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The
Boom
Economic
Year 12
1
2007 Version
THE BOOM
EVIDENCE OF PROSPERITY
A mass of statistical information supports the view that the USA entered a
period of unrivalled prosperity in the 1920s:
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• The prosperity of the working classes can also be measured in terms of
increased leisure time. For example, an estimated 80 to 100 million
Americans went to the movies every week by the end of the decade.
They also listened to their own radios, read magazines and shopped in
mail order catalogues from their increasingly comfortable homes.
• Leisure industries boomed. Sports became popular. The car made
visits to sports stadia possible. Baseball, college football and boxing all
became popular and so became big business. The radio stations
carried sports coverage. Movies became equally popular. 20,000
movie theatres were built in the 1920s. In 1923, 40 million tickets
were sold per week. By 1930, it was 100 million. Radio grew
throughout the period. New acts, radio stations and personalities
appeared every year.
• The 1920s was the growth of the suburbs as families moved into new
housing developments on the edge of cities and towns.
• Shares could be bought ‘on the margin’. The buyer paid a small
percentage of the cost of the shares in cash, usually 10%. The
remainder was covered by loans provided by ‘brokers’ who had
borrowed money from the banks to do so. Between 1926 and 1929,
brokers’ loans jumped from $3.5 billions to $8.5 billions.
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CAUSES OF PROSPERITY
The USA leant money to the Europeans so they could fight the war.
They made huge profits on these loans. The banks that made the
loans were able to lend money to US companies at a cheap rate.
The European powers were so damaged by the war that the USA was
left with few trade rivals.
The First World War gave American businesses the opportunity to
maximise their profits by supplying the Allies with food and weapons
and supplying markets previously supplied by Britain and Germany.
2) Government Policies
This leads to
greater profits for
the rich
The governments of the period also ensured that the people who were
supposed to regulate business were sympathetic to business interests.
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The Federal Commissions that were supposed to control mergers, trade
and transport were all staffed by men who disliked government regulation.
The basic government policy was laissez-faire. Strictly speaking, this means
that the economy was left to run itself. However, the picture was not quite as
simple as that, and the government did intervene to support business with
benevolent policies in three main ways.
i) High Tariffs
1919:
Price of European fertiliser $5 per tonne
Price of US fertiliser $8 per tonne
A sensible farmer would clearly buy European fertiliser.
Tariffs are introduced in 1921 and 1922. All European products have a tax
placed on them.
1922:
Price of European fertiliser $5 per tonne plus $4 tariff
Price of US fertiliser $8 per tonne
A sensible farmer would clearly now buy US fertiliser.
This is also good for the US economy because the tariffs raise money for the
government so they do not have to raise taxes on the US people.
The Acts gave the President the power to raise and lower tariffs. The usual
pattern was to raise them. Only a few products ever had their tariffs lowered
– including quails and paintbrush handles!
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The US government also ran a fleet of merchant ships at a loss so that US
products could be shipped abroad cheaply.
The government reduced federal taxes significantly in 1924, 1926 and 1928.
These reductions mainly benefited the wealthy. In 1920 the highest tax stood
at 65 per cent; in 1928 this was down to 25 per cent. During his eight years
of office, Mellon handed out tax reductions equalling $3.5 billion to large-scale
industrialists and corporations. Tax cuts gave money back to people and this
meant they could spend more money on the products of US industry. These
tax cuts helped fuel the boom.
However, of course, federal tax cuts meant little to people who were too poor
to pay taxes in the first place.
There were fewer regulations and fewer people to enforce them. This trend
meant that businesses were often left unhindered to carry on their affairs as
they saw fit. Laws concerning sharp business practice, such as price fixing,
were often ignored. Where the government did prosecute, the offenders
usually won on appeal.
Coolidge was careful to make sure that laws regulation businesses were not
enforced. When businesses were prosecuted for breaking a regulation the
fines were small and the impact on business minimal. On one occasion a
government lawyer was keen to prosecute a company for price fixing –
Coolidge promoted him to the Supreme Court so that he could not cause
problems!
3) Technical Advances
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The electric motor revolutionised production. Steam power became less and
less popular. In 1914 70% of factories were run on steam, by 1929 70%
were run on electricity.
In 1930, 26.5 million cars were on American roads. The motorcar was the
product of the 1920s. It had a great impact on American society and the
economy.
Henry Ford:
Of all those associated with the American boom years, Henry Ford is perhaps
the best known. In 1903, he founded the Ford Motor Company in Detroit,
which, by 1908, was producing a hundred cars a day at its Highland Park
factory. This output was achieved by simple mass production methods.
These were already established in some industries, for example, in the
manufacture of firearms, sewing machines and railway engines. They were
later extended to the production of clocks, typewriters and bicycles.
Invariably, this form of mass production was achieved by the trolley system in
which interchangeable parts were moved around the factory to the place
where the product was actually being made. Such methods demanded less
skill of the workers involved and tended to produce a semi-skilled workforce
who were not eligible for membership of craft trade unions. Techniques of
mass production were also sufficiently adaptable to be transferred to the
production of radios, refrigerators and vacuum cleaners. This was the basis
for the consumer boom of the 1920s.
Previously, cars had been only for the wealthy, but Ford wanted anyone
earning a reasonable income to be able to afford one. When he introduced his
moving line assembly in 1914, the cost of the Model T came down from $950
to $500.
By 1920 Ford could produce 1,250,000 cars per year, or one every 60
seconds. By 1925, when the price had fallen to $290, his factory could
produce one every 10 seconds. By this time, Ford was facing increasing
competition from General Motors and Chrysler. These ‘Big Three’ firms
dominated the American motor industry and it was very difficult for
independent companies to survive unless they produced specialist vehicles for
the wealthy.
Whilst Ford, his shareholders and associates were delighted with the progress
made and the profits that followed, his workers were less happy. As early as
1914, the unpleasant monotony of assembly-line work and repeated increases
in production quotas led to a monthly labour turnover at Ford’s factory of
between 40 and 60 per cent.
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In 1914, Ford introduced a number of changes to counteract the discontent of
his workers and the rapid labour turnover.
Whilst Ford paid his workers relatively well, they were tightly disciplined and
their work was closely supervised. Within his factories, Ford’s Protection
Department employed strong-armed security men who watched over union
organisers, intimidating and assaulting them. It was not until 1941 that any
labour union was recognised by the Ford Company to represent employees in
bargaining for wages. Clearly, Henry Ford took a paternalistic approach — he
was a ‘father figure’ who knew what was best for his workers. Consequently,
in his view, there was no need for unions in any of his plants.
When, in 1927, Ford noticeably began to lose his share of the market, he
closed down his factory, laying off 60,000 workers. During this layoff, the fac-
tory was retooled for the new Model A vehicle. Car design had to stay ahead
of the market and customers had to want to buy the new model rather than
keep the old one if the market was to remain buoyant.
The growth of the motor industry had major social and economic effects:
• Families could go out on drives and visit new places in their leisure
time.
• Courting couples had new freedom to stray away from their parents’
gaze.
• Family outings started to take the place of church attendance.
• Road deaths would stand at 20,000 per year by the later 1920s
• New production line industrial organisation stimulated the trade
unionism.
• In economic terms, by 1929, the industry employed 7 per cent of all
workers and paid them 9 per cent of all wages.
• By far the largest industry in the USA, it also stimulated many others.
80% of all rubber, 70% of plate glass, 60% of upholstery, 20% of
hardwood and 18% of copper in the USA went into car manufacture.
• The government spent huge sums of money on road building, which in
turn created jobs and demand for other products. 10,000 miles of
road were built each year under the 1921 Highways Act which replaced
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old roads that were only suited to horses. These new roads were soon
worn out by the vast numbers of new motor vehicles.
• Motor vehicles also created the growth of new service industries such
as garages, motels, petrol stations, and used car sale-rooms. They
gradually changed the landscape alongside the highways of the USA.
• Improved transportation also afforded new opportunities for industry.
For example, goods could be much more easily moved from factories
to their markets. The number of truck registrations increased from less
than 1 million in 1919 to 3.5 million by 1929, when 15 billion gallons of
petrol were used and 4.5 million new cars were sold.
• Cities such as Detroit boomed and grew rapidly as they became the
centre of the new industry.
However, one should beware exaggerating this trend. Much of rural America
was still without electricity in the 1920s. Even where electrical power was
available, many items we take for granted today were not widely in use. In
1925, for example, Clarence Birdseye patented his freezing process but in
1928 there were only 20,000 refrigerators in the whole country.
This was a period that saw the growth of huge corporations, of scientific
methods of management, and of advertising, which through the exploitation
of the new mass media, gained an influence previously unimagined.
Along with this trend came the growth of the department store – another
large corporate organisation. Woolworths is perhaps the most famous.
