The Boom and the Bust

THE BOOM AND THE BUST,
1920-1939
CHAPTER 5

INTRODUCTION
• The Great War was over…disillusioned and shocked by its frightful toll, Americans wanted to
retreat to the safe shell of prewar isolationism.
• Isolationism is the policy or doctrine of isolating one’s nation from the affairs of other nations instead
seeking to devote the entire efforts of one’s own nation to its own advancement.
• America wanted to return to business, which meant electing a Republican to the White House.
• Beginning in 1921, a Republican held the presidency for the next twelve years.
• First was Warren G. Harding (1865-1923), who campaigned on the promise of a “return to
normalcy.”
• After his election in 1920, the highlights of his weak administration were the loud whispers of
presidential philandering and the infamous Teapot Dome Scandal of 1923.

WARREN G. HARDING
INTERESTING FACTS
• Scholarly polls conducted in 1948, 1962, and 1996 all ranked
Harding last among the presidents considered.
• Harding was a keen poker player, who once gambled away an entire
set of White House china (dating back to Benjamin Franklin) on a
single hand.
• On August 2, 1923, at 7:35 p.m. Harding died of congestive heart
failure in the middle of a conversation with his wife in the Palace
Hotel’s presidential suite in San Francisco, California.

INTRODUCTION
• In the midst of that scandal, Harding died and was replaced by Calvin Coolidge (1872-1933),
best remembered for his statement that “the business of America is business.”
• Under Coolidge, America seemed to prosper during the Roaring Twenties, a period in which
the booming stock market was the centerpiece of a roaring economy.
• In spite of Prohibition, Americans enjoyed the carefree spirit of the Jazz Age, the literary masterpieces
of F. Scott Fitzgerald and Ernest Hemingway, and the soon to be multimillion-dollar movie productions
of Hollywood.
• Seemingly pleased with its wealth, Americans stayed the course in 1928 by electing Calvin
Coolidge’s commerce secretary, Herbert Hoover (1874-1964), an international hero who kept
Europe from starving during the First World War.
• His reputation faded fast being that he was cursed with overseeing the greatest economic collapse in
history.

CALVIN COOLIDGE
INTERESTING FACTS
• Coolidge’s father, a notary public, administered the presidential oath
of office in the family’s parlor by the light of a kerosene lamp at
2:47 a.m.
• Coolidge was the first president to have his inauguration and
address to Congress broadcast on radio.
• Ronald Reagan regarded Coolidge as his favorite president of the
twentieth century because of his belief in limited government.

HERBERT HOOVER
INTERESTING FACTS
• Hoover was elected to the presidency despite having no
electoral experience or high military rank.
• The relationship between Hoover and FDR was the most
severely strained in presidential history – FDR struck his name
from the dam on the Colorado River (Boulder Dam).
• Until Jimmy Carter, Hoover had the longest retirement of any
president at 31 years, 7 months, and 16 days.

INTRODUCTION
• As a worldwide economic collapse ensued, Hoover was dropped in 1932 in favor of the governor
of New York, Franklin D. Roosevelt (1882-1945), who was elected overwhelmingly by a nation
that desperately wanted a new direction.
• The economic crisis was met in America by Roosevelt’s progressivism and the “New Deal.”
• Overseas, there were different responses.
• As the answer to their woes, Germany turned to Adolf Hitler and Italy to Benito Mussolini.
• By the middle of the depressed thirties, the war that was not supposed to be was on the horizon.

FRANKLIN D. ROOSEVELT
INTERESTING FACTS
• FDR is said to have contracted polio in 1921, which resulted in
permanent paralysis from the waist down; however, new
evidence indicates that polio was a misdiagnosis and that
Guillain-Barre syndrome is the most fitting disease.
• Only two photographs are known to exist of FDR which were
taken while he was in his wheelchair and only four seconds of
film exists of the “walk he achieved after his illness.”
• Prior to their marriage, Franklin and Anna Eleanor Roosevelt,
Theodore Roosevelt’s niece, were fifth cousins, once removed.

