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The Great Depression (1920–1940)

History SparkNotes

Summary of Events

Overview

Key People & Terms

Harding and Coolidge

In 1920, President Warren G. Harding’s election heralded a new age of political and economic conservatism. The Republican Congress, for example, passed the Esch-Cummins Transportation Act in 1920 to deregulate the railroads and return them to private control. Also under Harding, Congress passed the 1922 Fordney-McCumber Tariff, which raised the average protective tariff rate to a new high of nearly 40 percent. Furthermore, the conservative Supreme Court reversed their previous Adkins v. Children’s Hospital ruling, stripping women workers of all special labor protection. This reversal came just after the ratification of the Nineteenth Amendment in 1920, which granted women the right to vote.

As a result of the resurgence of political and economic conservatism, big business reigned supreme once again, and labor movements dwindled. Instances of government corruption, such as the Teapot Dome scandal, were relatively frequent during Harding’s presidency, and in some cases the money trail led all the way to the president himself. When Harding died unexpectedly in 1923, the even more conservative Calvin Coolidge became president and continued to push his predecessor’s conservative policy. Coolidge was then elected to another term in the three-way election of 1924.

Isolationism

Harding’s and Coolidge’s stances on foreign policy were a reflection of Americans’ isolationist attitudes, and both presidents worked hard to reduce the United States’ influence abroad. Harding, for example, negotiated the Five-Power Naval Treaty in 1922 to reduce the number of American, British, and Japanese battleships in the Pacific. The same year, France, Britain, Japan, and the United States signed the Four-Power Treaty to guarantee the territorial status quo in the Pacific region and joined other European and Asian powers in signing the Nine-Power Treaty to uphold the Open Door policy in China. Furthermore, Coolidge’s secretary of state rather naively signed the 1928 Kellogg-Briand Pact (along with sixty other nations) to outlaw aggressive warfare. Coolidge’s vice president also drew up the Dawes Plan, which arranged a new timetable for impoverished Germany to pay off its World War I reparations to Britain and France.

The Roaring Twenties

The Roaring Twenties ushered in an exciting time of social change and economic prosperity, as the recession at the end of World War I was quickly replaced by an unprecedented period of financial growth. The stock market soared to unimaginable heights, buoyed by the so-called second Industrial Revolution of the turn of the twentieth century, which saw the development of new inventions and machines that changed American society drastically. For example, industry leader Henry Ford developed the assembly line, which enabled mass production of the automobile—the invention that changed the nation more than any other during the era. The car helped give rise to suburban America, as thousands of middle-class Americans left the congested cities for nicer communities in the city outskirts. The airplane, radio, and motion picture ranked with the automobile as popular new inventions of the time. At the same time, a new age of American literature blossomed in the 1920s.

The Red Scare and Immigration Restrictions

This social revolution of the 1920s was not without its darker side. Sudden changes in the social fabric spawned a reactionary backlash in the name of preserving American heritage, tradition, and culture. The Red Scare of 19191920, in which hundreds of socialists were persecuted, was just the first instance. The more sweeping Emergency Quota Act and Immigration Act of 1924 effectively slammed the door shut on all “undesirable” and “unassimilable” immigrants.

Anticommunist and anti-immigration sentiments notoriously culminated in the infamous Sacco-Vanzetti Trial of 1921. In the trial, two Italian-born Americans, both atheists and anarchists, were convicted of murder and executed even though there was no hard evidence that they had committed the crime.

Prohibition and Fundamentalism

Around the same time, conservative “drys” scored a major victory when in 1919 the Eighteenth Amendment was ratified and the Volstead Act was passed. These new laws began fourteen years of Prohibition, in which the consumption, sale, and manufacture of alcohol were made illegal under U.S. law. Not until 1933, when the Twenty-First Amendment repealed Prohibition, was alcohol once again legal.

Also during this period, Christian fundamentalists rallied together against Charles Darwin’s theory of natural selection, which they saw as heresy. These fundamentalists lost a great deal of credibility, however, after being humiliated on national radio during the Scopes Monkey Trial of 1925. Furthermore, the revamped Ku Klux Klan reemerged as a powerful new conservative, Protestant force while still continuing to intimidate and preach hatred against blacks, Jews, Catholics, and immigrants.

Hoover and the Crash of 1929

Elected president in 1928, Herbert Hoover, a popular administrative hero of World War I, promised more prosperity and more boons for big business. Hoover tried to remain true to his word even after the stock market crashed on Black Tuesday in October 1929. He promised that the recession resulting from the Crash of 1929 would be brief and that prosperity was just around the corner. Rather than offer a helping hand, however, Hoover and congressional Republicans passed the even higher Smoot-Hawley Tariff in 1930, driving the average tariff rate up to almost 60 percent.

