New Deal

New Deal Depression just "normal" depression in 1930 – unemployment below 9%

less severe than 1921 recession that had ended "naturally" with "lazy fairy" laissez faire treatment

"Recovery is just around the corner"

BUT Big bank collapse in Austria – Europe catching the disease we talked about

Hoover proposes suspension reparations and loans – politically courageous

Hoover is towering "progressive wing" figure –

FDR had said earlier Hoover would be best possible president

but shy and dour – orphaned early – tough childhood

aloof and not a great communicator

depicted as uncaring

Hoover is scholarly – engineer's tidy and logical mind

(FDR intuitive – doesn't read books as an adult)

more trapped by the generally accepted political and economic doctrines of the time

Gold standard & Balanced budgets ,

Hoover video history unjust – Hoover gets demonized for earlier Harding Coolidge stupidity –

then FDR wanders in and takes credit for reforms Hoover would have been in favor of

England off Gold 1931

US Federal reserve defends gold – dumb move

raise interest rates – constrict money supply – deflation even more serious

2300 bank failures GNP down 20% Hoovervilles erupt - unemployment 16%

Crops rot – armies of tramps - 13% deficit as receipts fall and expenses mount

John Maynard Keynes doesn't explain all of this till 1936

General Theory of Employment, Interest & Money

Hoover suggests deficits – chickens out and listens to orthodox advisers – huge income tax increase

Democrats even stupider – John Nance Garner Speaker of House wants National Sales tax

a tax which hits consumers harder

Hoover Reconstruction Finance Corp RFC – gives $$ to banks, mortgage assns,

"millionaire's dole" La Guardia

BONUS ARMY – COMES TO WASHINGTON IN spring 1932 show video

Veterans are scheduled to get a bonus in 1945

Hoover reacts by smearing as socialists communists and non-veterans (there are a few)

Orders McArthur to evict from govt buildings

Douglas McArthur – ignores Hoover's orders to merely evict from govt bldgs

In full Strutting Rooster mode - Slash and burn – kill a few of the "dangerous mob"

America shocked to see images of mounted cavalry, sabres unsheathed

chasing the unemployed down the streets of the nations capital

MacArthur amazingly self-righteous – tries to start atomic war in Korea

should have been fired for insubordination

Hoover takes responsibility for the idiot

FDR sees MacArthur (and Huey Long who we meet later) as the two most dangeous men in the country

When the Bonus marchers come back later – FDR invites them to tea – gives a few CCC jobs

1932 election

PUBLIC RELATIONS POLITICS – show Sinclair video

FDR – is amiable communicator – disorderly improviser & experimenter -

"second-rate intellect with a first-rate temperament." Oliver Wendell Holmes

Jaunty confidence of Aristocrat Chronically ebulient

wide grin infectious optomism – loves people and schmoozing

no commitment to any particular method

some call "no principles"

Can't bear to fire loyal but incompetent friend

Deliberately divides authority – does not let anyone get much authority independent of him

very mixed feelings about FDR – science – free market in ideas – have to spend much of our time as advertising and rhetoric analysts

FDR like an actor making an entrance

George Bush and Al Gore Jimmy Carter and Ronnie Reagan

some people know how to talk to America

Carter video?

FDR & Hoover platforms are very similar – and FDR says all the right things to rich supporters

Hammers Hoover for not balancing the budget

Hoover calls Chameleon on Plaid

Fdr is an actor coming on stage

Cold War as "acting contest" John Gaddis – Ronnie Reagan, Pope and Vslav Havel

last lecture – from the moment of the radio politics changes

can't understand WWII without mass propaganda – Hitler's & Japan's Emperor religion

Economy continues deteriorate – Revolution?

Socialism strong in Europe – But America is the land of individualism and opportunity

Socialist Norman Thomas gets 2.2% of vote

Gross National Product 56% of 3 years before

40% fewer hours worked

Interest rates on short term treasury bonds is negative

Banking panic – most banks and stock exchanges are closed

widespread suspicion that FDR will go off gold and devalue currency

INAUGURAL – DETERMINED TO RAISE SPIRITS

"So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself - nameless, unreasoning unjustified terror which paralyzes needed efforts to convert retreat into advancer"

MAGICAL EFFECT – HOOVER HAD 1 PERSON TO ANSWER MAIL

FDR needs 70 - 450,000 LETTERS & CARDS FIRST WEEK

Press Conferences – irresistable charm – press never shows public he is crippled

meets 30 times in 100 days – at least once a week thereafter

Fireside Chats

CALLS for strong EXECUTIVE POWER

active government – the invisible hand has failed miserably

Bold persistent Experimentation – takes his brain trust from wide variety of groups

businessmen, Wilsonians, Republicans, reformers, labor

Franklin Roosevelt has one strong principle - economic justice : "The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little."