AMERICAN PROSPERITY
• America’s postwar economy experienced some confusion from 1919 to 1921 as it struggled to
redirect its industry from wartime to civilian production.
• Beginning in 1922, the United States began a period of remarkable economic growth.
• From 1922 to 1929, the Gross National Product (GNP) grew at a yearly rate of 5.5 percent,
rising from $149 billion to $227 billion.
• The Gross National Product is the total market value of all the goods and services produced by a
nation during a specified period.
• The unemployment rate never exceeded five percent – and real wages rose about fifteen
percent.
• The unemployment rate is the percentage of the working population that is not working.

A CONSUMER SOCIETY
• In the nineteenth century (1800s), economic growth rested mostly on the production of capital
goods – factory machinery and railroad tracks.
• In the twentieth century (1900s), however, growth rested more on consumer goods –
automobiles and telephones.
• Other consumer goods became available for the first time: tractors, washing machines, refrigerators,
electric irons, radios, and vacuum cleaners.
• The term “consumer durable” was thought up to describe such goods, which (unlike food, clothing,
and other perishables) were meant to last.
• In addition, scientists had discovered the importance of vitamins in the diet and began urging
Americans to consume more fresh fruits and vegetables.

A CONSUMER SOCIETY
• The American public responded to these innovations with excitement:
• Refrigerators, vacuum cleaners, and washing machines would spare women the grind of housework.
• Radios would expand the public’s cultural possibilities.
• Cars, asphalt roads, service stations, hot dog stands, “tourist cabins” (the forerunners of motels), and
traffic lights seemed to announce a completely new automobile civilization.

A CONSUMER SOCIETY
• Some Americans even discovered the benefits to owning stocks.
• The number of stockholders in AT&T, the nation’s largest corporation, rose from 140,000 to 568,000.
• U.S. Steel stockholder numbers increased from 96,000 to 146,000.
• By 1929, as many as seven million Americans owned stock, most of them people of middle-class
means.
• A stock represents an ownership stake in a corporation; if your are a stockholder then you own a equal
share in the corporation’s assets (resources/money).
• This spread of stock ownership reflected the need for working capital among the nation’s corporations
because privately held wealth could not satisfy that need.
• It became the duty of the New York Stock Exchange (NYSE), first organized in 1792, to assist
in processing the transactions between the corporation and the stockholder.

A PEOPLE’S CAPITALISM
• Capitalists boasted that they had created a “people’s capitalism” in which practically all Americans
could participate.
• Now, everyone could own a piece of corporate America and could have a share of luxuries and services.
• Poverty, capitalists claimed, was eliminated and the gap between rich and poor all but closed.
• If every American could own an automobile and house, buy quality clothes, own stock, take vacations, and go
to the movies, then economic equality would cease to matter as a political issue.
• One solution came with the introduction of consumer credit.
• Car dealers, home appliance salesman, and other merchants began to offer installment plans that enabled
consumers to purchase a product by making a down payment and promising to pay the rest in installments.
• By 1930, fifteen percent of all purchases – including sixty percent of all automobiles and seventy-five
percent of all radios – were made on the installment plan.

THE RISE OF ADVERTISING
AND MASS MARKETING
• As the demand for consumer goods increased so did the desires for more bright colors, sleek
designs, and attractive packaging.
• This called for advertising campaigns intended to make the product “the answer” to the consumer’s
demands and desires.
• To create these campaigns, corporations turned to a new type of company: professional
advertising firms.
• The new advertising entrepreneurs tended to be well-educated, sensitive to public taste, and
knowledgeable in human psychology.
• In their campaigns, these advertisers played on Americans’ obsession with self-improvement and
personal pleasure.
• By 1929, more money was being spent on advertising than on education.

SELLING BEAUTY
AND HEALTH
This advertisement suggests the negative health effects of
smoking, but advertises “Luckies” as a healthful cigarette more
suitable for the delicate bodies of beautiful women.