Large corporations could invest in and exploit the plentiful raw materials of
the USA on a vast scale. By 1929 the largest 200 corporations possessed 20
per cent of the nation’s wealth and 40 per cent of the business wealth.
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Mergers in manufacturing and mining concerns trebled to over 1,200 during
the decade. Large corporations could dominate an industry in various ways.
They could operate a cartel to fix prices. Although this was technically illegal,
the government tended to turn a blind eye. They could, as in the case of the
petroleum companies, control the entire industrial process from the
exploitation of the raw materials, manufacture of the product, distribution to
wholesale and retail outlets, to the sale of products to the consumer.
Some concerns, for example US Steel, were so huge that they could dictate
output and price levels throughout the industry. They could create holding
companies. One huge company would obtain a controlling interest in smaller
companies to control the market. For example, Samuel Insull built up a vast
empire based on electrical supply. Eventually he controlled 111 different
companies with as many as 24 layers between him and the company actually
distributing the electricity. The chain became so complex that even he lost an
overall understanding of it. Many businessmen turned up on the boards of
directors of numerous companies, with the effect that firms ostensibly
competing with each other were in effect one and the same, with the power
to fix output and prices.
Management Science
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memorably in Charlie Chaplin’s 1936 film, Modern Times. However, it should
be remembered that these developments applied almost exclusively to large
business concerns. Outside the big cities most manufacturers still worked in
small workshops.
The new mass media, principally cinema and radio, caused a revolution in
advertising.
By 1928 there were 17,000 cinemas in the USA. Few areas were out of the
reach of the ‘movies’. A 10 cent ticket could buy admission and the darkened
auditorium enabled people to forget their troubles for a few hours and to
enter into a world of beauty and glamour where seemingly no one had to
work or pay the mortgage.
The radio business effectively began when the KDKA station in Pittsburgh
announced the results of the 1920 presidential election. As other stations
started to broadcast, a demand for radio sets was created. These began to be
mass produced in 1920 after the end of a dispute over patents between the
main producers. By 1929 there were 618 radio stations throughout the USA,
some of them broadcasting from coast to coast. The vast majority of them
were controlled by two companies, the National Broadcasting Company and
Columbia Broadcasting System.
The potential audience was vast. In 1922 WEAF in New York began the
most important trend when it broadcast the first sponsored programme,
advertising the delights of Jackson Heights, a housing development. As more
advertisers began to sponsor programmes, radio networks began to poll
listeners to see what sort of programmes they wanted. With more and more
programmes catering to mass appeal which was based firmly in the areas of
light music and humour, there was considerable criticism from those who felt
radio should be uplifting and enlightening. However, they were firmly in the
minority. By the end of the decade, radio costs were generally covered by
advertising and many programmes were firmly linked in people’s minds with
the name of the sponsor.
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reaching developments in advertising and salesmanship. Indeed with most
types of different goods virtually the same in quality, these often became the
variables in the market. A successful advertising campaign might well be the
only difference between huge profit and huge loss. Possibly the most
important aspect of a campaign was to find some way to differentiate
between one’s product and that of one’s competitors — to promote a unique
selling point.
Surplus Capital:
The USA made money from the Great War and continued to do so into the
1920s. The US banks had leant money to Europe to fund the war and these
loans led to high profits being made by the banks. The banks were therefore
able to lend money for industrial development and consumer spending.
Easy Credit:
The massive consumer boom was financed largely by easy credit facilities. By
1929 almost $7 billion worth of goods were sold on credit; this included 75
per cent of cars and half of major household appliances.
The point is, of course, that while credit facilities enabled consumers to buy
goods they otherwise could not have afforded, there were potential problems
if they over-committed themselves or if their financial circumstances altered.
Companies, as well as individuals, used easy credit facilities to finance many
of their operations. It seemed that almost everyone was in debt but there
was little concern over this. It was assumed that everyone’s credit must be
good. Banks and loan companies seemed to be falling over backwards to lend
money, often with few questions asked.
It seemed in the 1920s that with almost full employment, low inflation, high
tariffs keeping foreign goods out of the USA, benevolent government policies
and a consumer boom, the prosperity would go on forever. The period was a
time of great optimism. It wore a happy face. However, one did not have to
delve very far beneath the surface to discover real problems within the
system.
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Shares:
The banks were also able to lend money to the American people to buy
shares in the expanding industries. The Stock Exchange was making money
so people wanted to buy shares and cash in. They borrowed money to buy
shares and then used the profits to buy consumer goods.
Geographical Inequality:
The first wave of 19th Century industrialization took place in the North East
and Midwest, especially in the states of Illinois, Michigan and Pennsylvania.
The new industries such as the motor vehicle and electrical industries were
also drawn to these regions.
The North East and Far West enjoyed the highest per capita incomes; in 1929
these were $921 and $881 respectively. In comparison, the figure for the
South East was $365. To paint an even gloomier picture, in South Carolina,
while the per capita income for the non-agricultural sectors of the economy
averaged $412, that of farmers was only $129.
Other regions of the USA, notably the West and the South, had only sparse
industrial development. Things had not, in other words, altered in much of
the USA since the previous century, and for much of the country the major
occupation was still agriculture.
Industrial Inequality:
Old industries were generally experiencing hard times. Coal, for example,
suffered from competition from newly discovered energy sources, notably oil.
The introduction of synthetic fibres had adverse effects on the demand for
cotton. Moreover, this was at a time when changes, particularly in young
women’s fashions, dramatically reduced the quantity of material required.
Income Inequality:
One major effect of this disparity in industrial development was that income
was distributed very unevenly throughout the country.16 million families
received less that $2,000 a year (amount needed to supply basic needs). 70
million people were living below the poverty line. They were immigrants,
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African Americans, the elderly, disabled and sick who could not work and
farmers
Gender Inequality:
Women did not on the whole enjoy improved career opportunities during this
period. By 1930, for example, there were only 150 women dentists and less
than 100 female accountants in the whole of the USA. Women tended to
remain in comparatively low-paid and often menial jobs; 700,000 women
were domestic servants. There were few female industrialists or managing
directors. The number of women receiving a college education actually fell by
5 per cent during the decade. Even when women worked in the same job as
men, they normally received less money. Despite the image of ‘the flapper’,
women were generally expected to concentrate on marriage and homemak-
ing. The ‘emancipation of women’ in terms of employment opportunities
during this period is largely a myth.
Racial Inequality:
Farmers:
• The years preceding the 1920s had been relatively good ones for
farmers. During the war years prices had risen 25 per cent, and more
and more land had been taken into cultivation.
• However, after the war falling demand led to falling prices. For
example, wheat fell from $2.5 to $1 per bushel.
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o There were several reasons for this. Prohibition cut the demand
for grain previously used in the manufacture of alcohol, and
higher living standards meant Americans ate more meat and
fewer cereals.
o The growth of synthetic fibres lessened the market for natural
ones, such as cotton. At the same time, technical advances
meant that more could be produced on the same or even a
reduced acreage.
o During the l920s, 13 million acres were taken out of production
and the farm population fell by 5 per cent — yet farm output
grew by 9 per cent.
o Greater use of tractors meant fewer horses were necessary and
this in turn meant less demand for animal food.
o Ironically, because many farmers became more efficient through
mechanisation and new techniques such as the use of improved
fertilisers and better animal husbandry, they simply produced
too much. As a result, possibly as many as 66 per cent of farms
operated at a loss. Wage labourers, tenant farmers, and share
croppers — in the South, these were mainly African-Americans
— fared particularly badly.
• Many farmers blamed the government for their plight. During the war,
it had urged them to produce more but now it did little to compensate
them for their losses. Many farmers were particularly angered by the
fact that tariffs protected industry but not agriculture.
• However, although the farm lobby was very powerful, it was inevitable
that if the USA was to continue to develop as an industrial nation,
manpower and resources would have to be shifted from agriculture.
• It was mainly the small-scale farmers who went bankrupt. These often
asked the state for help, as they thought of big business and the banks
as being in league against them.
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• Two measures of the early 1920s did in theory protect farmers from
foreign competition: the 1921 Emergency Tariff Act and the 1922
Fordney—McCumber Act placed high tariffs on food imports. However,
because foreigners retaliated by placing similar tariffs on American
foodstuffs, farmers could not export their surpluses.
• The biggest problem for farmers was overproduction. Too much food
meant prices were too low. Farmers would not voluntarily under-
produce because they could not trust their neighbours to do the same.
Trade Unions:
• Trade Union membership had doubled during the Great War and stood
at just over 5 million by 1920. During the 1920s it fell to 3.6 million.
• The Red Scare and Palmer Raids made union membership less
attractive.