BANK HOLIDAY – under authority of Trading with enemy act from WWI

3/9 Emergency Bank Relief Act – not read – pass by accclamation 38 minutes

money flows back into the banking system

FDR had scared it out – by playing cards close to vest – no cooperation with Hoover

3/20 Economy Act – reorganized govt – cuts pensions of veterans – most powerful lobby

3/21Civilian Conservation Corps CCC Dams to stop soil erosion & tame rivers

2 billion trees planted ,83,000 miles telephone wire.

122,000 miles new minor roads and trails. 23,000 water sources in wilderness

3/22 Beer and wine under 4% alcohol legal – big taxes

4/19 off the gold standard gold illegal to hold – recall coins & bullion

will devalue dollar $20.66 / oz to $35 / 0z

FDR ignores advice of paper money inflationists – more cautious corse

failed to increase domestic money supply and bank credits

Thought in terms of overproduction instead of underconsumpion too

and failed to cooperate with England and France in international stabilization efforts

Gets international agreement in 1936

5/12 Federal Emergency Relief Act – $500 million to states for relief

AAA - Agric Adjustment Act limit production , raise prices, finance farm mortgages

cut off surpluses at the farm by plowing under instead of distributing around the world

which will hurt farmers around the world (which we do now)

farm income rises 250% 1932-1935

AAA leaves out small farmers and sharecroppers –

the land taken out of production might be their share-crop land

5/18 Tennessee Valley Authority - Public Power for 7 states –

improve navagatio & flood control

power and light to poor rural communities

look beyond state & city boundaries for big project

May 1935 Rural Electrification Act –

run wires in sparcely populated areas where private companies won't

transforms economically backward impoverished area to heavily industrialized

relatively wealthy area

forests replanted – erosion halted, cheap fertilizer renews fertility

FDR wanted regional projects in all underdeveloped areas – this is the only one he gets

would have been good to have one for Mississippi levees etc

5/27 Federal Securities Act – full disclosure to investors –

first regulation for Securities business – transparency

6/16 Farm Credit Act – refinance mortgages

Emergency Railroad Transportation Act

National Recovery Act NRA Industrial Cartels to limit competition

Most collectivist move – ease antitrust – labor gets collective bargaining

codes to coordinate labor, management – set working conditions,

no child labor

Large businesses got control of codes – lower wages women doing same work

enforcing codes jammed courts – breakdown in enfrcement

Ickes too cautious – spends hardly any of PWA's $3.3 billion to fuel consumption

focus on overproduction – not enough on injecting purchasing power

found unconstitutional

Glass-Steagall Banking Act – revolutionizes US Banking– Fed Reserve control greatly strengthened –

many more banks eligible for membership

power t set Margin requirements to stop speculation on Wall Street

Reserve requirements for banks

Set Discount rates – control open-market operations

FDIC – Deposit Insurance – eliminate bank panics ever since

Fed governors 14 year terms – independent from politics

First time since Andrew Jackson US has functioning empowered banking system

Weaken Morgan – have to split off investment businesses from banking business

Upward path unmistakable despite some mistakes – going in right direction

Money supply and wholesale prices increase 10 to 12% a year for 4 years

BUT unemployment stays high 14.3% in 1937

Persistent unemployment has its good side - leads to Kids staying in school

HS diplomas double in 1930's

College degrees up 50%

1934 – SEC Securities and Exchange Commission – Joseph Kennedy first chairman –

set a thief to catch a thief

Biggest resistance from Richard Whitney – President NY Stock Exchange

when he is led out in handcuffs and sent to Sing-Sing resistance slows

NYSE gets new rules – much less cheating

Democrats from a party emphasizing states rights and minimal government

to majority party – next 62 years GOP control House only 4 years

1936 Repubs 16 senators 89 representatives

New Deal Coalition - Eastern Dem establishment friends, Wilsonian reformers,

racist and conservative Southerners, farmers, ranchers, labor unions, urban ethnics

FDR must personalize – combines New Freedom of Wilson and Square deal of Teddy

, Blacks -MAJORITY VOTE DEM 1936 first time since Civil War

but FDR must placate South – FDR tries to intervene in primaries 1938 to defeat conservative & racists – loses big-time