THE HARLEM RENAISSANCE
• It is of great importance to note that with the emergence of the Jazz Age in “white” America
came the emergence of a black literary and artistic movement known as the Harlem
Renaissance.
• Black novelists, poets, painters, sculptors, and playwrights set about creating works rooted in their own
culture instead of imitating the styles of white Europeans and Americans.
• While blacks suffered discrimination in everyday life, they could express their racial pride and
demonstrate their talents in the world of culture.
• The most notable Renaissance figures include Zora Neale Hurston (author of Their Eyes Were
Watching God), Langston Hughes (poet and playwright), Louis Armstrong (musician), and Ella
Fitzgerald (musician).

PROHIBITION
• The ratification of the 18th Amendment to the Constitution, which prohibited the manufacture,
transportation, and sale of intoxicating liquors, ushered in a period known as Prohibition.
• This amendment was the result of a widespread temperance movement that focused on fixing the
social instability and moral decline of the early twentieth century.
• It soon became obvious, however, that Prohibition was doing more to encourage lawless activities
than abstinence.
• With only 1,500 federal agents to enforce the law, the government could not possibly police the
drinking habits of 110 million Americans.
• The increase of the illegal production and sale of liquor (bootlegging), the spread of
speakeasies (illegal drinking spots), and the complementary rise in gang violence led to the
future repeal of the amendment.

PROHIBITION
• Since the law prevented legitimate businesses from manufacturing liquor, organized crime added
alcohol to its portfolio.
• Mobsters acquired much of their liquor from Canadian manufacturers, smuggled it across the
border, protected it in warehouses, and distributed it to speakeasies.
• Al Capone’s Chicago-based mob alone employed 1,000 men to protect its liquor trafficking, which was
so profitable that Capone became the wealthiest and most feared gangster in America.
• Blood flowed in the streets of Chicago and other northern cities as rival mobs fought one
another to enlarge their share of the market.
• The rash of gang violence reached its bloody climax in a garage on the North Side on February 14,
1929, when seven men associated with George “Bugs” Moran, one of Capone’s longtime enemies, were
shot to death by several men disguised as policemen – the St. Valentine’s Day Massacre.

ST. VALENTINE’S
DAY MASSACRE
George "Bugs" Moran was on his way to
the garage in Chicago at the time of the St.
Valentine's Day Massacre; he missed getting
killed by minutes. A few days later, he told
reporters “only Capone kills like that."
Reached at his Florida home for comment
on the murders, Capone offered his own
opinion: "The only man who kills like that is
Bugs Moran."

PROHIBITION
• These unexpected consequences caused many early advocates of Prohibition, especially in the
cities, to withdraw their support.
• On the other hand, the violence produced by liquor trafficking confirmed their view of alcohol as evil.
• The high-profile involvement of Italian, Irish, and Jewish gangsters in the bootleg trade
reinforced their belief that Catholics and Jews were threats to law and morality.
• Many rural white Protestants became more, not less, determined to rid the country of liquor once and
for all; some among them resolved to rid the country of Jews and Catholics as well.
• By the mid-1920s, the Ku Klux Klan’s ideological focus expanded from loathing blacks to a
hatred of Jews and Catholics.
• Their new aim became to eliminate the influence of Jews and Catholics and restore “Anglo-Saxon”
racial purity, Protestant supremacy, and traditional morality to national life.

KU KLUX KLAN
By the turn of the twentieth century, many thought that the Ku Klux Klan was extinct. With the release of the film The Birth
of a Nation, which glorified the original Klan and its activities, the second Klan emerged. Formed in Georgia in 1915,
membership in the Klan rose to more than five million. For the first time in the history of the Klan, supremacy activities were
not confined to the southern state.

1928 PRESIDENTIAL ELECTION
• In 1928, Herbert Hoover campaigned for “a chicken in every pot and a car in every garage.”
• His landslide victory over Alfred E. Smith would be based on three principals: Prohibition, Prejudice, and
Prosperity.
• Prohibition
• Hoover was considered a “dry” in the popular language of the day because he considered Prohibition “an
experiment noble in purpose” whereas Smith, a committed “wet,” was concerned about the corruption and
lawlessness brought about by the 18th Amendment.
• Prejudice
• Smith was the target of much anti-Catholic sentiment – most Protestants were willing to believe that the
Catholic Church financed the Democratic Party.
• Prosperity
• The Republican Party took full credit for the prosperity of the 1920s and promised a continuation in
economic growth.

