Class Impact. Interestingly, it had been the working-class saloons that tended to be shut down; the ‘speakeasies’ which replaced them tended to sell spirits to a wealthy clientele; in this respect prohibition worked to the detriment of the poor.


Prohibition effectively transferred the provision and manufacture of alcoholic drinks from the hands of legitimate businesses into those of criminal organisations, especially in the big cities such as Chicago and New York. These were almost exclusively of immigrant origin. In New York, half were Jewish, a quarter Italian and a quarter were Polish and Irish. In Chicago, they were exclusively Italian and Irish. ‘Gangster’ leaders became incredibly wealthy and virtually controlled these cities. The significance of this was that crime brought political influence to groups previously without power.

Who were the key players?
John Torrio and Al Capone are particularly good examples of how gangsters operated and flourished in Chicago as a result of Prohibition. Torrio was the leader of an Italian— American gang with Mafia links. He organised Chicago into gang ‘territories’ to reduce conflict between criminal gangs. He bought the ‘protection’ of Mayor ‘Big Bill’ Thompson and ensured political support by rigging elections. For example, in 1924, after moving the base of his illegal operations to a suburb of Chicago called Cicero, he successfully fought off police intervention to ensure the election of a town council made up of his nominees. Torrio built up a very lucrative business in bootlegging and speakeasies until 1925 when he retired to Italy taking with him his $30 million fortune from crime. His successor in the ‘business’, Al Capone, was extremely violent. He was involved in every crime of vice and extortion that existed. Whilst appearing publicly alongside Mayor Thompson, politicians and officials as a city celebrity at charity events, he was extorting millions of dollars in protection money from Chicago citizens, making a fortune from speakeasies, brothels and drug trafficking, as well as indulging in gang warfare with his rivals. By 1927, his criminal activities had provided him with a fortune of around $27 million. He was driven around Chicago in an armour-plated Cadillac. In the midst of all of this, law enforcing bodies were helpless; judges and police officials were frequently in the pay of the gangsters. In addition to all of these crimes, between 1927 and 1931, there were 227 gangland murders for which no one was ever convicted. The most outrageous of these happened on 14 February 1929 and became known, therefore, as ‘The St Valentine’s Day Massacre’. Four members of Al Capone’s gang, dressed as policemen, trapped seven members of a rival Irish—American gang led by ‘Bugs’ Moran. The captives were told to put their hands against the wall. Expecting a routine police search, they did so without hesitation. Capone’s men produced sawn-off shotguns and submachine guns and shot them in the back. Such levels of violence angered the citizens of Chicago but Capone, himself, seemed untouchable. Finally, an FBI team led by Eliot Ness ensured the conviction of Capone for tax evasion for which he served 11 years in Alcatraz. He was never punished for the 400 murders that he is alleged to have ordered.

Why was organised crime so hard to control?
It was big and secretive – it was difficult to know what it was doing and was too large to control. It had money – The crime bosses on the other hand had money, weapons and personnel. Corruption – policemen, judges, public prosecutors and politicians were all bought by the crime bosses. They were paid low salaries and so were easy to buy off. Under-funding – the law enforcement organizations were poorly funded and resourced. Fear – the crime bosses used violence against opponents and informants. It was virtually impossible to infiltrate the crime syndicates for this reason.

By the end of the 1920s, many people questioned whether the ‘noble experiment’ had been worth it. There were pressures to end it: It had certainly led to an explosion in crime. Illegal drinking made criminals of a good percentage of the population. The enforcement of Prohibition was also virtually impossible. There was widespread urban opposition – Politicians in urban states started to campaign for repeal. Some Christians started to say that Prohibition was wrong. They pointed out that if Christ returned to earth and turned water into wine, he would be arrested. President Hoover set up the Wickersham Commission to investigate prohibition. When it reported after 19 months of deliberation, its findings were that the law could not be enforced — and yet the Commission as a whole favoured a continuation of prohibition. The New York World mocked the Commission as follows: Prohibition is an awful flop We like it It can’t stop what it’s meant to stop We like it It’s left a trail of graft and slime It’s filled our land with vice and crime

It don’t prohibit worth a dime Nevertheless we’re for it. Prohibition was not finally repealed until 1933, when the 20th Amendment made it the responsibility of individual states to decide on the issue.