• Big Business used the legal system and political connections to make
sure that court cases and judgments went their way. They used their
wealth and power to keep Unions under control. Court injunctions,
strike breakers and protection by state and federal officials all limited
union power.
• Workers were made to sign contracts that stopped them from striking.
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SUMMARY – WHAT CAUSED THE BOOM?
Government Policies:
Laissez faire
Tariffs
Tax reductions
Fewer regulations
Technical Advances:
Motor industry
Consumer goods
Electricity
Chemicals
Huge Corporations
Management science
Advertising
Foreign Loans
Easy Credit
Shares
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2007 Version
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US SOCIETY IN THE 1920S
THE RURAL-URBAN DIVIDE
Many people in the countryside and in small towns associated new ideas, particularly in
the cities, with vice and immorality:
• There was widespread distrust of cinema, jazz music and its associated dances,
particularly the Charleston and the Black Bottom.
• Women who wore short skirts, smoked in public and frequented speakeasies
were regarded as shameless.
• High profile scandals such as that which destroyed the career of ‘Fatty’ Arbuckle,
a very popular comedy star, made many fear the influence of Hollywood.
• There was concern with the growth of crime and fear that it might spread into
rural and small-town areas.
People in these small towns wanted to keep the USA White, Anglo-Saxon Protestant
(WASP). They feared immigrants would shift the racial balance, introduce foreign ideas
such as Communism, and overthrow the existing order. Even Roman Catholicism was
distrusted, being seen somehow as a threat to American religious practices. They
feared alcohol had led to sinfulness and sexual licence in cities, which they saw as
hotbeds of vice. They feared African-Americans and the influence of their culture on the
young. Above all, they feared change. They believed in a largely imagined past time of
hard work, high moral standards of behaviour and unquestioning belief in the literal
truth of the Bible.
In 1859, Charles Darwin had published his theory of evolution. It started off a scientific
revolution in which old ideas were challenged. In particular, the idea that humans
evolved from apes took hold in the scientific communities. This had led to much debate
in religious circles generally, but by the 1920s in America, Protestant groups were
divided on their views.
In 1919, these people set up the World’s Christian Fundamentals Association and
consequently became known as the Fundamentalists. They wanted to make it illegal to
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teach or discuss Darwin’s theories. In 1921—2, fundamentalist politicians led by
William Jennings Bryan, succeeded in passing laws banning the teaching of
evolution in schools. Six southern states implemented the laws (The Butler Act),
including the state government of Tennessee. The supporters of the CFA were not all
country dwelling yokels. Indeed many of their members were learned theologians and
educated men and women.
They believed the Protestant faith was the true basis of America’s success and
society – if you undermine it, you undermine America.
Many people were convinced by the charismatic Bryan – he was a popular figure.
Progressive religious ideas were seen as being European and foreign. In
particular they became associated with Germany. The War had made American
fear “foreigners” and their ideas. Equally, it had created a climate of fear in
terms of spy scares.
There had been a series of high profile murder cases – including one where two
New York rich kids had killed a 14 year old boy just to prove they could – and
they felt that any decline in the Bible would lead to even more actions of this
kind.
Many Protestant leaders were concerned that America was being seduced by
science. Radio waves, electricity, calories, vitamins, radioactivity, blood groups
were all marvels of the age. How could religion cope with such real miracles as
these? They wanted to scotch the idea that science was the new religion.
The progressive era of the pre-war years had upset many protestants – they
wanted to put an end to these ideas.
There was already concern about social progressivism – women getting the vote,
women smoking in public, courting couples in cars etc.
The ban was seen as an infringement of individual liberty and the American Civil
Liberties Union (ACLU) offered to defend anyone who wished to test the law. They
argued that academic freedom was vital if scientific and moral knowledge was to be
enhanced and they also felt it was against the First Amendment to the Constitution.
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The media certainly got what it came for. In cross-examination, Darrow challenged
Bryan’s views on biblical accuracy. His literal belief in the description of Creation, the
story of Noah and the Flood and other biblical ‘miracles’ was completely ridiculed by the
press who also exposed his ignorance of scientific interpretation, so much so, that the
presiding judge stopped this humiliating cross-examination. Scopes was found guilty
and fined $100, but the real point had been made.
ANTI-IMMIGRANT FEELING
The USA prided itself on being a land born of immigrants. However, the truth
was that the USA basically welcomed white immigrants, preferably from north-
western Europe.
Immigration was running at about 1 million people per year for the first 15 years
of the century. This was stopped by the war, but it increased again in the post
war period.
Ellis Island, the point of entry for Immigrants became jammed with the 800,000
immigrants who entered the USA in 1920. There were millions more waiting in
Southern Europe to gain entry to the USA.
By the early part of the 1920s, there was a growing Anti-Immigrant feeling in the USA.
The Great War: Foreigners were blamed for dragging the USA into War -
America feared foreigners. Americans started to see the rest of the world as a
potential burden. Deaths in the war had made many Americans feel it was best
to adopt an Isolationist stance – this included not welcoming foreign immigrants.
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Failure of the Melting Pot: In 1782, a Frenchman living in New York called Jean
de Crèvecoeur, put forward the idea of the American ‘melting pot’. According to
him, men and women could arrive in America from any part of the world and, as
a result of the experience of settlement, would receive a new nationality. They
would be miraculously transformed into Americans. By the 1920s, it was
abundantly clear that the ‘melting pot’ was not working. As thousands of
immigrants poured into the USA during the nineteenth and early twentieth
centuries, they not only brought with them the language, religion and culture of
their origins, but they also clung to them. In the large cities, they congregated
together in clearly identifiable districts — Italian, Polish, Greek, etc. There was,
therefore, less possibility of these immigrants integrating into US society.
The Politics of Immigrants: There was, strong opposition to the war, emanating
from some immigrant minorities, particularly Italian-Americans. Immigrant
organisations had been involved before the War in organising strikes and
demands for higher wages and were quickly dubbed ‘socialists’ and ‘anarchists’.
One particularly influential anarchist Italian publication was Cronaca Sovversiva,
edited by Luigi Galleani. The authorities were especially apprehensive of this
because it accepted violence and revolution as means to securing its ends and
had taken up an aggressively anti-war position.
Economic Issues: After the war, the closing of the munitions factories, the fall in
demand for food and the effects of large numbers of soldiers returning to the
workforce adversely affected large proportions of the rural and urban working
population. White Americans believed that they were either being deprived of
work or forced to accept lower wages because of the abundant availability of
cheap immigrant and black labour. Hatred and intolerance of immigrants of
Eastern European or Asian origin were accelerated by economic considerations
such as these.
Russian Revolution: The post-war years also saw the birth of international
communism. The Bolshevik Revolution of 1917 and its subsequently stated
intention to spread communism abroad caused fear and alarm in all the
democratic states of the western world but nowhere more so than in America.
Unrest and criticism, common in all those countries whose economies had been
dislocated by the war, were quickly dubbed communist and subversive.
Fear of Foreign Cultures: The large-scale waves of immigration from southern
and eastern Europe in the latter part of the nineteenth and early twentieth
centuries led to racist concerns about the survival of the ‘Anglo-Saxon’ race.
Figures in 1920 showed that 58.5 per cent of the population had native white
parents but there was nevertheless considerable racist concern that the Anglo-
Saxons were being swamped by ‘inferior’ races which bred much more quickly.
Racism: Racist tracts such as ‘The Passing of the Great Race’ by Madison Grant
became best sellers. These tracts were written by serious academics (including
a professor from Harvard) who used pseudo-science to prove their point. They
said that immigrants were “parasites” who set out to “steal” women from the
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“true Americans”. The immigrants from southern Europe were described as
“good-for-nothing mongrels”. This would clearly inflame anti-immigrant feelings.
Pseudo-Science: There were dubious tests that seemed to suggest ‘Anglo-
Saxons’ were superior to other races; these seemed to give credence to the
ideas promoted by Grant. During the First World War, for example, the Army
began to administer intelligence tests to new recruits to identify potential
officers. However, most of the questions demanded good knowledge of American
history and geography, which recent immigrants from southern and eastern
Europe tended not to have. The result was that they came out seeming less
intelligent than the northern Europeans who tended to have lived in the USA
longer and were, therefore, more knowledgeable about its history and
geography. Nevertheless, all this was fuel to the racist fire.
ANTI-IMMIGRATION LAWS
In 1924 this was stiffened by the Johnson—Reed Immigration Act (National Origins
Act). This Act:
Banned any immigration from Japan — other Asian groups having been barred
earlier.
Set an absolute ceiling of immigration at 150,000 per annum, apportioned
according to the native origins of the existing white population. This clearly
favoured those from north-western Europe. 85% of permitted immigration was
to be from Northern Europe.
Interestingly, this law did not apply to Mexicans, whom Californian farmers
traditionally used as a supply of cheap labour at harvest time.
