Published: October 22, 2006 02:27 pm            

Dr. Richard Elam: Game’s up: The ’20s come crashing down

The 1920s was a time of pleasure for many. The mood in the United States was upbeat in spite of the losses from the Great War. The Jazz Age witnessed a new energetic, urbanized America reflected in music, literature, art and a host of other manifestations. Business boomed, or at least seemed to, as new products came online and new technologies and “scientific-management” techniques resulted in a tremendous burst of consumerism. Americans were ready to get the Great War and the Progressive Reform Movement behind them, make money, enjoy life and ignore events in the rest of the world. A conservative reaction witnessed the election of three Republican presidents, Warren G. Harding, Calvin Coolidge and Herbert Hoover, all of whom seemed to have a laissez faire attitude toward business and government. Fundamentalist religion may have bemoaned the lack of spirituality and small-town America might have feared for its youngsters, but overall America was a vibrant and optimistic island of prosperity. Or so it was assumed.

The crash of the stock markets in the fall of 1929 came as a shock to many Americans, believing as they did that the United States had reached a “permanent plateau of prosperity.” If anyone had looked closely, however, the warning signs had been there for a number of years. Agriculture, although doing better than pre-war years, never seemed to completely recover from the heady days of the war itself. Construction, a good indicator of economic health, began to level off by mid-decade. By 1928, settlement houses, inner city social institutions, were noticing an increase in abnormal unemployment, but when they tried to warn Washington, the government was either not interested or disbelieving. Although a lot of wealth was created during the decade, its distribution was irregular. Not enough went to middle- and lower-class consumers who could turn around and purchase the many new products being developed so overproduction was beginning to creep up. Finally, a tremendous amount of debt was piling high because of installment credit and other financial innovations. One commentator suggested that a “mountain of credit existed on a molehill of real money.”

Furthermore, while the United States was a playground for many in the 1920s, Europe was struggling to recover from the war. America, now a creditor nation for the first time, insisted our allies repay the loans we gave them to conduct the war. In turn, Britain and France squeezed Germany with a massive indemnity and reparations bill that was all but impossible to pay. With the United States loaning money to Germany, Germany trying to pay off its obligations and the allies repaying their own loans, all seemed like a useless circle of payments. The struggling economies of Europe were seedbeds of dissent and disturbances as both the left (Communists) and right (Fascists) fought to represent the true interests of the masses with pitched battles in the streets of many countries.

Our own response to the war had been to downsize our Navy and Army, remain out of any international peace-keeping organization (the League of Nations), sign an agreement outlawing war (the Kellogg-Briand Pact) and, by the 1930s, create a commission to investigate the origins of the Great War. The commission’s conclusion was that it had been a conspiracy of arms manufacturers. All of these things were indications of our intent to step back from world leadership. We might keep an eye on world events, but primarily as a way to expand our business interests if nothing else.

When Warren G. Harding was inaugurated as president in 1921, he proposed that America return to a period of “normalcy.” After dying suddenly in 1923, his successor, Calvin Coolidge, suggested that the “business of America is business.” Harding, a corrupt and decadent politician from Ohio, was followed by the pristine Coolidge, a throw back to small-town or rural America. Yet both were weary of the positive government policy of the Progressive Era as was Herbert Hoover. Hoover, a California businessman, had impressed Washington with his success in the war effort through government regulation and in mounting a campaign to get food to Belgium. As president, however, he reverted to form and opposed such massive government interventions. He was elected in 1928 against the first Roman Catholic to be nominated by a major political party in the United States, Alfred E. Smith, governor of New York. Although the Ku Klux Klan and other groups propagandized against Smith and his Catholic connections, the New Yorker managed to bring a massive new voting block into the Democratic Party, naturalized immigrants and their descendants.

By 1928 and on into 1929, the seeming prosperity of the country was being touted as the cause of a huge surge in stock prices, the Great Bear Market. Small-time investors put in their savings so as not to miss out on the largesse and big-time investors drove the prices higher and higher. Hoover believed that regular cycles of recession were at an end and issued platitudes to strengthen the already strong market. But storm clouds were approaching. A few large investors cashed in, unemployment continued to increase, the underlying weaknesses mentioned earlier and events in Europe. The party was almost over.

Lesson of history: Periods of prosperity lead people to develop a sense of immunity to normal historical and economic forces. Overindulgence, debt accumulation, the scramble for consumer goods and the unwillingness to consider the consequences led to the Great Crash of 1929. Similar attitudes led to the collapse of the dot-com companies in the late 1990s, but is also fueling a tremendous debt problem in the United States today. Can we continue to indulge ourselves without someday paying the piper as happened in 1929? That is the critical question we need to ask ourselves.



Dr. Richard Elam has been a

history and government instructor for Hill College Johnson County Campus for the past two decades. He can be reached at RichardElam@hotmail.com. His column appears bimonthly.

        

• Click to discuss this story with other readers on our forums.