History Department AS History: Unit 1


Year 12

2007 Version


BUST – 1929-33
By 1927 the US economy was not as strong as many at time thought. There were many weaknesses and problems below the surface.

The slowing down of the economy:
• • • • • the sales of new motor cars went down fewer new houses were built -1928 and 1929, there was a 25 per cent decline in house building the rise in industrial wages slowed down American farmers, grappling with the effects of overproduction, saw earnings decrease. Unemployment started to rise from 1927

However, the stock market remained strong – share prices did not reflect the gloom in the economy.

Government Policies:
The Republicans in the 1920s operated a policy of minimal intervention in the economy. It has been argued that this helped encourage the collapse of 1929. The lack of regulation, tariffs, tax cuts, failure to help the poor and no policy for helping the farmers have all been seen as destabilising elements in the economy.

US industry grew rapidly in the 1920s and output grew enormously. Factories and farms produced more than the US economy could absorb. This led to stockpiling which hit employment, profits and, ultimately, the value of shares. The tariffs imposed by the Republican government also made this situation worse. The USA could not sell goods abroad in such large numbers because other governments imposed retaliatory tariffs on US goods.

Unequal distribution of wealth:
Whilst American economic prosperity in the 1920s was fairly widespread, this wealth was unequally distributed. Sixty per cent of American families had an income of less than $2,000 per year, the minimum thought necessary for survival. There were, therefore, significant


differences between the wealth of the rich, middle-class Americans and the rest who made up over 50 per cent of the population. The top 5 per cent of wealthy Americans earned one third of the total personal income. How had this come about? The high profits created by gains in productivity had been paid out to investors whilst the workers received comparatively small wage increases. This concentration of potential buying power in the hands of a relatively small proportion of the population was to have seriously adverse effects on the domestic market for goods produced in American factories. Only the well-off could afford to buy. As output increased, it was not matched by an increase in consumer buying power – this led to over-production. The only way that the less wealthy could manage to buy cars, radios, telephones and other mass-produced goods was by taking advantage of credit facilities. In the process, large sections of the population borrowed far in excess of what they could realistically afford. Their ability to repay depended entirely on their wages. Eighty per cent of Americans had no savings at all at this time. Clearly, the Republican view, voiced by Coolidge, that the interests of business and those of the nation were the same was not correct. Whilst the American economy had prospered in the 1920s, the wealth was not equally distributed amongst those who created it.

Farming problems:
Perhaps the unequal distribution of wealth is best illustrated in farming, where farmers in South Carolina were earning only about 10 per cent of those in California. The problems faced by American farmers such as overproduction resulting from mechanisation, the creation of food surpluses and falling prices was made worse by their attempts to find a solution to these problems. In the 1920s, American farmers borrowed $2,000 million in mortgages. Whilst these mortgages were easy to obtain from banks willing to offer cheap loans, the farmers had virtually no chance of repaying them. Many were evicted and the workers they employed were sacked as a result.

Trade problems:
The protectionist policy of the Republicans, characterised by high tariffs on imported goods, may have encouraged the consumer boom of the 1920s but it had dangerous side effects. The most important of these was retaliation by other world trading powers against US goods. This meant that American goods could not be cheaply exported to other countries. In the longer term, this adversely affected American manufacturing industry. Mass production meant that eventually output would be greater than the demand from the home market alone. As goods could not be sold abroad, this would lead to stock46

piling at home and, consequently, to cutbacks in production. Eventually, this would hit employment, profits and, ultimately, the value of shares. Protection also meant that there were no export markets for surplus US food. As the 1920s progressed, the situation of the US farmers, in particular, worsened.

Banking Problems:
US banks were poorly regulated. This meant that there were poor banking practices that destabilised the whole system: • • • • • Banks lent out too much money and they lent it irresponsibly. Banks were small and localised. They had no support mechanisms to help in times of crisis. When banks had problems they recalled loans and this put pressure on business. Another solution to problems was to sell the shares the banks had stockpiled. This depressed share prices. Banks had small reserves and they could be hit by depositors withdrawing money in times of crisis.

European Loans:
European governments and businesses were not always quick to repay their debts. This added to the problems of the US banks.