FDR NOT A RADICAL – NO SERIOUS INCOME REDISTRIBUTION

BUT TAX SYSTEM MUCH MUCH MORE PROGRESSIVE

DOES NOT Nationalize banks – private enterprise with transparency

Safety net for poor

Complaints from Left

Frances Townsend – old age pensions to get $ into circulation

Upton Sinclair – wrote Jungle meat packing – EPIC – end poverty in California

charged with being Commie as he runs for governor Calif – fake documentaries

FDR wusses out of endorsement –

deal with republican Governor not interfere New Deal pgms

Huey Long – every man a king – country humor - quotes deuteronomy –

Schools, roads and hospitols built

Polls indicate he can take 3 or 4 million votes from FDR in 1936

12 foot thick concrete in some roads

free textbooks for kids – tax oil and other big business interests

Senator – introduce "soak the rich" – outlaw incomes over $1 million

eveyone gets $2500 guaranteed annual income

assassinated

Father Coughlin – National Union Social Justice – loves FDR at first

then hates – has not driven Jews and money changers out of the temple

SECOND NEW DEAL

FIRST NEW DEAL WAS COALITION OF ALL CLASSES

Business and financial classes & conservative Democrats turn against adm

just before election Liberty League formed August 1934

"destroying constitutional government, coddling labor, spending country into bankrupcy

Liberty league try to gain control Democratic party

revolt of conservatives coalesced lower and middle classes

election 1934 – bigger margins – 2/3 Senate

away from Central planning to interests of specific groups

UNEMPLOYED GET WORKS PROGRESS ADMIN WPA

$10 billion – 13 million unemployed put on payroll - get avg 1 years work

half million miles country roads, 40,00 bldgs, 350 airports etc

artists and writers – Orson Welles

monthly average 2.1 million on payroll

May 1935 – Supreme court overturns NRA on oil, then Railroad retirement act

language suggests all social welfare / security legislation may be UNCONSTITUTIONAL

Nation and FDR shocked to see "horse and buggy" court invalidate laws–

confusion on future cases

Big arguments now on same topic - about commerce clause

Cases now whether govt can do wetlands protection, environmental law

Federalists say no mostly

definition of commerce - early judicial activism throws out common law

which all founders assumed beneath constitution –

Common law has death penalty for tanners who pollute river and kill someone

1936 – AAA partially unconstitutional

NRA was weak on labor – many company unions – FDR gets behind Wagner act

National Labor Relations Act –July 1934 - Wagner act – right to organize –

elections to select representatives – company unions gone

NLRB oversees elections

Magna Carta for Labor

United Auto Workers – sit-down strikes – get contracts with GM big industries

1933 AFL has 3 million members, by 1945 they have 14 million

some loose ends created – the way we supply health care – only unions and the rich get it

Re-enact some laws to meet court objections

1935 - Social Security – every European country has had similar system for half century

America's DNA – early Republic – frontier conditions

pensions funded from payroll tax employers and employees

matching state funds for non-SSecy eligible old, dependent mothers & children (welfare reform) handicapped, public health funding, and aid to blind

unemployment insurance

enlatrged and strengthened until B43

Tax reform – change entire system to progressive basis –

from 1940 to 1980 the lowest 20% are the fastest growing segment

Graduated tax on corporations

surtax on high incomes – estate tax to maximum 70%

attack on concentrated wealth -

ELECTION 1936

FDRE – campaigns against "economic royalists" "This generation of Americans has a Rendezvous with Destiny"

Alf Landon – Literary Digest sez he will win – FDR 28 million to 17 million

Blacks to Democrat party

SUPREME COURT AAA unconstitutional 1936 – food and coal "local" not interstate commerce ignore those trains and trucks (hapless toad)

cannot regulate child labor, wages and conditions – violation of freedom of contract

as we noted earlier 14^th amendment re-written in Slaughterhouse – no protect black vote

does protect corporations as "Persons"

PROGRESSIVES IN uproar

FDR submits Federal Judiciary reform "COURT PACKING"

DID NOT CONSULT congress – uproar against ignoring separation of powers

Supreme court resolves crisis – reverses itself on commerce – retirements and replacements transform court

