Chapter 25, Section 1: Politics and Prosperity

Main Idea: As the Main Idea: As the Republican party returned Republican party returned to power in the 1920s, the to power in the 1920s, the

economy boomed.economy boomed.

A. Republicans in Office Warren Harding won the 1920 election using the campaign

slogan “Back to Normalcy,” which meant a return to a simpler time (pre-WWI).

Harding Takes OfficeHarding Takes Office For his top cabinet posts, Harding chose capable men

Andrew Mellon – Secretary of the Treasury Herbert Hoover – Secretary of Commerce

Corruption & ScandalsCorruption & Scandals For other posts, he chose his friends from home, known as

the “Ohio Gang.” While Harding was honest, many of them were not, resulting in many scandals. Charles Forbes, head of the Veterans Bureau, was convicted

of stealing millions from it. After, many other scandals came to the surface, leading to Harding’s death from a heart attack.

Tea Pot Dome Scandal- Secretary of Interior Albert Fall Secretary of Interior Albert Fall secretly leased government land in California & Wyoming secretly leased government land in California & Wyoming to private oil companies in exchange for bribes; he was to private oil companies in exchange for bribes; he was tried and found guilty (1st cabinet member sent to prison) tried and found guilty (1st cabinet member sent to prison)

Coolidge Takes OfficeCoolidge Takes Office “Silent Cal” – response to woman’s bet … “You lose.” Wins Election of 1924: “Keep Cool With Coolidge.”

The 1920 ElectionThe 1920 ElectionThe 1920 ElectionThe 1920 Election

Elk Hills,CaliforniaElk Hills,California

19121912

U.S. NAVYU.S. NAVY

O I LO I LTeapot Dome,Wyoming

Property of U.S. NAVY

Teapot Dome,Wyoming

Property of U.S. NAVY

President William H. TaftPresident William H. Taft

The oil reserves of Teapot Dome, Wyoming, and Elk Hills, California shall be for US Naval use only.

I appoint Albert Fall to be the Secretary of the Interior.

President Warren G. HardingPresident Warren G. Harding

Psssssst. Albert,Take this. Ooh la la!

A hundred thousand dollars!

Why thank you very much Harry

Sinclair of the Mammoth Oil

Corp and Edward Doheny of Pan

American Petroleum.

Elk Hills,CaliforniaElk Hills,California

Teapot Dome,Oil reserved

forU.S. NAVY

Teapot Dome,Oil reserved

forU.S. NAVY

Mammoth Oil Corp

19211921

U.S. NAVYU.S. NAVY

O I LO I L

Pan American

PetroleumPan American

Petroleum

Hey, the bribe worked, Harry. Our buddy Albert let us lease Naval reserves and drill for oil.

Sssssweet Ed!

Except I’m in jail!

1927

Secretary of the Interior Albert Fall

Harry Sinclair

(Mammoth Oil Corp.)

Edward L. Doheny (Pan-American Petroleum)

Yo, Albert buddy! How about letting

Edward and I drill for oil in Elk Hills and

Teapot Dome!

But that’s Naval

property! You can’t drill

there!

Maybe $100,000 would help you

change your mind!

Why didn’t you say so, Ed? You’ve got a deal!

B. Coolidge Prosperity Like Harding, Coolidge was very pro-business.Like Harding, Coolidge was very pro-business.

Industry BoomsIndustry Booms “Coolidge Prosperity” refers to the economic ” refers to the economic

boom of the mid- to late- 1920s, while Coolidge boom of the mid- to late- 1920s, while Coolidge was President.was President.

Factory production increased, which meant more Factory production increased, which meant more jobs were created, which meant incomes rose, jobs were created, which meant incomes rose, which meant spending increased, which meant which meant spending increased, which meant more economic growth, which meant ……more economic growth, which meant ……

Advertising boosted sales by boosted sales by convincing people they’d be happier if they bought certain products

Buy now, pay later- installment buying (buying on credit) encouraged people to buy things they really couldn’t afford. This increased both the demand for goods, as well as consumer debt (people owed more than they had).

“Perhaps one of the more important accomplishments of my administration has been minding my own business.”

“The business of America is business.”

A Booming Economy: The 1920’s

Income increases

People purchase more goods

Companies earn higher profits

Companies expand and hire more people

People getting rich from the People getting rich from the stock market encouraged stock market encouraged others to invest.others to invest.

Buying on marginBuying on margin is like is like buying stocks on credit. This buying stocks on credit. This can be dangerous because can be dangerous because stock values don’t always rise.stock values don’t always rise.

By 1928, stock values rose By 1928, stock values rose faster than company values. faster than company values. Some experts warned that the Some experts warned that the “Great Bull Market” would not “Great Bull Market” would not last forever, but most investors last forever, but most investors ignored the warnings.ignored the warnings.

A Soaring Stock MarketA Soaring Stock MarketAs the economy boomed, the stock market soared. Stock values skyrocketed & many investors got rich (called a bull market).

How does the stock market work?

You buy 100 shares of stock ofx $5.00 per shareHow much money

have you invested? $500.00

Scenario #1

stock increases to $20 per share

100 shares of stockx $20.00 per share

How much are your 100 shares of stock now worth?

$2,000.00

How much profit have you made?

$2,000.00 stock value

- $500.00 initial investment

$1,500.00 net profit

How does the stock market work?

You buy 100 shares of stock ofx $5.00 per shareHow much money

have you invested? $500.00

Scenario #2

stock decreases to $1 per share

100 shares of stockx $1 per share

How much are your 100 shares of stock now worth?

$100.00

How much money have you lost? $100.00 stock value

- $500.00 initial investment

$400.00 net loss

C. A Limited Role in World Affairs After WWI , the U.S. was now the world’s leading After WWI , the U.S. was now the world’s leading

power, but most Americans wanted to stay out of power, but most Americans wanted to stay out of European affairs & keep to ourselves (isolationism).European affairs & keep to ourselves (isolationism). The U.S. signed a separate peace treaty with the losers The U.S. signed a separate peace treaty with the losers

of the war and would not join the League of Nations.of the war and would not join the League of Nations.

Latin AmericaLatin America Trade between US & Latin America increased. At

times, we intervened to protect our interests there. Nicaragua – US Marines were sent to protect American

plantations & RRS during a revolution there Mexico – A US diplomat worked out a compromise

The Soviet UnionThe Soviet Union Russia became the Soviet Union after V.I. Lenin Russia became the Soviet Union after V.I. Lenin

(Bolshevik Revolution) installed a communist gov’t.(Bolshevik Revolution) installed a communist gov’t. U.S. refused to recognize the new government due to U.S. refused to recognize the new government due to

anti-communist feelings anti-communist feelings (no private property or religion).(no private property or religion). We still sent $20 million in aid to starving Russians in 1921.We still sent $20 million in aid to starving Russians in 1921.

Pursuing PeacePursuing PeaceBecause militarism was one of the main causes of WWI, many people in the 1920s favored disarmament.

DisarmamentDisarmament- reducing - reducing armed forces and weaponsarmed forces and weapons

By the end of the decade, the US & 61 other nations signed the Kellogg-Briand Pact, which “outlawed” war

It’s one fatal flaw, however, was that it didn’t say how it would keep the peace.

What would happen to aggressive nations?