Stock market speculation:
The growth of the stock market was far from as secure as the profits enjoyed by the US speculators suggested. Indeed, after 1927 the stock market was based on a false belief that shares would go on rising forever. Shares were bought for the wrong reasons, by the wrong people and with borrowed money. Around 1 million Americans were speculating on the stock market. They were trying to buy and sell shares quickly in an attempt to make money out of what was known as the Great Bull Market. A bull market is where stock prices rise significantly over a long period of time. Other Americans were buying shares just as a long-term investment. Whilst the actual number playing the markets is important, what is more significant is that many of the shares which were changing hands were doing so with borrowed money. The practice of buying shares on credit, ‘on the margin’, worked well as long as prices were rising, but when the price rise started to slow down or prices fell, problems began to set in. The way in which 75 per cent of the purchase price of shares could be borrowed. This encouraged excessive speculation, which kept prices artificially high. Easy credit policies on the part of the Federal Reserve Board, plus tax cuts made more money

available for speculation and resulted in a situation where, by the summer of 1929, loans from bankers had reached $6 billion. The complete lack of stock market regulation by government or any other agency encouraged more and more speculation. In 1925, the market value of all stocks stood at $27 billion but by October 1929, it had reached $87 billion. The stock market was uncertain and its growth was based on borrowed money and misplaced optimism. Why then did Wall Street ignore them? Perhaps there was a blind confidence that nothing could go wrong and that what were temporary setbacks would soon be overcome. Whatever the thinking of those speculators involved, they were about to receive a great shock, the disastrous effects of which they could never have imagined.

Although 29 October 1929, known as ‘Black Thursday’, is widely accepted as the day that the Wall Street Crash began, the US stock market had, in fact, been behaving erratically throughout the mid and late summer of 1929. However, by October 1929 there was some hope that things were getting better. But this level of optimism was misplaced. On 24 October, panic set in and prices dropped alarmingly as more and more investors tried to sell their holdings. As soon as the New York Stock Exchange opened its doors at nine in the morning, stockbrokers started selling shares in large numbers. By midday, shares in even the largest companies had gone down dozens of points. By the end of the day, the Stock Exchange had lost $4 billion. On Friday, 25 October, the situation was difficult, attempts were being made to stop the slide. These attempts continued on Saturday, 26 October and cost US bankers $40 billion. Over the weekend of 26—27 October, the situation worsened. Many brokers who had sold shares ‘on the margin’ had borrowed money from banks to buy the shares in the first place. The banks were now demanding repayment of their money. To repay the banks, the brokers in their turn had to ask their customers for repayment of debts; the only way in which their customers could repay was to sell shares — at any price. Panic-stricken brokers and investors sold over 16 million shares in one day. The average price of shares fell 40 points and stock prices slumped by $14,000,000. By early to mid November, there was a growing realisation amongst many Americans of what had actually happened during that last week in October. On Wall Street, millions of dollars had been wiped off the price of shares to the extent that, between 29 October and 13 November, over $30 billion disappeared from the value

of the American economy. Many individual Americans suffered personal financial ruin. Whilst on 19 December The New York Times was proclaiming that ‘The worst is over’, there was also a recognition that the ease with which speculation had been made possible was the cause of the Crash.

How share prices dropped:

3 Sept. ($) 182 162 204 396 182 505 279 313 251

13 Nov. ($) 86 70 50 168 36 28 150 102 52

American Can Anaconda Copper Electric Bond and Share General Electric General Motors New York Central Radio United States Steel Westinghouse E & M Woolworth

It is an often-quoted statistic that, during the panic selling of shares on 24 October 1929, eleven ruined speculators committed suicide. A popular joke at the time runs like this, ‘Did you hear about the fellow who engaged a hotel room and the clerk asked him whether he wanted it for sleeping or for jumping?’ This is a nice story, but there was no significant change in the number of suicides.

Why did it happen?
The Crash had a number of causes: • • • For the reasons shown above, the US economy was not doing so well. Investors started to realize that the share prices were based on an economy that was not really doing that well – they started to sell their shares. Banks in Europe, especially in Britain, started to offer more attractive investments. The US investors sold their US shares to buy British investments. When people started to sell shares in large numbers, the price of shares fell. This started to cause concern and then panic. As the prices fell, people sold shares and prices fell even more. Panic selling set in and share prices went into freefall. The Wall Street Crash was underway.

Firstly, as was laid out above, the economy was already showing signs of weakness before the crash. These long-term causes led to the depression undermined the economy and the after-effects of the Crash led to the Depression.