Thus, immigration from Europe fell from 2,477,853 in the 1920s to 348,289 by the
1930s. The total number was reduced from 4,107,200 in the 1920s to 528,400 by the
1930s. This quota system continued to systematically reduce the numbers of people
who were allowed into the USA until the 1960s.
In the period following the First World War and in the wake of the Russian Revolution
there was a ‘Red Scare’ that saw 6,000 arrests. These were known as the ‘Palmer
Raids’, named after the then Attorney General, Mitchell Palmer. Palmer had become
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very popular through his exposure of ‘communist activity’ in the USA. In August 1919,
Palmer had created the General Intelligence Division to investigate revolutionary
activities. Under its head, J Edgar Hoover, this was the forerunner of the Federal
Bureau of Investigation (FBI) and Mitchell had relied heavily on its information for his
targets.
Elected Members of the New York Legislature were arrested and prevented from taking
their seats. Other states started to seek out socialists and communists in their
administrations. These were no more than witch hunts. Magazines, newspapers and
other organisations were raided and documents seized. Some were closed down.
In 1920, a known anarchist, Andrea Salsedo, was arrested in New York City. He was
denied his rights to receive a fair trial and to be represented by legal counsel,
supposedly guaranteed by the 5th Amendment. He was imprisoned for eight weeks
without contact with his family or a lawyer before his crushed body was found, on the
ground, 14 floors below where he was being held by the FBI. The official explanation
was that he had committed suicide.
However, most of the detainees had to be released within a few days due to a complete
lack of evidence against them. The sweep netted no more than three pistols, while
most of those arrested were long-standing US citizens of impeccable respectability.
Palmer announced there was to be a huge Communist demonstration in New York on
20 May 1920. When this failed to materialise he increasingly looked ridiculous and the
Red Scare died away. With it went his hopes of nomination for the presidency.
The ‘red scare’ resulted in a virtual witch hunt in US political circles. It created an
atmosphere of fear and suspicion that not only pervaded most of the decade but was
also responsible for actions that were uncharacteristic of a nation pledged to liberty and
freedom.
After the First World War, high inflation caused much industrial unrest. Workers
were taking industrial action in order to get higher wages to keep pave with
inflation. It was estimated that during 1919 4,000,000 workers (or 1 in 5 of the
labour force) went on strike.
Many people believed strikers were led by Communists who sought revolution in
the USA in the same way that it had been achieved in the USSR. Fears grew as a
general strike brought the city of Seattle to a halt and even policemen struck in
Boston. 340,000 steel workers went on strike. Their leader, William Z Foster was
believed to be a Communist.
24
Recent immigrants from Eastern and Southern Europe came, in particular, to be
identified with Communism and attempts to overthrow the American system of
government.
Men like Palmer wanted to make a name for themselves. Palmer hoped he could
use this as a springboard for Democratic nomination for the presidency in 1920.
There was a fear of all things “foreign” – socialism and communism included.
Few events of the twenties in America have caused the same interest and heated
debate as the trial of these two Italian-Americans. Amongst other things, it is seen as
illustrating, more than any other event of the time, the deep divisions and prejudices in
American society. It also has other implications.
On 15 April 1920 two men were robbed and murdered near the Slater and Morrill Shoe
Factory in South Braintree, Massachusetts. They were carrying a $15,776 payroll. This
kind of robbery was quite common in the years of hardship following the end of the
war. This particular one, however, gained national attention because the two men,
Sacco abd Vanzetti, who were eventually charged with the murders were known
anarchists who had opposed the war, avoided military service and supported strikes.
Their arrest also coincided with the high point of Palmer’s onslaught on communists and
anarchists.
The fairness of the trial of Sacco and Vanzetti was highly questionable. The judge,
Webster Thayer, was a conservative Republican who was clearly prejudiced against the
two men because they were Italian immigrants and political activists. He had already
tried Vanzetti on a lesser crime of robbery at Bridgewater, not far from South Braintree.
On that occasion, very few concessions had been made to the fact that Vanzetti
himself, and also many of the Italian witnesses in the case could not speak very good
English. When the Braintree murder trial was held, Thayer presided over that also,
contrary to the usual practice. He made adverse comments about the men privately,
confirming the suspicion that he was determined to see them convicted and executed.
On flimsy, circumstantial evidence, the men were convicted and sentenced to death.
There followed a lengthy, seven-year struggle to prove the men’s innocence and
secure, at least, a re-trial. In spite of the fact that there was huge international support
for the movement to free Sacco and Vanzetti, including that of many eminent literary
figures of the day, the convictions and sentences were upheld. Sacco and Vanzetti went
25
to the electric chair in 1927. News of the executions prompted riots in Paris, Geneva,
Berlin, Bremen, Hamburg and Stuttgart. By 1927, they had become martyrs in a huge,
left-wing, propaganda exercise. Their case had become an international cause célèbre
which makes it difficult now to extricate the truth. The trial and the evidence
surrounding it remain the subject of academic interest and debate today.
There is still much speculation but the following points are significant:
• As Italian immigrants, they were the victims of racial discrimination. They were
denied the rights to which they were entitled.
• They were also the victims of the political mood of the time. At the end of the
day, this may be considered to be the real significance of their case. Vanzetti had
refused to take the stand to give evidence in his own defence at his trial in
Bridgewater. He was afraid that his political activities would become a major
focus and that, in reality, he would be tried for this rather than for robbery. In
fact, he was sentenced to 15 years in the Charlestown State Penitentiary. This
was an excessive punishment for robbery at this time.
• The evidence that condemned them to death was highly circumstantial. Their
supporters claimed that vital evidence had been disregarded. Subsequent
research has suggested that Sacco may well have been guilty but it remains a
matter for debate.
However, the case of Sacco and Vanzetti is perhaps more important for what it tells us
about American society at this time rather than for itself. The allegedly subversive
activities of some immigrants and the economic effects of the ‘open door’ policy finally
convinced politicians that immigration had to be controlled. This was backed up by
pressure from the rural and small town communities that were overwhelmingly white
Protestant American. President Coolidge undoubtedly spoke for them when he affirmed
that, ‘America must be kept American’.
AFRICAN-AMERICAN MIGRATION.
The First World War had boosted the US economy. America’s wheat fields produced
food for the warring Allies. Its wartime munitions factories created jobs for women but
especially for immigrant workers and African-Americans who were being drawn
increasingly into urban areas by the opportunity of work. This migration from the
southern rural areas had begun in the 1890s but reached its peak in the war years
when an estimated 500,000 African-Americans moved into the big cities of New York,
Philadelphia, Boston, Chicago, Detroit, Cleveland and St Louis. This aggravated long-
established racial tension between blacks and whites. Incidences of race riots increased
between 1917 and 1919.
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RACE RIOTS.
Following the abolition of slavery, African-Americans had been guaranteed their civil
rights by the 14th and 15th Amendments to the Constitution. The first of these gave
them equality before the law and the second gave them the right to vote. Both of these
had been disregarded. The southern states evaded the law and excluded blacks by
imposing literacy and tax qualifications to obtain the vote. They continued to be
persecuted throughout the last three decades of the nineteenth century. Almost 2,000
were killed in the south during this time by lynch mobs who hanged their victims and
sometimes even burned them alive.
The accelerated movement of African-Americans into the cities during the First World
War years extended and increased these tensions. Their arrival resulted in serious
housing shortages that adversely affected the white population. In parts of St Louis and
Chicago, there was violence from time to time during 1917.
In July 1919 violence once again erupted in Chicago. A teenage black boy had
accidentally drifted towards a ‘whites only’ beach on Lake Michigan. The people on the
white beach began to stone him until he disappeared under the water. His death began
a week of horrific violence that left 23 black people and 15 whites dead and 537 people
wounded. This incident clearly indicates the depth and extent of the hatred and
prejudice. There were similar, but smaller riots in at least 20 other cities where African-
Americans were tending to cluster in ghetto areas.
There is a fundamental irony that the most characteristic feature of the twenties in
America — jazz — should have largely emerged from the place that perhaps best
exemplifie the other side of the American dream — Harlem. This once highly
fashionable corner of New York, populated by comfortably-off Americans had received
the largest proportion of the migrant African-Americans coming from the South,
gradually displacing its original inhabitants. By the 1920s, 87,417 blacks had arrived.
Their numbers had been swelled by 45,000 Puerto Ricans and immigrants from the
West Indies. The arrival of the latter increased racial tension. They were hard-working
and entrepreneurial. As such they were resented by the rest of the ghetto population,
leading to inter-racial violence that, by 1925, had risen by 60 per cent.
