From Normalcy to Great Depression
The Presidential Policies of Harding, Coolidge, and Hoover
Oct 17, 2008
During the 1920s, most Americans wanted to forget the uncertainties of World War I and return to “Normalcy.” However, the political movement that arose in opposition to President Woodrow Wilson and his Fourteen Points generated the policies of the Red Scare and isolationism. Even though America exhaled for the first time in five years, the Republican policies of the 1920s were merely a precursor to the suffocation of the Great Depression.
Most historians agree that the United States emerged from WWI with newfound worldwide respect as Woodrow Wilson sat poised to lead a new era of international cooperation. However, his vision of the League of Nations ended with his death. This led to the Republican Party politically dominating the remainder of the decade.
Even though the economy experienced a brief depression in the early 1920s, it eventually recovered under Republican Warren Harding who cut taxes and federal spending. Unfortunately, Harding died suddenly in 1923 and Calvin Coolidge took control of the country. Sadly for Coolidge, the problems of the Harding administration, such as Teapot Dome scandal, became public knowledge and the job of restoring faith in government rested on his unimposing shoulders.
When the economy turned sluggish again by mid-decade, the Reserve banks relaxed credit requirements and created over $500 million in new money, and made loans of more than $4 billion available to the American public. It was hoped that such an economic stimulus would jump-start the economy. However, it had the opposite effect as consumers fell further into debt while the prices of real estate and stocks skyrocketed. Coolidge also supported the Revenue Act (1926), which reduced taxes on higher incomes but provided little relief for middle-income families.
Calvin Coolidge declined to run for office in 1928, and Herbert Hoover stepped to the forefront of the Republican Party as the conservative ideological heir apparent. Hoover won the Presidency in 1928 at a time when the country’s economic and social structures seemed on stable ground. But in less than a year, the whole world succumbed to a new economic crisis. In a series of missteps that would later haunt the Republicans, for example the fiasco with the U.S. veterans from World War I, Hoover was unable to get a handle on the worsening economic and social conditions of most Americans. It appeared that Hoover was too detached from the people to fully understand or appreciate their depths of despair.
In October 1929, stockholders panicked and sold their stocks at a rate too fast for the system to compensate for such rapidly changing prices. The result was a loss of 43 points in the stock market index. The following day the same thing happened as stockholders continued dumping their shares. Stocks were no longer being traded at face value, but for anything the market would bring.
As a result, the stock market crashed and destroyed the American economy practically overnight. This event became the symbolic beginning of the worst economic crisis in the nation’s history. Millions of Americans found themselves unemployed as companies, factories and banks closed. This led to increased corporate mergers, consolidations, and bankruptcies. Banks that also supported stock speculation suffered tremendously as more than 5,000 banks collapsed. By 1932, twelve million Americans were out of work.
References
Mayer, George. 1964. The Republican Party: 1854-1964. New York: Oxford University Press.
Rutland, Robert. 1996. The Republicans: From Lincoln to Bush. Columbia: University of Missouri Press.