What were the causes of the Depression?
The Wall Street Crash did not, by itself, cause the Great Depression. It was the ‘trigger’ for general economic collapse because it had a disastrous knock-on effect on the US banking and financial system. Consequently, the Crash had a tremendous impact on a large number of Americans.

The banks:
Before the Crash the banks made two main weaknesses: • • of a national organisation but often only existed locally or statewide. Many of these banks tended to be small, lacking the funds to meet unusual demands. Too Much Lending: In the 1920s, they used the money deposited by their customers and lent it out liberally to enable speculators to make quick profits for themselves on the stock market. The easy terms banks offered for loans encouraged the high level of borrowing that resulted in the wild speculation that led to the Crash of 1929.

Too Small: It is important to understand that American banks were not part

When the Crash happened the banks could not cope: • • In the immediate aftermath of the Crash, those who had savings deposited in the banks, rushed en masse to withdraw their savings, fearful that they, too, might be lost. Faced with this run on the bank and unable to recover loans from bankrupt speculators, many banks were forced to close their doors and declare themselves bankrupt. Consequently, many savers also lost their money.

Bank failures:
Number of banks closed Total deposits lost

1929 659 $200 m

1930 1,352 $853 m

1931 2,294 $1,700 m

When the banks collapsed businesses and private investors lost money on a massive scale. This damaged the economy and made any recovery very unlikely - there was no one left to buy product or invest.

Unemployment and Falling Consumption:
The unemployed could not spend money and the people who lost savings and investments stopped spending. This his businesses and they closed.


World Economic Problems:
Us banks could no longer lend money to the rest of the world and this caused business failures across Europe and Asia. The world economy suffered a similar slump. They could not buy US products and this caused more business failures.

Businesses collapse:
• • • • • The collapse in spending power and confidence led to a fall in consumption. This created business failures and unemployment. The failure of the banking system ruined any chance of a speedy recovery from the Crash. Unable to obtain the necessary bank loans to tide them over, many businesses were forced to close. Workers who may have saved for a ‘rainy day’ now found themselves with nothing and there was no ‘dole’ of any kind to help them through these difficult times. US industries were largely producing consumer goods, but workers without jobs bought less. The subsequent fall in demand led to a shorter working week and, ultimately, unemployment, further reducing consumer spending power. Repossession of goods bought on credit also reduced the demand for further production and entrepreneurs found it increasingly difficult to raise the money needed to run their companies. Consequently, as purchasing power fell dramatically and companies were forced into closure, the US economy was rapidly squeezed to half the size it was prior to the Wall Street Crash.

• •

America had faced economic depressions before in 1873, 1893, 1904, 1907 and 1921. The Great Depression that hit the USA in 1929 was different from these in its length and in the extent of the poverty that it brought to the American people.

• • • • • • Gross National Product (i.e. the value of goods produced plus income from abroad) slumped from $104 billion to $59 billion in 1932. Farm prices fell by 60 per cent between 1929 and 1932. ‘Wheat prices plunged from $1.04 per bushel to 51 cents. 5,500 banks had closed their doors by 1933. 20,000 companies went bankrupt. Unemployment soared from 3 per cent in 1929 to 25 per cent in 1933. These figures represent a daily increase of 12,000 reaching a total of 13 million by 1933. Many others who were in work were facing cuts in wages and a reduction in working hours. National income fell by half from $80 billion in 1929 to $40 billion in 1932.


The human cost
Millions of Americans suffered during the Great Depression, none more so than the farmers. Facing a massive fall in food prices, they reduced production, halving it in the period from 1929 to 1932. Thousands of American farmers lost their livelihoods and their farms. Industries connected with farming also went bankrupt.

Unemployment and its consequences
Unemployment made individuals and families destitute. This was particularly acute in the industrial cities such as Chicago where there was a 40 per cent rate of unemployment. Here a local relief organisation gave the most desperate a meagre $2.40 per week for an adult and $1.50 for a child (a dozen eggs cost 28 cents). Immigrant communities, black and Mexican Americans were particularly badly affected. Homelessness was a massive problem. Unable to pay rents, thousands of families were forced to take shelter in makeshift ‘homes’. These ‘shanty towns’ grew up in the cities and became known, sarcastically, as ‘Hoovervilles’ after President Hoover who seemed to be doing very little to deal with the crisis. Ill health was an inevitable long-term consequence of this experience — inadequate medical care, poor diet and even malnutrition became commonplace. The drop-out

rate in high schools escalated. By 1933, approximately 300,000 children were out of school. The suicide rate had risen and families were breaking up under the pressure of trying to survive. Finally, deprived of their pensions and robbed of their savings, older adults had very little to live on or to look forward to.