The Depression Begins

The American economy quickly slipped into recession and then plummeted headlong into the greatest depression the nation had ever experienced. The Great Depression in the United States had a widespread ripple effect throughout the world, soon leading to economic stagnation and widespread unemployment in virtually every industrialized nation. Millions of Americans lost their jobs and their homes, and shantytowns dubbed “Hoovervilles” (after the president whom many blamed for the depression) began to spring up throughout the country.

Despite the worsening economic plight, Hoover still refused to provide any direct federal assistance to relieve the suffering. He even authorized the army to use force to remove 20,000 members of the “Bonus Army, a group of World War I veterans and their families who marched on the U.S. Capitol demanding economic relief. By 1932, Americans, fed up with Hoover’s lack of economic assistance, voted him and his Republican counterparts out of office. The optimistic Democrat Franklin Delano Roosevelt of New York—a distant cousin of previous president Theodore Roosevelt—took office.

Roosevelt’s New Deal: Relief, Recovery, and Reform

Roosevelt rallied the panicked Democratic majority in Congress and pushed for the passage of a bundle of sweeping laws known collectively as the New Deal. Taking a calculated risk, Roosevelt structured the New Deal policies around the untested theories of British economist John Maynard Keynes, who believed that planned deficit spending by the federal government could “prime the economic pump” and jump-start the economy again.

The First Hundred Days

During Roosevelt’s First Hundred Days in office, he and Congress passed the bulk of the legislation of the First New Deal. The first thing Roosevelt did was to declare a national bank holiday so that banks could reopen the following week on more stable footing. The Emergency Banking Relief Act also gave the president control over exchange rates and all banking transactions. Additionally, the Glass-Steagall Banking Reform Act created the Federal Deposit Insurance Corporation (FDIC) to insure individual deposits with government money. The FDIC helped restore the public’s confidence in banks, as many people had lost their savings when banks failed after the stock market crash of 1929. The FDIC made sure that Americans would not lose their savings if a bank ever collapsed again.

The “Alphabet Agencies”

The New Deal created the Agricultural Adjustment Administration (AAA) to provide federal subsidies to farmers and created countless new jobs through the formation of the Civil Conservation Corps (CCC), the Civil Works Administration (CWA), the Public Works Administration (PWA), and the Tennessee Valley Authority (TVA). The Federal Emergency Relief Administration (FERA) was also established to provide relief on the state level, while the National Industrial Recovery Act (NIRA) was passed to bail out the nation’s failing factories.

The Second New Deal

Criticism from both conservatives and liberals prompted Roosevelt to push a second wave of New Deal legislation through Congress from 1935 to 1936, in a collective package known as the Second New Deal. This legislation included the sweeping Social Security Act to provide government pensions to the elderly, the Indian Reorganization Act to allow Native American tribes to own land, and the Soil Conservation and Domestic Allotment Act to help farmers.

Congress also created a variety of new agencies to provide immediate relief and a long-term plan for recovery. These agencies included the Second Agricultural Adjustment Administration, the United States Housing Authority, and the Works Progress Administration (WPA). Labor organizations such as the newly formed Congress of Industrial Workers received a boost from the Wagner Act and the Fair Labor Standards Act.

The Court-Packing Scheme

Still, as the Great Depression entered its sixth year, Roosevelt faced an increasing amount of opposition to his New Deal. Aging, conservative Supreme Court justices, for example, struck down the National Industrial Recovery Act in Schechter v. United States in 1935 and the first Agricultural Adjustment Administration in Butler v. United States in 1936.

In 1937, Roosevelt asked Congress to allow him to add as many as six new Supreme Court justices (bringing the total number to fifteen) and to give him the power to force justices over the age of seventy to retire. This move was meant to effectively “stack the deck” in the Supreme Court to prevent the Court from striking down any more New Deal legislation. The American people, Republicans, and even some conservative members of the president’s own party saw right through this “court-packing scheme” and were rightly outraged by it.

The End of the New Deal

The “Roosevelt Recession” of 1937 contributed to the president’s plummeting popularity. Roosevelt bowed to pressure from conservatives and scaled back deficit spending in 1937, believing that the worst of the depression was over and recovery was well under way. In reality, though, the depression was far from over, and the economy was not ready to stand on its own. Without any federal support, the economy crashed again and put millions of people on the streets once more.

When this new recession hit, Roosevelt pointed fingers at everyone but himself, even though it was likely that he had caused the recession with his own policies. Americans ended up voting many New Dealers from Congress out of office in the midterm elections of 1938. Freshman Republicans then passed the Hatch Act of 1939 to reform national elections and weaken the Democratic Party’s power over poorer Americans, who had relied heavily on New Deal handouts. With few supporters left in Congress, the New Deal was essentially dead. It would not be until the United States entered World War II in December 1941 that industry would recover and the economy would truly turn around.

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