STOCK MARKET SPECULATION
• Between 1928 and 1929, the New York Stock Exchange experienced a remarkable run-up in
prices, which is known as a bull market.
• Many investors were buying stocks on ten percent “margin” – putting up only ten percent of the
price of a stock and borrowing the rest from brokers and banks.
• Few thought that they would ever have to repay these loans with money out of their own pockets.
• Instead, investors expected to resell their shares within a few months at dramatically higher prices, pay
back their loans from the earnings, and still clear a fine profit.
• As investors grew more greedy, they began to invest in all kinds of risky enterprises and the stock
market spiraled upward, out of control.
• In October 1929, the market crashed from its dizzying heights.

• As confidence in future earnings weakened, creditors began issuing margin calls.
• A margin call is the demand that investors who had purchased stocks on margin repay their loans.
• The stock market collapsed on October 24, a day that would forever be known as “Black
Thursday.”
• The average price of the thirty leading American industrial shares dropped from $380 per share to $230
per share.
• The market took its steepest dive on October 29, a day later dubbed “Black Tuesday.”
• Stocks lost an estimated $10 to $15 billion in value in a single day.
• By mid-November, stock prices had dropped by over one-third and more than $30 billion had
been lost.

• America had experienced other depressions, or “panics,” and no one would have been surprised
if the boom of the 1920s had been followed by a one or two year economic downturn.
• No one was prepared, however, for the economic disaster of the 1930s.
• The stock market crash fails to explain why the Great Depression lasted as long as it did.
• Poor decision making by the Federal Reserve Board.
• An ill-advised tariff took effect soon after the depression hit.
• An unequal concentration of wealth in the hands of the rich deepened the economic collapse and made
recovery more difficult.

MISTAKES BY THE FEDERAL RESERVE BOARD
• In 1930 and 1931, the Federal Reserve Board reduced the amount of money in circulation and
raised interest rates, thereby making credit more difficult for the public to secure.
• This tight fiscal policy might have controlled the stock market and strengthened the economy in 1928
and 1929 but it was disastrous once the market had crashed.
• What the economy needed in 1930 and 1931 was an expanded money supply, lower interest rates,
and easier credit.
• Such a course would have enabled debtors to pay their creditors.
• By choosing the more restrictive approach, the Federal Reserve plunged an economy starved for
credit deeper into depression.

AN ILL-ADVISED TARIFF
• The Tariff Act of 1930, also known as the Hawley-Smoot Tariff Act, sped up economic
decline abroad and at home.
• Throughout the 1920s, American farmers favored higher tariffs to protect their products from foreign
competition.
• But the Hawley-Smoot not only raised tariffs on seventy-five agricultural goods from thirty-two
percent to forty percent (the highest rate in American history), it also raised tariffs by a similar
rate on 925 manufactured products.
• The legislation was a disaster.
• Angry foreign governments retaliated by raising their own tariff rates to keep American goods
out of their country.
• International trade, already weakened by the tight credit policies of the Federal Reserve, took another
blow at the very moment that it needed a boost.

A MALDISTRIBUTION OF WEALTH
• A maldistribution in the nation’s wealth that had developed in the 1920s also frustrated economic
recovery.
• Although the average income per family rose in the 1920s, the income of the wealthiest families rose
higher than the rest.
• Average Americans had bought high-cost goods, such as automobiles and appliances, on credit or
installment plans.
• Paying off these debts limited their purchasing power and slowed consumption, which led many
manufactures to limit production and lay off employees.
• Even when the wealthy spent their money lavishly – building large mansions, buying expensive
automobiles, or vacations to the French Riviera – they still spent a smaller percentage of their
total incomes on consumption than wage-earners did.