African Americans
• • • Unemployment rates for African-Americans were six times higher than those for whites Low-paid jobs such as lift attendant and railway porter that had previously been reserved for African Americans were now being taken by whites. Rural African Americans were hit less hard than their urban counterparts. Rural poverty was normal.

• • Women were laid off before men. Married women had to cope with the impact of the depression on family life. Feeding and clothing children was often their responsibility.


By the beginning of 1932, Herbert Hoover, US President since March 1929, had come to realise that his efforts so far to combat the effects of the Great Depression had failed. Although a follower of Republican ideals and principles, Hoover had rejected the view of many in his party that the Crash and subsequent Depression were part of a natural economic cycle, the terrible effects of which would simply have to be borne until better times arrived.

‘Voluntarism’ and ‘Individualism’:
To ease the suffering faced by many Americans, Hoover first pinned his hopes between 1929 and 1932 on the Individualist (self-help) and Voluntarism approaches. • Business leaders were summoned to the White House and pledged themselves there to maintain wages and employment. This was essential to overcome the Depression. But they cut both wages and levels of

employment. In 1931, US Steel, General Motors and other large business corporations broke their pledges and cut wages.

many states refused to spend money they did not have on projects they did not believe in.
• In October 1930, he established the Emergency Committee for Employment to co-ordinate voluntary relief agencies. However, these projects lacked

Seeing unemployment as a local issue, Hoover called on municipal and state governments to create public works projects. There were some projects, but

funding and were not properly coordinated. The massive scale of the depression needed proper national action, not charities and local efforts. Public charities and local welfare agencies faltered. In Philadelphia, for example, as the jobless total rose to 300,000, the city actually cut relief payments to $4.23 per family per week and in June 1932 suspended them altogether.
• In 1931, he persuaded the nation’s largest bankers to establish the National Credit Corporation to lend money to smaller banks to make loans to businesses. Banks were reluctant to do this in such uncertain times. He cut taxes at home. This meant that a family man with an income of $4,000 had his tax cut by two thirds. However, this only helped those in

work. These tax cuts did not stimulate spending as people lacked confidence in the economy.
• He increased government spending to $2.2 billion in 1931. However, this is

was not enough to make an impact on such a huge problem.


By this time many Americans were becoming disillusioned with Hoover and the Republicans. As early as November 1930, the Republicans had not only lost eight Senate seats but also control of the House of Representatives. It was clear to Hoover that a new approach was needed.

Hoover also backed some interventionist policies to help alleviate the impact of the depression: • He worked with Congress to stabilise agricultural prices by buying up surplus produce at a high price. This was meant to guarantee farm incomes. However it was expensive and unpopular with taxpayers. The US government was paying 80c per bushel when the price on the world market was only 32c per bushel. It was a waste of much needed government cash and did not solve the problem of over-production. In 1930 Congress introduced higher tariffs. This was meant to help US industry, but it failed. Other countries introduced tariffs against the US and so the people of Europe and Asia bought fewer US products. In 1931 Hoover announced that he would freeze the collection of war debts from Germany. He hoped this would free up money in Germany so they could buy US products. However, by this point the German economy was in such a poor state that it had little impact.

Unemployment Relief was a controversial issue.

Many people were without any real help despite being thrown into poverty, but many senior politicians were against offering succor. $500million was assigned to help the unemployed, but this was wholly inadequate for the scale of the problem. In January 1932, Congress provided $2 billion in funding a new agency, the Reconstruction Finance Corporation (RFC), to make loans to large economic organisations such as railroads and insurance companies. However, most of the money went to a small number of large corporations and smaller business concerns were ignored. The policy was unpopular and seen as corrupt. In July 1932, he signed legislation authorising the RFC to give $2 billion to state and local governments for public works programmes.

