Roaring Twenties: What events led to the Great Depression?
What policies led to the Great Depression?
America entered a new era with the election of consecutive conservative Presidents Warren G. Harding in 1921 and Calvin Coolidge in 1923. Their presidencies were largely influenced by their big business agendas, which acted as get-rich-quick schemes for the country. This prosperity was short lived, however, as these policies eventually led to the Stock Market Crash of 1929, entering the U.S. into a national depression and leaving millions in debt.
One of the biggest scandals in American history is the Teapot Dome Scandal that took place under Harding from 1921 to 1924. This incident is a perfect example of Harding’s frivolity with money and favor of big business that tarnished the economy. The U.S. designated three naval oil reserves: Naval Reserve One in Elk Hills, California, Naval Reserve Two in Buena Vista California, and Naval Reserve Three in Salt Creek, Wyoming (aka Teapot Dome). “The naval oil reserves were three oil-rich tracts of land set aside by the Taft Administration to provide naval ships with fuel in case of a national emergency.” The Secretary of the Navy had authority over the lands, but as soon as Albert B. Fall was appointed Secretary of the Interior, he sought to have jurisdiction. He convinced President Harding, and with the signing of Executive Order 3474, authority was shifted to Secretary of the Interior. Fall soon began making private agreements to lease the land, first in California to Edward Doheny and then in Wyoming to Harry Sinclair. Doheny gave a “loan” to Fall: “Doheny had his son draw $100,000 in cash from the son's account, wrap the bills up in paper, put them in a little black bag and bring the bag to Fall in Fall's apartment.” Doheny had to build storage tanks, fill them with oil, erect a refinery in California and build a pipeline from the naval reserves to the refinery and in return, he received exclusive rights to oil lands estimated at $100 million. Two other companies expressed interest but were rejected by Fall when they insisted that Congress approve the contract. Meanwhile, Fall was negotiating Teapot Dome with Harry Sinclair; it was leased to Sinclair in full in exchange for several loans, gifts and favors over many months. Sinclair was to then build a pipeline for the Teapot Dome oil fields, use the proceeds from the Navy’s share (the Navy received no money) to build storage tanks on the Atlantic coast and fill it with oil. Teapot Dome was so valuable that Fall could have received "$100 million… with a bonus of as much as $50 million over and above the royalties Sinclair was obligated to pay, if the lease had been awarded after competitive bidding instead of in the privacy of Fall's ranch house." Despite Fall’s best efforts to keep the lease a secret, news spread as people became suspicious of his sudden influx of wealth. An investigation was called, and Fall’s was found guilty of accepting bribes and the land was returned to the Navy. This is one of the many ways the rich stole to get richer under the Harding Presidency.
In 1922, Harding passed the Fordney-McCumber Tariff which put a 38.5% tax on imported goods. This urged Americans to only buy domestic goods. “It also authorized the president to raise or lower a given tariff rate by 50% in order to even out foreign and domestic production costs.” His protectionist policy benefitted factories and farms immensely, but it would “prevent these countries from trading further with the United States, thereby making it more difficult for them to repay their war debts.” The tariff eventually led to a trade war; countries later put tariffs on American goods, limiting exports when America’s economy was at its worst. While the tariffs benefited them when the economy was booming, they hurt them when it began to tank and foreign countries had no money to repay or loan. This greed and favor of big business led America into a hole that conservative politicians could not dig themselves out of.
Under Calvin Coolidge’s presidency, the Dawes Plan was enacted to take Weimar Germany out of hyperinflation and help stabilize their economy. Unable to pay the installments from the Treaty of Versailles used to pay the damages done by World War I, Germany was left in debt and in dire need of financial assistance. The Dawes Committee, comprised of the U.S., the U.K., Italy, Belgium, and France, sent in two experts of finance from each nation to find a way to boost Germany’s economy. “Under the Dawes Plan, Germany’s annual reparation payments would be reduced, increasing over time as its economy improved; the full amount to be paid, however, was left undetermined.” Over the next couple years, America continued to lend Germany money to make reparation payments to other countries. In turn, the countries receiving payments from Germany used the money to repay the U.S. from war debts. Though this plan made America flourish, it made Germany reliant on the loans. Once the loans ran out, Germany’s economy sank again, and not only were they unable to repay the U.S., but they could not help them during the Depression.