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By the end of the 1920s, Harlem had become a slum. Its dense population (336 to the
acre) led to a high demand for the available housing and this, in turn, to extortionately
high rents and overcrowding. Standards of health and hygiene were very poor. Yet this
ghetto area produced what came to be known as the ‘Harlem Renaissance’. Poets,
writers and musicians attracted the attention of white patrons who admired the talent
of the few whilst ignoring the poverty and suffering of the masses. The ultimate irony is
that when black jazz musicians entertained in the Harlem jazz clubs, negroes were
banned from the audiences. Their only source of escape from relentless persecution
and hardship was either through membership and support for the National Association
for the Advancement of Coloured People (NAACP) or through the propaganda of Marcus
Garvey and the concept of ‘Black is beautiful’.
The glitz and glamour that attracted the attention of the rest of the world to the USA in
the 1920s was superficial. For a short time, it hid the reality of the experience of the
mass of the people, especially those who had gone there in the belief that life would be
better, only to be disappointed. Freedom and equality were limited to the few. Soon the
bubble would burst and, when that happened, its dark and empty heart would be fully
revealed.
The cause of white Protestant American supremacy was taken up by the Ku Klux Klan.
This formidable racist organisation had died out in the l870s but re-formed in 1915 in
Georgia.
Wider Appeal:
o This time the targets were Catholics and Jews as well as African-
Americans, trade union members and anyone else that could be described
as ‘subversive’.
o The War had created a mistrust of foreigners – this made the Klan
appealing.
o The economic and social tensions caused by migration and immigration
made the Klan’s ideas more popular.
o It attacked new ideas such as evolution and working on the Sabbath.
o The Klan opposed the perceived immorality and progressivism of the
towns – this made them popular in some rural areas.
o It also opposed any borrowing from non-‘Anglo-Saxon’ cultures.
o Undoubtedly the Klan met a need among many Americans. It gave them a
sense of importance — particularly those who held local office —
belonging and power. With its secretive language, hoods and robes,
burning crosses and propensity to violence, it added purpose and glamour
28
to the humdrum lives of the farmers, artisans and shopkeepers who were
the mainstay of its membership.
o Undoubtedly, it also appealed to the bullying and sadistic instincts in
many. Victims could be tarred and feathered, branded and even killed.
o Plain living, prohibition and church attendance could now be upheld by
terror.
o Just like the gangsters, the Klan had control of influential politicians. It
has been alleged, for example, that in 1924 it helped elect governors in
Maine, Ohio, Colorado and Louisiana. At one point both Georgia senators
were Klansmen. Certainly it helped destroy the campaign of Al Smith — a
Catholic New Yorker — to be nominated for President in 1924, and fought
energetically against him again in 1928. Evans claimed there were
5,000,000 members of the Klan in 1923.
Better Organisation:
o By 1920, a huge recruiting campaign was underway.
o Using modern business and salesmanship techniques were used.
o Members were told to play on whatever prejudices were most common in
their particular area, it had attracted 100,000 followers by 1921.
o Two of its leaders, Edgar Clark and Elizabeth Tyler, were professional
fundraisers and publicity agents.
o They divided the country into eight ‘domains’, each under a ‘Grand
Goblin’. Domains were subdivided into ‘realms’, each under a ‘Grand
Dragon’, with a bewildering array of minor posts under him — such as
Kludds and Kleagles.
o Recruits were charged $10, most of which went to local Klan officials, and
were paid on a commission basis for signing up further new members.
o The robes, which cost $3.28 to make and sold for $6.50, were manufac-
tured by a Klan-owned clothing company.
o All printed material was published at vast profit by the Searchlight
Publishing Company, again owned by the Klan.
o It even moved into land sales through the Clark Realtor Company. All in
all, the Klan made a large amount of money out of its members.
Scandal: In Indiana, David Stevenson had built the Klan into a powerful
political machine. His downfall was sudden and shocking; this followed the sui-
cide of a woman he had raped. He was convicted of second degree murder.
Stevenson’s wickedness helped kill off large-scale support of the Klan.
The Klan Was Too Negative: The ideas and aims of the Klan offered no
positive ways forward – it was based on hate. This meant that its appeal was
limited and its message depressing.
29
Narrow Base: The Klan had very little influence in big cities. It was
overwhelmingly a movement of small towns and rural areas. 40% of its
membership came from three states. Its base was mainly in the old
Confederacy and it had few followers in the North, Midwest or Pacific Coast.
Newspaper Criticism: The Klan was subjected to severe criticism in the
newspapers and this made them less appealing. Attacks on their ideas, methods
and general style became common in the press. The Klan was made to appear
crude.
Fraud: The organisation was also hurt by revelations of financial
mismanagement in Pennsylvania. By 1929, its membership had fallen to
200,000.
Discontent From Members: Evans tried to turn the Klan into more of a social
club by emphasising outdoor activities such as camping expeditions as opposed
to its political role and attraction to violence. This angered the extremists who
felt it had gone soft.
By 1930 the power and influence of the Klan was broken on the national stage,
although its terrorism continued at local levels.
On the surface, the freedom and affluence that characterise this period would seem to
make it potentially a golden age of opportunity for women.
Flappers saw liberation as the freedom to dress and behave as they chose. They were
distinguishable by bobbed hair, loose, shorter length clothes, bare, sometimes made-up
legs and outrageous behaviour. They smoked, partied, drank and danced the
Charleston until the early hours.
There were hints of sexual permissiveness in their lifestyles. They loved the popular
music of the twenties – jazz. They saw themselves as ‘modern’ – a new breed of
feminists, a product of the 1920s.
Ads for automobiles, cigarettes, electrical gadgets and home furnishings helped to
create a fantasy world of grace and pleasure. Images of beautiful women in Model T
Fords and fashionable clothes made these a must for the emancipated woman.
Methods of mass production both increased job opportunities for women and provided
the labour-saving devices that promised liberation from time-consuming domestic work.
30
However, these images are misleading. The true picture is difficult to define because it
is clear that American women in the inter-war period continued to hold different and
often conflicting views of their role in society and of their ambitions. This undoubtedly
limited the extent of change. Men had definite expectations of women, although these
also varied.
During the 1920s, feminist groups struggled for female emancipation. This had begun in
the nineteenth century over issues such as the right to higher education and access to
the professions such as medicine and the law.
By 1900, many groups were campaigning for women’s rights. Although women were
now accepted as fully qualified doctors and lawyers, the campaign for equal rights
continued particularly over wages and working conditions.
In 1917, Jeanette Rankin (Montana) became the first woman to be elected to Congress
and The National Woman’s Party led by Alice Paul began a more aggressive campaign
to secure the vote.
In January 1917, in freezing temperatures, women picketed the White House. Later the
same year, 168 women made US history by becoming its first political prisoners when
they were arrested for peaceful picketing. In prison, they went on hunger strike and
were force-fed.
During the First World War, with many men away, women took over their work in
heavy industry, manufacturing, driving transport vehicles and delivering mail.
In 1919, Congress passed the 19th Amendment to the US Constitution which became
law on 26th August 1920. Women were allowed to vote for the first time in the
presidential election of that year.
Women in the western states had had the vote for some time, mainly because in the
west, women vastly outnumbered men.
In 1924, Nellie Tayloe Ross of Wyoming became the first woman to be elected state
governor and in 1926, Bertha Knight Landes became the first female mayor of a city
(Seattle).
Carrie Chapman Catt and The National League of Women Voters (1920) tried to raise
the awareness of women to the opportunities opening up to them but most appeared
31
more interested in mass produced labour saving devices. They seemed happy to stay at
home rather than developing their careers at work.
In the 1920s medical schools allocated only 5% of their places to women and the
number of women doctors declined over the period. In 1920, 47.3% of college students
were women. Over the decade, the percentage declined. There were growing
opportunities for higher education in the late 19th Century.
The American workforce remained mainly male. Although the number of women at
work rose by 2 million in the 1920s, the figure was only 24% of the population.
Discrimination in wages continued.
The feminist movement splintered. The older followers rejected the materialism and
mass consumption of the 1920s. In doing so, they lost the support of younger women
who were attracted by it.
Many women were not generally interested in politics. In the nineteenth century, they
had supported the abolition of slavery. In the 1920s, middle class women supported the
temperance movement and Prohibition.
American women had different views of their role in society. There was still a strong
belief that their domestic role was of the greatest importance. Women who had worked
during the First World War were content to return to the domestic scene after 1918.
African American women were not allowed to vote in elections even after the law
changed.
Middle class women took up the anti-lynching cause and later supported the cause of
equal rights for men and women. Others became involved in social campaigns against
poverty and poor living and working conditions.
Large numbers of working-class women were already in the workplace. Many of these
were young immigrant workers who worked long hours in ‘sweatshop’ conditions for
very low wages.