UNIONS- CIO formed in 1937 – AFL has done only craft – skilled organizing

USSteel unionized 1937

Autos – GM 1937 Ford 1040

FDR denounces sit-down strikes – John Lewis of UMW becomes an enemy

Wagner act leaves out many categories of workers – only 28% non-farm org by 1940

CIO 5 million 1941 AFL 4.5 million

Second Inaugural "1/3 of nation ill-housed, ill-clad, ill-nourished" (2/3 by modern standards)

first attention to "invisible" people near bottom

1937 – FDR falls back into old orthodoxy - attempts to balance budget

economic downturn again

industrial output falls 33% - unemployment up rapidly

Congress becomes enthusiastic New Dealers again

Farm Tenancy – help sharecroppers buy land

National Housing – attack slums

AAA – soil conservation – producers can limit production by 2/3 vote

Fair Labor Standards (Wages and Hours) minimum wage 25 cents – to go to 40 cents later

WPA gets $3Billion for Public works in states

1938 – FDR trys to intervene in promaries and defeat conservative Dems – loses miserably

all further advances dead - civil rights, women etc – FDR looks overseas,

Lose domestic power till Pearl Harbor

Reform may have impeded investment by scaring the investing classes

US responds for first time to challenges of industrialization

sweeping administrative and regulatory reform

Increase power of federal government

Federal Share GNP 3% 1929 9% in 1940

National debt 9% to 16% GNP

FDR erects superstructure – to be adjusted and perfected thru 1970's

Responsibility of government – was balancing budget and paying down debt

becomes provider of last resort of essentials for an adequate stadard of living

freedom changes – considers the social requirements for freedom

is a sharecroppers child as Free as Bush or Forbes kid?

New Deal Concensus lasts till 1980

Strengthens after WWII.

Richard Nixon – "we're all New Dealers now"

Looking forward from this view of active government to

Reagan's "Government is the problem"

Jimmy Carter video?

Much left undone – women, blacks, agric labor

FDR Renews faith in Democracy when it is failing all around the world

PROHIBITION (18^th) – US is the only society to outlaw their customary intoxicant

2.6 gal/year just before prohibition .97 gal/year at end Repeal (21^st 1934)

subsidize crime – black Market – Capone

Harry Anslinger, head of federal Prohibition enforcement bureaucracy - needs employment after repeal

testifies about AMA findings "no medical use for marijuana" but tincture of Marijuana is one of most commonly used in pharmacaopia

Movies – Reefer madness

Hearst (owns many newspapers) just got German patents on process making paper from wood instead of hemp.

When immigration is cut off in 1920's Mexico was the only source of cheap labor left. Anglos resent competition.

Marijuana is the intointoxicant of choice for Mexican immigrants and Blacks.

Confluendce of economics, race and bureaucracy = outlaw marijuana.

Result in late 1990's : In US 39% kids experiment with Marijuana

In Netherlands (where legal and regulated) 3-6% of kids experiment

Prison-Industrial Complex & thrives with Moralistic thinking

New Era to Great Depression

Lec 10 New Era to Depression

RETREAT FROM THE WORLD

Immigration cut drasticly on racist & patriotic grounds & workers fearing job competion

Jews had been coming to US from Palestine faster than entering Palestine

now nowhere to go except Arab lands – Israel and Holocaust enabled

POLITICS 1920 -1928

most of the country still slightly progressive – but progressive in many different ways

Democrats are horribly split culturally - no uniting figure – not a national party

eastern & midwestern big-city ethnic wing - labor progressives – Al Smith

anti-prohibition Catholics Jews –

southern and western rural populist progressives - nativist wing –

anti-evolution (because it is foundation of Social Darwinism) pro-prohibition

suspicious of big-city ethnics

William Jennings Bryan - Scopes Trial –

treated with contempt by cosmopolitan "elite" "boobsoise"

KKK revive – in North too - 1924 4.5 million members

Nativism – anti-black-Catholic-Jewish-cities-permissive-liberal- evolution- prohibition

1920 Republican primaries 3 progressives got almost all the votes

Convention deadlocked.

Republican (GOP) party machinery,

controlled by Eastern & midwest financial & industrial & oil interests

party bosses especially OIL interests take over Republican Convention –

Harding PICKED – Amiable gregarious with grassroots appeal - lazy undisciplined

below average intelligence - no curiousity-

Progressives refuse Vice Presidential nomination – Coolidge tapped

Oil interests pick Interior secretary Fall

Harding knows he's over his depth – depressed by nis friends activities - dies

Teapot Dome Scandal – ENRON of the 1920's

Coolidge “Business of America is Business”

Harding Coolidge economics pro-business and pro-rich, not free-markets –

Agricultural subsidies for agribusiness while small farmers are in a depression

small farmers are even more disadvantaged by subsidies.

small farmer is doomed in the long run.

cannot compete with the large mechanized farms.