THE GREAT DEPRESSION DEEPENS
• Despite guarantees from Hoover and other national figures that the economic crisis would run its
course, hardships continued to only get worse over the next three years.
• By 1930, four million Americans looking for work could not find it and that number rose to 6 million in 1931.
• Bread lines, soup kitchens, and the homeless became more and more common in America’s towns and cities.
• Farmers could not afford to harvest their crops and were forced to leave them rotting in the fields while
people elsewhere starved.
• In the fall of 1930, the first of four waves of banking panics began, as large numbers of investors lost
confidence in the security of their banks and demanded all deposits in cash.
• In order for banks to supply this demand for cash, they had to call on all debts and loans to be repaid
immediately.
• Bank runs swept across America in 1931 and 1932, and by early 1933, over 9,000 banks had closed their
doors.

SHANTY-TOWNS
As the Depression worsened, shanty-towns
appeared across the United States as the
unemployed were evicted from their homes.
These makeshift houses, located on the
outskirts of major cities, became known as
Hoovervilles. Hooverville shanties were
constructed of cardboard, tar paper, glass,
lumber, tin, and whatever other material
could be salvaged.

HOOVER’S PROGRAM
• To cope with the crisis, Hoover first turned to a concept or policy called associationalism.
• He encouraged farmers, industrialists, and bankers to share information, boost each other’s spirits, and
create policies to aid economic recovery.
• Hoover urged farmers to restrict output, industrialists to hold wages at pre-depression rates, and
bankers to help each other to remain solvent.
• In turn, the federal government would them with information, strategies for mutual aid, occasional
loans, and morale-boosting speeches.
• Hoover turned to more aggressive policies once he realized that associationalism was failing.
• He steered through Congress the Glass-Steagall Act of 1932, which was meant to help American
banks meet the demands of European depositors who wished to convert their American dollars to
gold.

HOOVER’S PROGRAM
• To ease the crisis at home, he began to expand the government’s economic role.
• The Reconstruction Finance Corporation (RFC), created in 1932, made $2 billion available in
loans to ailing banks and to companies willing to build low-cost housing, bridges, and other
public works.
• Hoover insisted that the RFC issue loans only to relatively healthy institutions that were capable of
repaying them and that it favor public works.
• The RFC was the largest federal peacetime intervention in the economy up to that point in American
history.
• Hoover was reluctant to involve the federal government in providing relief to the unemployed
and homeless Americans – that was the task of the state and local governments.
• He firmly believed that providing aid would destroy every American’s desire to work and sense of self-
worth.

THE BONUS ARMY
• In the spring 1932, a group of army veterans mounted an emotional challenge to Hoover’s
economic policies.
• In 1924, Congress had authorized a $1,000 bonus for First World War veterans in the form of
benefit certificates that would mature in 1945.
• Now the veterans were demanding that the government pay the bonus immediately.
• A group of Portland, Oregon veterans, calling themselves the Bonus Expeditionary Force,
hopped onto empty box-cars of freight trains heading east, determined to stage a march on
Washington D.C.
• As the impoverished “army” moved eastward, its ranks multiplied, so that by the time it reached
Washington its numbers had swelled to 20,000, including wives and children.
• The so-called Bonus Army set up camp in the Anacostia Flats, southeast of the Capital, and
petitioned Congress for the early payment of their promised bonus.

THE BONUS ARMY
• The House of Representatives agreed on early payment, but the Senate turned them down.
• Additionally, Hoover refused to meet with the veterans.
• In July, federal troops led by Army Chief of Staff Douglas MacArthur and 3rd Cavalry
Commander George Patton attacked the veteran’s Anacostia encampment, set the tents and
shacks ablaze, and dispersed the protestors.
• In the process, more than 100 veterans were wounded and one infant was killed.
• News that the veterans and their families had been attacked in the nation’s capital served only to
harden anti-Hoover opinion.
• Hoover would leave the presidency a bewildered man, reviled by American for his seeming indifference
to suffering and his ineptitude in dealing with the economy’s collapse.