What did this mean? That was the burning question in the 1920s. No one really knew
the answer. Certainly, a different lifestyle separated the young and perhaps more
affluent women from the rest.
32
The flappers, who have come to characterise the jazz age, were only united in their
determination to rebel and to reject the accepted norms of the day when it came to
dress, hair, correct behaviour and sex. These were young, well-off, middle-class girls
who lived in towns; they were therefore unrepresentative of women in general.
The consumer boom of the 1920s and especially the availability on credit of labour-
saving devices created not only jobs but also the opportunity for all women and
especially for married women.
By 1928, sales of vacuum cleaners, irons, refrigerators and washing machines had risen
phenomenally. Married women entering the workforce rose in the period from 22.8 per
cent of working women to 28.8 per cent.
But jobs, like the goods that they were producing, were not accessible to all women
and, in the workplace, women faced discrimination in wages.
They also faced the hostility of male trade unionists who argued that if women needed
special legislation to protect them in the workplace, perhaps they should not be there.
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2007 Version
34
PROHIBITION & ORGANISED CRFIME
WHAT WAS PROHIBITION?
The power to ban (prohibit) the production, export, import, transportation or sale of
alcoholic beverages was given by the 18th Amendment to the Constitution, which was
passed in 1917. It was gradually adopted by state governments across America and
was followed up in 1919 by the National Prohibition or Volstead Act that defined liquor
as drink containing 0.5 per cent of alcohol and prescribed penalties for breaking the
law.
Many women’s groups saw alcohol as a means by which men oppressed them.
Big business saw drunkenness as leading to danger and inefficiency in the
workplace — particularly in large factories.
Many religious groups believed alcohol was the work of the devil and was
overwhelmingly responsible for sin and wrongdoing.
Supporters tended to be overwhelmingly Protestant, live in small towns in the
South and West and, except in the former region, vote Republican.
Opponents were likely to be urban, of non-northern European ethnic origin,
Roman Catholic and vote Democrat.
There had long been a temperance movement in the USA. As far back as the
Revolution in the 18th century there had been campaigns to ban the consumption of
35
alcohol. Some states banned alcohol in the early part of the 20th century. Feminists
and liberals saw alcohol as a social evil that was stopping the eradication of poverty and
other social ills such as wife beating and child abuse.
Prohibition originated in rural and small town America. Here the local religious leaders
still held sway. Baptists and Methodist ministers spoke out against alcohol and won
over people of other denominations. Middle class businessmen were able to convince
their employees to give up alcohol and well-established elites were able to influence the
behaviour of their social inferiors.
It was a crusade against liquor inspired by the misery, poverty, depravity and violence
that alcohol was perceived to produce. The campaign for a total ban on alcohol was
driven by a pressure group called the Anti-Saloon League whose membership was
drawn from middle-class, Protestant, church-going Americans who were especially
critical of behaviour and morality in the big, crime-ridden cities such as New York and
Chicago. Prohibition was, in the words of one of its supporters, the “pure stream of
country sentiment and township morals to flush out the cesspools of cities”.
The League enjoyed the support of other middle-class temperance groups such as the
Women’s Christian Temperance Union.
Collectively, these groups were able to exert a significant influence by voting for
politicians who would then support their cause in Congress. By the time the 18th
Amendment was discussed and voted on, there was sufficient support to ensure that
prohibition of alcohol became law either because these politicians believed in it or
36
because the moral pressure was so great that they did not want to be seen to oppose
it. Several states already had prohibition laws on their statute books and the federal
prohibition movement built on this.
Big Business
Prohibition also had the very influential backing of some big business tycoons. For
example, John D. Rockefeller gave both his personal support and large sums of money
to the Anti-Saloon League. This was not from his own strong moral convictions, but
rather because he believed that his workers would be far more productive if their minds
and bodies were free from the debilitating influence of alcohol!
Men such as Henry Ford, with their new production lines and machinery needed to have
sober men in their factories. In the past farmers had ploughed with a bottle of beer in
their hand – this was not safe when operating a machine.
The forces against prohibition were not well organised. Beyond a march and rally in
New York City, a parade in Baltimore and a resolution against taking away the working
man’s beer by the American Federation of Labor there was little protest.
At the most, 3,000 treasury agents were employed to enforce prohibition. They were
paid an average salary of $2,500 to shut down an illegal industry whose profits were
estimated at $2 billion annually. It is no wonder that many were corrupt. One federal
agent was said to have made $7 million selling illegal licences and pardons to bootleg-
gers. While agents such as ‘Izzy’ Einstein and ‘Moe’ Smith became famous for the
ingenuity with which they closed down illegal stills and ‘speakeasies’, it should be
remembered that, between 1920 and 1930, about 10 per cent of prohibition agents
were fined for corruption. It is very likely that many more escaped prosecution.
Their task, however, was made even more impossible since they lacked the scientific
and industrial expertise to carry out the work.
37
Equally, the agents work was unerfunded. The Anti-Saloon League estimated a $5
million of funding would be enough; in the event, Kramer’s department was given $2
million.
Smuggling
The USA has 18,700 miles of coastline and land border; those waters just outside the
national limits became known, with good reason, as ‘rum row’. Smuggling was so
successful that in 1925, the officer in charge of prohibition enforcement guessed that
agents only intercepted about 5 per cent of alcohol coming into the country illegally; in
1924, they seized $40 million worth of alcohol so the actual volume of business must
have been immense.
Legal Alcohol
Chemists could still sell alcohol on doctors’ prescriptions; this vas naturally open to
widespread abuse. Many people known as ‘bootleggers’ went into business as
producers and distributors of illegal alcohol. The ‘King of the Bootleggers’, George
Remus bought up Tarious breweries on the eve of prohibition for the manufacture of
medicinal alcohol; he then arranged for an army of 3,000 gangsters to highjack his
products and divert them to the illegal stills of the big cities. In five years, Remus made
$5,000,000.
Industrial alcohol was easily diverted and re-distilled. Problems with the suitability of
this for consumption can easily be imagined and exotic cocktails were often invented to
take away the unpleasant smell and taste of materials intended for industrial
manufacture. There is a legend that one sceptical buyer took his bootleg whisky for
analysis to a chemist — to be told that his horse had diabetes! Poisoning from wood
alcohol, though not common, was known during this period and in one instance, 34
people died in New York City.
Urban Opposition
The towns never supported the Prohibition laws and they opposed them with vigour.
They hated what became known as the “yokel contingent” of country do-gooders.
Immigrants were not won over by the appeal to stop drinking, especially those from
Ireland and Eastern Europe. The influential urban middle classes were also outraged at
not being able to have cocktails at their fashionable parties. These groups provided
opposition to the law.
38
Lack of Government Action
Some historians have even argued that Congress did not do more to enforce prohibition
because it did not want to alienate rich and influential voters. In addition, this was a
period of a reduced role by federal government and most state governments were, at
best, lukewarm in enforcement, particularly where cost was concerned. No one in
government seemed to be prepared to say openly that prohibition could not be
enforced because Americans liked to drink, but this was nevertheless apparent to many
people.
Changing Attitudes
As the 1920s progressed, the mood of the nation changed. For many Americans,
particularly those living in the cities, their main aim in life became having a good time.
Illegal drinking in gangster-run ‘speakeasies’ became popular venues for many
fashionable city dwellers.
The ‘dry’ lobby, while very well organised to achieve prohibition, was ill equipped to
help enforce it. The Anti-Saloon League, for example, was bitterly divided between
those who sought stricter enforcement laws, believing the League should actually be
given power over appointment of officers, and those who emphasised education
programmes to deter people from drinking in the first place.
39
1920. During the period when Prohibition was in force (1920—33), this rose to
182 million. By the time of the repeal of the prohibition laws, Coca Cola and its
rival, Pepsi Cola, were well established household names and the industry was
flourishing.
Class Impact. Interestingly, it had been the working-class saloons that tended
to be shut down; the ‘speakeasies’ which replaced them tended to sell spirits to a
wealthy clientele; in this respect prohibition worked to the detriment of the poor.
40
ORGANISED CRIME – A PRODUCT OF PROHIBITION?
Prohibition effectively transferred the provision and manufacture of alcoholic drinks
from the hands of legitimate businesses into those of criminal organisations, especially
in the big cities such as Chicago and New York. These were almost exclusively of
immigrant origin. In New York, half were Jewish, a quarter Italian and a quarter were
Polish and Irish. In Chicago, they were exclusively Italian and Irish. ‘Gangster’ leaders
became incredibly wealthy and virtually controlled these cities. The significance of this
was that crime brought political influence to groups previously without power.