FARM ECONOMY

During the war US farmers had done well exporting food to countries upset by war.

Marginal lands were brought into production , yields increased & labor requirements decreased

gasoline powered tractors quadrupled in war years to 85,000 tractors –

almost a million tractors by 1929..

Tractors reduced demand for horse and mule-power.

frees pasture / grazing land for crops or dairy – increasing production even more.

War ends- other countries resumed normal life - huge surpluses

prices slumped dramatically cotton 35cents a pound to 16 cents, corn $1.50 to $.52 a bushel

wool 60 cents to 19 cents/pound.

Just as in manufacturing - overproducton – continuing and increasing - no end in sight.

Farm states in US have disproportionate power in the Senate

(sparsely populated farm states with 18% of the population can elect 51 senators)

so we still subsidize overproduction - huge subsidies for crops and water projects.

Third world and small farmers hurt

Farm population net decline in 1920's

13 million move to cities - especially big cities which have 50% growth

CONCENTRATION OF WEALTH

Harding-Coolidge & Hoover

Tariffs drasticly increased – tax load increased on workers, farmers, & poor

Progressive taxes repealed – estate and excess profits - top rate income tax 73% to 25%

Widening gap between Rich and poor

national wealth doubles but most of increase to top 5% to 10%

from 1922 - 1929 manufacturing wages rise 1.4% while common stocks go up 16.4%

The Top 1/10 of 1% (24,000 families) have same income bottom 42% (11.5 million families)

PROHIBITION (18^th) – US is the only society to outlaw their customary intoxicant

2.6 gal/year just before prohibition .97 gal/year at end Repeal (21^st 1934)

subsidize crime – black Market – Capone

Harry Anslinger, head of federal Prohibition enforcement bureaucracy - needs employment after repeal

Hearst (newspapers) just got German patents on process making paper from wood instead of hemp

Mexican immigrants and Blacks - marijuana is their intointoxicant of choice

Confluendce of economics, race and bureaucracy = "Reefer Madness"

Result late 1990's : In US 39% kids experiment with Marijuana

In Netherlands 3-6% of kids experiment

Prison-Industrial Complex thrives with Moralistic thinking

Women in the 1920's have slightly more freedom & status. They make up ¼ of non-farm labor force Slightly decrease divorce

Spectator sports - boxing and baseball

Movies – sex & exotic adventure – escape from daily life into fantasy

Flight – aviation technology advancing rapidly. Charles Lindberg flys Atlantic solo in 1927.

"Lucky Lindy" becomes incredibly huge celebrity. Princess Di to 10^th power.

All the fluff in the media makes it harder to make people pay attention to politics, economics, etc

first time since Andrew Jackson voting below 50% 1920 even lower 1924

TECHNOLOGICAL / ECONOMIC REVOLUTION

US was experiencing massive productivity growth

interchangable parts &

assembly line &

Fredrick Taylor's efficiency spiked productivity

Manufacturing labor does well enough for the new cheaper toys

Top 60% of Americans have enough money for great new toys

Before WWI a car costs 2 years wages avg worker

by 1929 car costs 3 months wages -

most voters have limited desire for reform – little interest politics

- let the good times roll

AUTO production went from 1000 hours of labor per car to 100 hours with Ford's advances

Ford voluntarily paid $5 /day so his workers could buy his cars – but few other businesses follow

Car goes from utilitatrian to symbolism of comfort, power, beauty, luxury, & status

GM has more marketing savvy - with many models to demonstrate rising status levels

overtake Ford's utilitaian simplicity "any color you want as long as it's black"

Cars make suburbs possible – starting a slow trend of increased economic segregation

sprawl westward

Cars begin liberating a small upper-middle Scott-Fitzgerald-ish youth culture – flappers

productivity rising much more rapidly than earlier ; 1909-1919 7% industry 6% agric

1919-1929 40% industry 26% agric

Electric power and radio are 2^nd most important economic interest by 1929 –

A stock boom like the internet

Electric causes great continuing increase in productivity

Radio explodes after the war – with nationwide broadcast networks that can unify the nation –

4.5 million radios a year by 1929

Hoover did NOT believe in Laissez Faire –

but in active management of social change through informed,

scrupulously limited government action

Hoover much different Harding and Coolidge –

has supported labor and government-business cooperation

Believer in use of social science data

Sees public works as a tool to offset slumps and contractions

"the federal government should use all of it's powers"