Though Coolidge did not enact as many big business favoring policies as Harding, he still carried his presidency with the same laissez-faire ideas. “Coolidge's policies exacerbated the uneven distribution of income and buying power, which led to the overproduction of goods for which there were not enough affluent consumers.” He was known for his tax cuts, often called his “domestic agenda,” that rose the wages of the rich and ultimately caused inflation. This quick growth scheme only played to the wealthy, and the 60% of Americans living under the poverty line were left empty handed. As their wages stayed the same, prices for goods rose, leaving an overabundance of high-cost goods with not enough people to buy them. This unequal distribution of wealth “led to the richest 1% of American’s owning approximately 40% of the country’s wealth.” Income inequality rose to record levels under his presidency, causing the Depression to hit most Americans harder than it should have.
Through the free policy, big government ideals used throughout the presidencies of William G. Harding and Calvin Coolidge in the 1920s, the U.S. economy became out of control. By being frivolous with the money, favoring the rich and ignoring the poor, and trying to get wealthy fast, these presidents caused the American economy to inflate and eventually shatter with the Stock Market Crash of 1929.
Bibliography
Bennett, Leslie. "One Lesson From History: Appointment of Special Counsel and the
Investigation of the Teapot Dome Scandal." The Brookings Institution. 1999.
http://academic.brooklyn.cuny.edu/history/johnson/teapotdome.htm.
Carroll, Sarah. "Causes of the Great Depression." Causes of the Great Depression.
http://econc10.bu.edu/Ec341_money/Papers/Carroll_paper.htm.
Le, Jasmine. "Acts of Neutrality After World War I." United States Foreign Policy.
http://www.mtholyoke.edu/~le20j/NeutralityAfterWar.html.
University of Virginia. "Miller Center." American President: Biography of Calvin Coolidge.
http://millercenter.org/president/coolidge/essays/biography/print.
U.S. Department of State. "Protectionism in the Interwar Period." Milestones: 1921-1936.
https://history.state.gov/milestones/1921-1936/protectionism.
U.S. Department of State. "The Dawes Plan, the Young Plan, German Reparations, and
Inter-allied War Debts." Milestones: 1921–1936.
https://history.state.gov/milestones/1921-1936/dawes.
What policies led to the Great Depression?
America entered a new era with the election of consecutive conservative Presidents Warren G. Harding in 1921 and Calvin Coolidge in 1923. Their presidencies were largely influenced by their big business agendas, which acted as get-rich-quick schemes for the country. This prosperity was short lived, however, as these policies eventually led to the Stock Market Crash of 1929, entering the U.S. into a national depression and leaving millions in debt.
One of the biggest scandals in American history is the Teapot Dome Scandal that took place under Harding from 1921 to 1924. This incident is a perfect example of Harding’s frivolity with money and favor of big business that tarnished the economy. The U.S. designated three naval oil reserves: Naval Reserve One in Elk Hills, California, Naval Reserve Two in Buena Vista California, and Naval Reserve Three in Salt Creek, Wyoming (aka Teapot Dome). “The naval oil reserves were three oil-rich tracts of land set aside by the Taft Administration to provide naval ships with fuel in case of a national emergency.” The Secretary of the Navy had authority over the lands, but as soon as Albert B. Fall was appointed Secretary of the Interior, he sought to have jurisdiction. He convinced President Harding, and with the signing of Executive Order 3474, authority was shifted to Secretary of the Interior. Fall soon began making private agreements to lease the land, first in California to Edward Doheny and then in Wyoming to Harry Sinclair. Doheny gave a “loan” to Fall: “Doheny had his son draw $100,000 in cash from the son's account, wrap the bills up in paper, put them in a little black bag and bring the bag to Fall in Fall's apartment.” Doheny had to build storage tanks, fill them with oil, erect a refinery in California and build a pipeline from the naval reserves to the refinery and in return, he received exclusive rights to oil lands estimated at $100 million. Two other companies expressed interest but were rejected by Fall when they insisted that Congress approve the contract. Meanwhile, Fall was negotiating Teapot Dome with Harry Sinclair; it was leased to Sinclair in full in exchange for several loans, gifts and favors over many months. Sinclair was to then build a pipeline for the Teapot Dome oil fields, use the proceeds from the Navy’s share (the Navy received no money) to build storage tanks on the Atlantic coast and fill it with oil. Teapot Dome was so valuable that Fall could have received "$100 million… with a bonus of as much as $50 million over and above the royalties Sinclair was obligated to pay, if the lease had been awarded after competitive bidding instead of in the privacy of Fall's ranch house." Despite Fall’s best efforts to keep the lease a secret, news spread as people became suspicious of his sudden influx of wealth. An investigation was called, and Fall’s was found guilty of accepting bribes and the land was returned to the Navy. This is one of the many ways the rich stole to get richer under the Harding Presidency.