John Torrio and Al Capone are particularly good examples of how gangsters operated
and flourished in Chicago as a result of Prohibition. Torrio was the leader of an Italian—
American gang with Mafia links. He organised Chicago into gang ‘territories’ to reduce
conflict between criminal gangs. He bought the ‘protection’ of Mayor ‘Big Bill’ Thompson
and ensured political support by rigging elections. For example, in 1924, after moving
the base of his illegal operations to a suburb of Chicago called Cicero, he successfully
fought off police intervention to ensure the election of a town council made up of his
nominees. Torrio built up a very lucrative business in bootlegging and speakeasies until
1925 when he retired to Italy taking with him his $30 million fortune from crime.
His successor in the ‘business’, Al Capone, was extremely violent. He was involved in
every crime of vice and extortion that existed. Whilst appearing publicly alongside
Mayor Thompson, politicians and officials as a city celebrity at charity events, he was
extorting millions of dollars in protection money from Chicago citizens, making a fortune
from speakeasies, brothels and drug trafficking, as well as indulging in gang warfare
with his rivals. By 1927, his criminal activities had provided him with a fortune of
around $27 million. He was driven around Chicago in an armour-plated Cadillac. In the
midst of all of this, law enforcing bodies were helpless; judges and police officials were
frequently in the pay of the gangsters. In addition to all of these crimes, between 1927
and 1931, there were 227 gangland murders for which no one was ever convicted.
The most outrageous of these happened on 14 February 1929 and became known,
therefore, as ‘The St Valentine’s Day Massacre’. Four members of Al Capone’s gang,
dressed as policemen, trapped seven members of a rival Irish—American gang led by
‘Bugs’ Moran. The captives were told to put their hands against the wall. Expecting a
routine police search, they did so without hesitation. Capone’s men produced sawn-off
shotguns and submachine guns and shot them in the back.
Such levels of violence angered the citizens of Chicago but Capone, himself, seemed
untouchable. Finally, an FBI team led by Eliot Ness ensured the conviction of Capone
for tax evasion for which he served 11 years in Alcatraz. He was never punished for the
400 murders that he is alleged to have ordered.
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Why was organised crime so hard to control?
It was big and secretive – it was difficult to know what it was doing and was too
large to control.
It had money – The crime bosses on the other hand had money, weapons and
personnel.
Fear – the crime bosses used violence against opponents and informants. It was
virtually impossible to infiltrate the crime syndicates for this reason.
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It don’t prohibit worth a dime
Nevertheless we’re for it.
Prohibition was not finally repealed until 1933, when the 20th Amendment made it the
responsibility of individual states to decide on the issue.
43
History Department AS History: Unit 1
Bust
Year 12
44
2007 Version
BUST – 1929-33
By 1927 the US economy was not as strong as many at time thought. There were
many weaknesses and problems below the surface.
However, the stock market remained strong – share prices did not reflect the gloom
in the economy.
Government Policies:
Overproduction:
US industry grew rapidly in the 1920s and output grew enormously. Factories and
farms produced more than the US economy could absorb. This led to stockpiling
which hit employment, profits and, ultimately, the value of shares. The tariffs
imposed by the Republican government also made this situation worse. The USA
could not sell goods abroad in such large numbers because other governments
imposed retaliatory tariffs on US goods.
Whilst American economic prosperity in the 1920s was fairly widespread, this wealth
was unequally distributed.
Sixty per cent of American families had an income of less than $2,000 per year, the
minimum thought necessary for survival. There were, therefore, significant
45
differences between the wealth of the rich, middle-class Americans and the rest who
made up over 50 per cent of the population.
The top 5 per cent of wealthy Americans earned one third of the total personal
income. How had this come about? The high profits created by gains in productivity
had been paid out to investors whilst the workers received comparatively small wage
increases.
The only way that the less wealthy could manage to buy cars, radios, telephones
and other mass-produced goods was by taking advantage of credit facilities. In the
process, large sections of the population borrowed far in excess of what they could
realistically afford. Their ability to repay depended entirely on their wages. Eighty
per cent of Americans had no savings at all at this time. Clearly, the Republican
view, voiced by Coolidge, that the interests of business and those of the nation were
the same was not correct. Whilst the American economy had prospered in the
1920s, the wealth was not equally distributed amongst those who created it.
Farming problems:
Trade problems:
In the longer term, this adversely affected American manufacturing industry. Mass
production meant that eventually output would be greater than the demand from
the home market alone. As goods could not be sold abroad, this would lead to stock-
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piling at home and, consequently, to cutbacks in production. Eventually, this would
hit employment, profits and, ultimately, the value of shares. Protection also meant
that there were no export markets for surplus US food. As the 1920s progressed, the
situation of the US farmers, in particular, worsened.
Banking Problems:
US banks were poorly regulated. This meant that there were poor banking practices
that destabilised the whole system:
• Banks lent out too much money and they lent it irresponsibly.
• Banks were small and localised. They had no support mechanisms to help in
times of crisis.
• When banks had problems they recalled loans and this put pressure on
business.
• Another solution to problems was to sell the shares the banks had stockpiled.
This depressed share prices.
• Banks had small reserves and they could be hit by depositors withdrawing
money in times of crisis.
European Loans:
European governments and businesses were not always quick to repay their debts.
This added to the problems of the US banks.
The growth of the stock market was far from as secure as the profits enjoyed by the
US speculators suggested. Indeed, after 1927 the stock market was based on a
false belief that shares would go on rising forever. Shares were bought for the
wrong reasons, by the wrong people and with borrowed money.
Around 1 million Americans were speculating on the stock market. They were trying
to buy and sell shares quickly in an attempt to make money out of what was known
as the Great Bull Market. A bull market is where stock prices rise significantly
over a long period of time. Other Americans were buying shares just as a long-term
investment.
Whilst the actual number playing the markets is important, what is more significant
is that many of the shares which were changing hands were doing so with borrowed
money. The practice of buying shares on credit, ‘on the margin’, worked well as long
as prices were rising, but when the price rise started to slow down or prices fell,
problems began to set in.
The way in which 75 per cent of the purchase price of shares could be borrowed.
This encouraged excessive speculation, which kept prices artificially high. Easy credit
policies on the part of the Federal Reserve Board, plus tax cuts made more money
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available for speculation and resulted in a situation where, by the summer of 1929,
loans from bankers had reached $6 billion. The complete lack of stock market
regulation by government or any other agency encouraged more and more
speculation. In 1925, the market value of all stocks stood at $27 billion but by
October 1929, it had reached $87 billion.
The stock market was uncertain and its growth was based on borrowed money and
misplaced optimism.
Why then did Wall Street ignore them? Perhaps there was a blind confidence that
nothing could go wrong and that what were temporary setbacks would soon be
overcome. Whatever the thinking of those speculators involved, they were about to
receive a great shock, the disastrous effects of which they could never have
imagined.
Although 29 October 1929, known as ‘Black Thursday’, is widely accepted as the day
that the Wall Street Crash began, the US stock market had, in fact, been behaving
erratically throughout the mid and late summer of 1929.
However, by October 1929 there was some hope that things were getting better.
But this level of optimism was misplaced. On 24 October, panic set in and prices
dropped alarmingly as more and more investors tried to sell their holdings. As soon
as the New York Stock Exchange opened its doors at nine in the morning,
stockbrokers started selling shares in large numbers. By midday, shares in even the
largest companies had gone down dozens of points. By the end of the day, the Stock
Exchange had lost $4 billion.
On Friday, 25 October, the situation was difficult, attempts were being made to
stop the slide. These attempts continued on Saturday, 26 October and cost US
bankers $40 billion.
Over the weekend of 26—27 October, the situation worsened. Many brokers who
had sold shares ‘on the margin’ had borrowed money from banks to buy the shares
in the first place. The banks were now demanding repayment of their money. To
repay the banks, the brokers in their turn had to ask their customers for repayment
of debts; the only way in which their customers could repay was to sell shares — at
any price. Panic-stricken brokers and investors sold over 16 million shares in one
day. The average price of shares fell 40 points and stock prices slumped by
$14,000,000.
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of the American economy. Many individual Americans suffered personal financial
ruin. Whilst on 19 December The New York Times was proclaiming that ‘The worst
is over’, there was also a recognition that the ease with which speculation had been
made possible was the cause of the Crash.
How share prices dropped:
3 Sept. ($) 13 Nov. ($)
• For the reasons shown above, the US economy was not doing so well.
Investors started to realize that the share prices were based on an economy
that was not really doing that well – they started to sell their shares.
• Banks in Europe, especially in Britain, started to offer more attractive
investments. The US investors sold their US shares to buy British
investments.
• When people started to sell shares in large numbers, the price of shares fell.
This started to cause concern and then panic. As the prices fell, people sold
shares and prices fell even more. Panic selling set in and share prices went
into freefall. The Wall Street Crash was underway.
Firstly, as was laid out above, the economy was already showing signs of weakness
before the crash. These long-term causes led to the depression undermined the
economy and the after-effects of the Crash led to the Depression.
