Chapter 14:Politics and Prosperity

1920-1929

Russian RevolutionBolsheviks led by Vladimir I. Lenin- “Reds”

vs. landowners, gov’t officials, Russian army leaders, and others- “Whites”

Bolsheviks win and create Union of Soviet Socialist Republics (USSR)-

CommunismGovernment owned all land and propertySingle political party controlled the gov’tNeeds of the country always took priority over

rights of ind.

The Red ScareFor communism to survive, Lenin believed that it

would have to be spread throughout the worldAmerican’s distrust of Europeans grew after WWI

and Am. worried about foreigners from EuropeRed Scare- an intense fear of communism and

other politically radical ideasAmericans called for known Communists to be jailed

or driven out of the countryWave of labor strikes helped fuel Red Scare in 1919-

many Am. Believed communist “agitators” were the cause

Red Scare consequencesAm. Felt that Republicans were more likely to

restore stability than DemocratsDecade of Rep. pres: Warren G. Harding,

Calvin Coolidge, Herbert Hoover

Harding Presidency“return to normalcy”Domestic Policy

Nativism- resulted in immigration restrictions Quota imposed on immigrants representing certain ethnic groups or nations

Foreign Policy Isolationism Disarmament Expansion of trade

Fordney-McCumber Tariff- raised import taxes to historically high levels Dawes Plan- set a payment schedule, reorganized the German

national bank, and approved a loan to GermanyTeapot Dome Scandal- Harding’s Secretary of the Interior secretly

gave oil-drilling rights on gov’t oil fields in Elk Hills, CA and Teapot Dome, WY to two private oil companies in return for more than $300,000 in illegal payments and gifts disguised as loans

Coolidge Presidency“The chief business of the American people is business”Laissez-faire business policies- fueled economic

boomInsistent on a minimal role for government

Refused to regulate the buying of stocks on easy credit urged by Sec. of Commerce, Herbert Hoover

Refused to help Mississippi flood victims- gov’t has no duty to protect citizens “against the hazards of the elements”

Kellogg-Briand Pact- 15 nations pledged not to use the treat of war in their dealings with one anotherUnrealistic and unworkable because it had no

provisions for enforcement

Hoover presidencyProhibition = “noble experiment”Rising productivityRising personal debtStock market boomUneven prosperity

Business Booms: a Consumer EconomyConsumer Economy = one that depends on a large

amount of spending by consumers (indiv. who use, or consume, products)

Factors that helped spark more buying in this decadeHigher wagesClever advertising- mass media; spoke less about the

product and more about how the product coud enhance the consumer’s image; association of celebrities w/products

New products- cars; furniture; vacuum cleaners; radios; refrigerators; washing machines

Lower costsWidespread availability of credit- installment plan

Boom TimesGeneral rise in productivityGrowth of the automobile industry and related

businesses (i.e. garages, car dealerships, campgrounds, etc.)

Henry Ford wanted to produce more cars that ordinary people could affordAdapted assembly line for his factoriesEconomy of scale = the more automobiles he

made, the less each one costGrowth of other industries: movie making,

radio broadcasting, publishing, aviation

Bypassed by the BoomFarm economy

As huge wartime demand shrank, farm prices plummeted

Farmers expanded during wartime by borrowing money- could not pay debts in post-war era

Cotton textilesBituminous (soft) coalrailroads

“Everybody ought to be rich”Economy appeared healthy in 1925

Low unemployment (4%)High consumer confidence

stock prices continued to soar Am. made risky investments

Welfare capitalism- Employers raised wages and provided benefits such as paid vacations, health plans, recreation programs, and English classes to combat labor unions

Economic Danger signsUneven prosperity- only the rich got richer while must Am.

struggled to make ends meetPersonal Debt- Am. Became accustomed to credit spending

and counted on future income to cover their debtsPlaying the Stock Market- widespread speculation (the

practice of making high-risk investments in hopes of getting a huge return)Buying on margin- allowed investors to purchase a stock for

only a fraction of its price and borrow the restBrokers charged high interest rates and could demand

payment of the loan at any timeToo many goods, too little demandHardships of farmers and workers