THE DUST BOWL
• Just as the depression rolled in, the rain stopped falling on the plains.
• The land, stripped of its native grasses by decades of excessive plowing, dried up and turned to
dust.
• And then the dust began to blow and “black blizzards” swarmed the open prairies, sometimes traveling
over 1,000.
• Dust became a constant feature of the daily life on the plains, covering furniture, floors, and appliances,
and penetrating people’s lungs.
• The worst dust storm occurred on April 14, 1935, when a great mass of dust, moving at speeds
of forty-five to seventy miles per hour, roared through Colorado, Kansas, and Oklahoma.
• The storm blackened the skies, suffocated livestock, and dumped thousands of tons of topsoil and red
clay on homes and streets.

DUST BOWL
This map shows the areas in five states –
Texas, New Mexico, Oklahoma, Colorado,
and Kansas – claimed by the Dust Bowl
between 1935 and 1940. The darken area
shows the area where the winds caused the
worst damage.

THE DUST BOWL
• Nearly one million had left their homes by 1935, and another 2.5 million would leave after 1935.
• Most headed west, piling their belongings onto their jalopies, snaking along Route 66 until they
reached California.
• They became known as Okies, because many, although not all, had come from Oklahoma.
• Their dispossession and forced migration disturbed many Americans, for whom the plight of
these once-sturdy yeomen became a symbol of how much had gone wrong with the American
dream.

SEARCHING FOR
A BETTER LIFE
Scenes like this one were common in the
1930s as farm families in Oklahoma and
Texas who had lost their land began heading
to California. Here a family’s entire
belongings are packed onto a truck, and the
mother tends to her baby on an isolated
road.

ESCAPING THE DEPRESSION
• Despite the overwhelmingly difficult times, Americans could escape, if only for an hour or two,
through entertainment.
• Many Americans had the means to scrape together enough money to go to the movies or listen to one of the
may radio program broadcasts.
• Sixty to ninety million weekly viewed strolled into theaters and into a fantasy world of thrills, romance,
and comic relief.
• The original “fantasy factory” produced feature length films such as Snow White and the Seven Dwarfs (1937),
The Wizard of Oz (1939), Mr. Smith Goes to Washington (1939), Gone with the Wind (1939), and short films by the
Marx Brothers and The Three Stooges.
• While Hollywood captured the imagination, the radio offered a more personal form of entertainment.
• Families gathered around the radio to hear about The Adventures of the Green Hornet, The Lone Ranger, Amon ‘n’
Andy, and numerous soap operas like The Guiding Light.

JAMES BRADDOCK
INTERESTING FACTS
• During the Great Depression, Braddock gave up professional
boxing and worked at the docks and accepted government relief
money to feed his family.
• In 1950, the Associated Press conducted a poll and ranked
Braddock’s heavyweight victory over Max Baer in 1935 as the
fourth greatest sports upset of the first half of the twentieth
century.
• Damon Runyon nicknamed Braddock “the Cinderella Man” for his
rags-to-riches comeback story.

• The worsening economy virtually guaranteed that the Democratic Party would win back the
White House; however, the only question was who would win the nomination of the splintering
party.
• Al Smith, the “Happy Warrior” of 1924 and 1928
• John Nance “Cactus Jack” Garner, Speaker of the House
• Albert Ritchie, Governor of Maryland
• FDR, “Roosevelt Minor,” Governor of New York
• Roosevelt was able to secure the nomination with two dramatic moves:
• First, he broke tradition by appearing at the Democratic Convention in Chicago before he was officially
nominated.
• Second, he traveled from Albany, New York to Chicago, Illinois by air.

1932 DEMOCRATIC
CONVENTION
“Let it be symbolic that I broke traditions.
Let it be from now on the task of our party
to break foolish traditions…. I pledge you, I
pledge myself to a new deal for the
American people.”

• In the 1932 elections, the discredited Republican Party was voted out of office after having
dominated national politics for thirty-six years.
• The exception were the two terms or eight years of Woodrow Wilson.
• The trauma of the Great Depression could be measured by the changing fortunes of Herbert
Hoover.
• In the 1928 presidential election, he won 444 electoral votes and carried all but eight states.
• In the 1932 presidential election, he won only 32 electoral votes and carried only seven states.
• The overwhelming victory went to Franklin D. Roosevelt and the Democratic Party.

The Boom and the Bust

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