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What were the causes of the Depression?
The Wall Street Crash did not, by itself, cause the Great Depression. It was the
‘trigger’ for general economic collapse because it had a disastrous knock-on effect
on the US banking and financial system. Consequently, the Crash had a tremendous
impact on a large number of Americans.
The banks:
• Too Small: It is important to understand that American banks were not part
of a national organisation but often only existed locally or statewide. Many of
these banks tended to be small, lacking the funds to meet unusual demands.
• Too Much Lending: In the 1920s, they used the money deposited by their
customers and lent it out liberally to enable speculators to make quick profits
for themselves on the stock market. The easy terms banks offered for loans
encouraged the high level of borrowing that resulted in the wild speculation
that led to the Crash of 1929.
• In the immediate aftermath of the Crash, those who had savings deposited in
the banks, rushed en masse to withdraw their savings, fearful that they, too,
might be lost.
• Faced with this run on the bank and unable to recover loans from bankrupt
speculators, many banks were forced to close their doors and declare
themselves bankrupt. Consequently, many savers also lost their money.
Bank failures:
1929 1930 1931
Number of banks closed 659 1,352 2,294
Total deposits lost $200 m $853 m $1,700 m
When the banks collapsed businesses and private investors lost money on a massive
scale. This damaged the economy and made any recovery very unlikely - there was
no one left to buy product or invest.
The unemployed could not spend money and the people who lost savings and
investments stopped spending. This his businesses and they closed.
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World Economic Problems:
Us banks could no longer lend money to the rest of the world and this caused
business failures across Europe and Asia. The world economy suffered a similar
slump. They could not buy US products and this caused more business failures.
Businesses collapse:
America had faced economic depressions before in 1873, 1893, 1904, 1907 and
1921. The Great Depression that hit the USA in 1929 was different from these in its
length and in the extent of the poverty that it brought to the American people.
• Gross National Product (i.e. the value of goods produced plus income from
abroad) slumped from $104 billion to $59 billion in 1932.
• Farm prices fell by 60 per cent between 1929 and 1932.
• ‘Wheat prices plunged from $1.04 per bushel to 51 cents.
• 5,500 banks had closed their doors by 1933.
• 20,000 companies went bankrupt.
• Unemployment soared from 3 per cent in 1929 to 25 per cent in 1933. These
figures represent a daily increase of 12,000 reaching a total of 13 million by
1933. Many others who were in work were facing cuts in wages and a
reduction in working hours.
• National income fell by half from $80 billion in 1929 to $40 billion in 1932.
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The human cost
Millions of Americans suffered during the Great Depression, none more so than the
farmers. Facing a massive fall in food prices, they reduced production, halving it in
the period from 1929 to 1932. Thousands of American farmers lost their livelihoods
and their farms. Industries connected with farming also went bankrupt.
Unemployment made individuals and families destitute. This was particularly acute in
the industrial cities such as Chicago where there was a 40 per cent rate of
unemployment. Here a local relief organisation gave the most desperate a meagre
$2.40 per week for an adult and $1.50 for a child (a dozen eggs cost 28 cents).
Immigrant communities, black and Mexican Americans were particularly badly
affected.
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rate in high schools escalated. By 1933, approximately 300,000 children were out of
school.
The suicide rate had risen and families were breaking up under the pressure of
trying to survive.
Finally, deprived of their pensions and robbed of their savings, older adults had very
little to live on or to look forward to.
African Americans
• Unemployment rates for African-Americans were six times higher than those
for whites
• Low-paid jobs such as lift attendant and railway porter that had previously
been reserved for African Americans were now being taken by whites.
• Rural African Americans were hit less hard than their urban counterparts.
Rural poverty was normal.
Women
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HERBERT HOOVER & THE GREAT DEPRESSION
By the beginning of 1932, Herbert Hoover, US President since March 1929, had
come to realise that his efforts so far to combat the effects of the Great Depression
had failed. Although a follower of Republican ideals and principles, Hoover had
rejected the view of many in his party that the Crash and subsequent Depression
were part of a natural economic cycle, the terrible effects of which would simply
have to be borne until better times arrived.
To ease the suffering faced by many Americans, Hoover first pinned his hopes
between 1929 and 1932 on the Individualist (self-help) and Voluntarism approaches.
• He cut taxes at home. This meant that a family man with an income of
$4,000 had his tax cut by two thirds. However, this only helped those in
work. These tax cuts did not stimulate spending as people lacked confidence
in the economy.
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By this time many Americans were becoming disillusioned with Hoover and the
Republicans. As early as November 1930, the Republicans had not only lost eight
Senate seats but also control of the House of Representatives. It was clear to
Hoover that a new approach was needed.
Interventionism:
Hoover also backed some interventionist policies to help alleviate the impact of the
depression:
• In 1931 Hoover announced that he would freeze the collection of war debts
from Germany. He hoped this would free up money in Germany so they
could buy US products. However, by this point the German economy was in
such a poor state that it had little impact.
• The popular view is that the measures taken by Hoover were ‘too little, too
late’ and came nowhere near to tackling the enormous problems which the
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American economy faced. There is some truth in this view but it does not go
far enough.
o farmers would need to cut their production – they did not. Indeed
guaranteed prices had the opposite outcome.
o employers would need to keep their workers on the payroll – they did
not.
• None of these needs was met because the American people, as a nation, had
lost confidence in their economy, in themselves and in the ability of
Republican politicians to lead them out of the Depression.
MOUNTING DISCONTENT
Thus, by early 1932, the American public viewed Hoover as a president who
appeared not to care about their plight and the difficulties they were experiencing.
His belief in ‘self-help’ may have worked in the rural, farming communities that were
once the main feature of American society, but it was no longer applicable in a
country that was now increasingly urban and industrial. Although Hoover was
elected unopposed as Republican candidate in the forthcoming presidential election,
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even his most ardent supporters must have been gloomy about his prospects of
success. In the summer of 1932, these prospects worsened as bitterness and
resentment grew among the unemployed and in some instances, erupted into
violence.
By the spring of 1932, anger and resentment were mounting among the
unemployed and, in some instances, threatening to turn into violence. Those evicted
for non-payment of rent, and without enough food for their families, threatened to
take food from stores unless they were given it at no cost. The bread lines, made up
of unemployed Americans who had lost everything, became places of discontent
where those preaching violence received a sympathetic hearing.
In the late spring, veterans of the First World War, who were without work and
whose families were hungry as a result, began a march on Washington demanding
the payment of a veterans’ bonus approved by Congress in 1924 but to be paid 20
years afterwards. The sum voted by Congress was $3,500,000,000 and it is easy to
understand why, in 1931, Congress received a proposal to pay the bonus
immediately.
Clearly, the money would provide an important lifeline for those veterans and their
families who were suffering so much. Thus, the purpose of the 20,000 marchers was
to lobby Congress to approve the proposal. In mid-June, Congress rejected it. In
protest, several thousand ‘bonus marchers’ and their families stayed on and built
settlements of tents and packing crates on Anacosta Flats in the south-western part
of Washington DC, threatening to stay there until their demands were met.
On 28 July, Hoover, having ordered the veterans to be confined to the Flats, now
approved a plan to evict them. Army Chief of Staff, General Douglas MacArthur and
his aide, Major Dwight D. Eisenhower were in command of the operation, but Major
George Patton was the cavalry commander who led the attack. One thousand armed
soldiers, equipped with tear gas, tanks and machine guns, drove the veterans from
the camp and burned it to the ground. Two veterans were killed and as many as a
thousand were injured.
What is the significance of this incident? The idea of an American president ordering
troops into action against fellow Americans, particularly those who had risked their
lives in war, shocked millions. Hoover was seen as cruel and insensitive to the
distress which so many were experiencing, whilst the desperate plight of the
marchers was a terrible comment on the depths into which the American economy
had sunk. On 8 November, presidential election day, American voters would have
the opportunity to pronounce their verdict on Hoover’s presidency. The terrible
events on Anacosta Flats in July only served to damage further his failing fortunes.
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CONCLUSION
Whilst Hoover was returned unopposed as Republican candidate for the presidency,
party members must have realised that, in the forthcoming election, they faced
defeat. Although they praised his efforts to deal with the effects of the Depression,
they knew that he had become widely unpopular. The mocking use of the term
‘Hoovervilles’, for example, was a reflection of this. They must also have recognised
that election defeat would not only bring to an end the period of their ascendancy
but also the political career of probably the most brilliant Republican politician of the
century so far. Hoover was a great humanitarian Quaker who was just overwhelmed
by the Depression. He was a pragmatic politician, but his pragmatism did not stretch
to the kind of radical measures necessary to halt the onward march of the
Depression.
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