The failure of intervention:
• The popular view is that the measures taken by Hoover were ‘too little, too late’ and came nowhere near to tackling the enormous problems which the


American economy faced. There is some truth in this view but it does not go far enough. • The reality is that, for the measures to succeed or even to be implemented, Hoover needed the support and cooperation of a number of bodies and agencies away from Washington. If the American economy was going to recover: o state governments would need to keep up their spending to support the economy at a local level – they did not. Most states reduced spending and did not cooperate with Federal projects. o farmers would need to cut their production – they did not. Indeed

guaranteed prices had the opposite outcome. not.

o employers would need to keep their workers on the payroll – they did o the banking system would need to be reformed and general economic regulation was needed – again, it was not done. o Hoover also needed to be sure that financiers would invest government money in private enterprises and that bankers would give their customers credit to revive their damaged businesses – they did not. o Hoover needed the support of Congress and his fellow Republicans –

However, they believed that the best way to solve the problems was to cut taxes and balance the budget. They were against intervention. Even if the Republicans had been advocates of federal action, it is difficult to envisage how a national system of relief could have operated in a country where there was no precedent for this kind of social spending on the part of the government. After all, there was no national education system, no national police force and, in 1929, federal spending was only 2.5 per cent of GNP.

None of these needs was met because the American people, as a nation, had lost confidence in their economy, in themselves and in the ability of Republican politicians to lead them out of the Depression.

Thus, by early 1932, the American public viewed Hoover as a president who appeared not to care about their plight and the difficulties they were experiencing. His belief in ‘self-help’ may have worked in the rural, farming communities that were once the main feature of American society, but it was no longer applicable in a country that was now increasingly urban and industrial. Although Hoover was elected unopposed as Republican candidate in the forthcoming presidential election,


even his most ardent supporters must have been gloomy about his prospects of success. In the summer of 1932, these prospects worsened as bitterness and resentment grew among the unemployed and in some instances, erupted into violence.

The bonus marchers:
By the spring of 1932, anger and resentment were mounting among the unemployed and, in some instances, threatening to turn into violence. Those evicted for non-payment of rent, and without enough food for their families, threatened to take food from stores unless they were given it at no cost. The bread lines, made up of unemployed Americans who had lost everything, became places of discontent where those preaching violence received a sympathetic hearing. In the late spring, veterans of the First World War, who were without work and whose families were hungry as a result, began a march on Washington demanding the payment of a veterans’ bonus approved by Congress in 1924 but to be paid 20 years afterwards. The sum voted by Congress was $3,500,000,000 and it is easy to understand why, in 1931, Congress received a proposal to pay the bonus immediately. Clearly, the money would provide an important lifeline for those veterans and their families who were suffering so much. Thus, the purpose of the 20,000 marchers was to lobby Congress to approve the proposal. In mid-June, Congress rejected it. In protest, several thousand ‘bonus marchers’ and their families stayed on and built settlements of tents and packing crates on Anacosta Flats in the south-western part of Washington DC, threatening to stay there until their demands were met. On 28 July, Hoover, having ordered the veterans to be confined to the Flats, now approved a plan to evict them. Army Chief of Staff, General Douglas MacArthur and his aide, Major Dwight D. Eisenhower were in command of the operation, but Major George Patton was the cavalry commander who led the attack. One thousand armed soldiers, equipped with tear gas, tanks and machine guns, drove the veterans from the camp and burned it to the ground. Two veterans were killed and as many as a thousand were injured. What is the significance of this incident? The idea of an American president ordering troops into action against fellow Americans, particularly those who had risked their lives in war, shocked millions. Hoover was seen as cruel and insensitive to the distress which so many were experiencing, whilst the desperate plight of the marchers was a terrible comment on the depths into which the American economy had sunk. On 8 November, presidential election day, American voters would have the opportunity to pronounce their verdict on Hoover’s presidency. The terrible events on Anacosta Flats in July only served to damage further his failing fortunes.


CONCLUSION Whilst Hoover was returned unopposed as Republican candidate for the presidency, party members must have realised that, in the forthcoming election, they faced defeat. Although they praised his efforts to deal with the effects of the Depression, they knew that he had become widely unpopular. The mocking use of the term ‘Hoovervilles’, for example, was a reflection of this. They must also have recognised that election defeat would not only bring to an end the period of their ascendancy but also the political career of probably the most brilliant Republican politician of the century so far. Hoover was a great humanitarian Quaker who was just overwhelmed by the Depression. He was a pragmatic politician, but his pragmatism did not stretch to the kind of radical measures necessary to halt the onward march of the Depression.


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