In 1922, Harding passed the Fordney-McCumber Tariff which put a 38.5% tax on imported goods. This urged Americans to only buy domestic goods. “It also authorized the president to raise or lower a given tariff rate by 50% in order to even out foreign and domestic production costs.” His protectionist policy benefitted factories and farms immensely, but it would “prevent these countries from trading further with the United States, thereby making it more difficult for them to repay their war debts.” The tariff eventually led to a trade war; countries later put tariffs on American goods, limiting exports when America’s economy was at its worst. While the tariffs benefited them when the economy was booming, they hurt them when it began to tank and foreign countries had no money to repay or loan. This greed and favor of big business led America into a hole that conservative politicians could not dig themselves out of.
Under Calvin Coolidge’s presidency, the Dawes Plan was enacted to take Weimar Germany out of hyperinflation and help stabilize their economy. Unable to pay the installments from the Treaty of Versailles used to pay the damages done by World War I, Germany was left in debt and in dire need of financial assistance. The Dawes Committee, comprised of the U.S., the U.K., Italy, Belgium, and France, sent in two experts of finance from each nation to find a way to boost Germany’s economy. “Under the Dawes Plan, Germany’s annual reparation payments would be reduced, increasing over time as its economy improved; the full amount to be paid, however, was left undetermined.” Over the next couple years, America continued to lend Germany money to make reparation payments to other countries. In turn, the countries receiving payments from Germany used the money to repay the U.S. from war debts. Though this plan made America flourish, it made Germany reliant on the loans. Once the loans ran out, Germany’s economy sank again, and not only were they unable to repay the U.S., but they could not help them during the Depression.
Though Coolidge did not enact as many big business favoring policies as Harding, he still carried his presidency with the same laissez-faire ideas. “Coolidge's policies exacerbated the uneven distribution of income and buying power, which led to the overproduction of goods for which there were not enough affluent consumers.” He was known for his tax cuts, often called his “domestic agenda,” that rose the wages of the rich and ultimately caused inflation. This quick growth scheme only played to the wealthy, and the 60% of Americans living under the poverty line were left empty handed. As their wages stayed the same, prices for goods rose, leaving an overabundance of high-cost goods with not enough people to buy them. This unequal distribution of wealth “led to the richest 1% of American’s owning approximately 40% of the country’s wealth.” Income inequality rose to record levels under his presidency, causing the Depression to hit most Americans harder than it should have.
Through the free policy, big government ideals used throughout the presidencies of William G. Harding and Calvin Coolidge in the 1920s, the U.S. economy became out of control. By being frivolous with the money, favoring the rich and ignoring the poor, and trying to get wealthy fast, these presidents caused the American economy to inflate and eventually shatter with the Stock Market Crash of 1929.
Bibliography
Bennett, Leslie. "One Lesson From History: Appointment of Special Counsel and the
Investigation of the Teapot Dome Scandal." The Brookings Institution. 1999.
http://academic.brooklyn.cuny.edu/history/johnson/teapotdome.htm.
Carroll, Sarah. "Causes of the Great Depression." Causes of the Great Depression.
http://econc10.bu.edu/Ec341_money/Papers/Carroll_paper.htm.
Le, Jasmine. "Acts of Neutrality After World War I." United States Foreign Policy.
http://www.mtholyoke.edu/~le20j/NeutralityAfterWar.html.
University of Virginia. "Miller Center." American President: Biography of Calvin Coolidge.
http://millercenter.org/president/coolidge/essays/biography/print.
U.S. Department of State. "Protectionism in the Interwar Period." Milestones: 1921-1936.
https://history.state.gov/milestones/1921-1936/protectionism.
U.S. Department of State. "The Dawes Plan, the Young Plan, German Reparations, and
Inter-allied War Debts." Milestones: 1921–1936.
https://history.state.gov/milestones/1921-1936/dawes.