Depression in 1921 – makes active efforts – cut working hours from 12 to 8 in steel industry

Reform has been ignored since the entry to the war

wants old age insurance, bank reform, unemployment and accident insurance

Agriculture marketing act – government buys surplus

Hoover has just come into office when the Stock Market crash hits

Does not have time to do much before the Crash

Hoover is handicapped by the limited nature of the National government

Federal budget then approximately 3% GDP – 20% now

State and local much bigger than Federal – total government 15% GDP –

twice as large as 1914

education, infrastructure, war debts (1/3 total federal spending)

Hoover urges states and private industry to increase construction budgets

Federal public works doubled

State and local do as much as possible

Hoover does not propose big deficits

Federal Reserve is independent of Hoover – cannot force to finance deficits

FDR will be similarly timid – cut spending much too soon after minor hints of recovery

This orthodoxy is powerful before Keynes is accepted

John Nance Garner – Majority leader – balanced budget – to right of Hoover

hinder Hoover's efforts

The extreme of lunacy - Andrew Mellon – cut spending and run a surplus in a depression.

"liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge

the rottenness out of the system. High costs of living and high living will come down.

People will work harder, lead a more moral life."

Even progressives no idea what to do

like bleeding sick people in Medieval times?

Mellon's Social Darwinist "reward the rich" tax policy – which concentrates wealth - is actually a major cause of the depression – lack of demand from consumers

Gold Standard – origin of money in Goldsmiths –

becomes almost religious belief that money will be arbitrary and unreliable

without connection to Gold

"no merchant will know what he might receive by the time his goods were delivered"

Shortage of gold – money supply does not expand to meet increased production

leads to deflaionary economy

Britain goes off Gold in 1931 – moderate recovery in 1932

America / Mellon prefer to let children starve, homes and land foreclosed, etc

Trade-off between bondholders and workers

to counter deflation must go off gold

1932 - Smoot Hawley Tariff – big increase tariff levels

generates similar protectionist moves around the world

Brits create protected area in Commonwealth & colonies

Hoover fails to veto even though he knows it is horrific and will worsen situation

hopes an empowered tariff commission will let him mitigate rates later

Nationalism encouraged everywhere.

Not enough political power or will to veto.

Always easy politically to increase tariffs

every congressman protects his friends

WEAKNESSES IN THE U.S. ECONOMY BEFORE THE GREAT DEPRESSION

Each of the factors present in your strong, balanced economy are necessary and interdependent. If any factor becomes unbalanced, it will effect the stability and strength of the entire structure. If too many factors become unbalanced, the entire economy might collapse.

POOR TAX POLICY CONTRIBUTES TO CENTRALIZATION OF WEALTH–Andrew Mellon, one of the richest men in America, served as Secretary of the Treasury under Harding and Coolidge administrations. Mellon believed that wealth should be rewarded, not punished by high tax rates. By 1929, more than one-third of all personal income belonged to the top 5% of the population. This was problematic, because mass production relies on mass consumption. The rich could spend only so much money; they invested a majority of it, but there was already plenty of productive capacity in 1929–what was needed was more consumption, more markets for the goods already being mass produced.

INDUSTRIAL OVERPRODUCTION–Henry Ford had introduced the idea of the assembly line and mass production to the United States at the turn of the century. Other manufacturers soon followed suit, vastly expanding industry’s productive capacity. But Henry Ford had also increased his workers’ wages to $5 a day, arguing that the workingman should make enough money to buy the car that he worked to manufacture. In other words, he wanted to foster the mass consumption that would support mass production. Few other employers followed Ford’s lead on wages, however. Instead they preferred to maximize their own profits, which served to centralize wealth and undercut mass consumption. .

OVERINVESTMENT IN THE STOCK MARKET–Despite heavy investment in plant expansion and new technology tapering off in the late 1920s, wealthy investors still sought outlets for their surplus capital, and they turned to the stock market. In addition, many small investors hoped to get rich quick by borrowing the capital they needed to buy stocks–this was called buying on margin. In one week in 1929, stock brokers’ loans to such investors rose $137 million. This fueled an incredible rise in the value of stocks. In a little over a year, selected industrial stocks climbed by nearly 200 points on the New York Stock Exchange. But the value of the stocks had no relationship to the actual growth of the nation’s corporations, their value, or the expected dividend of the stockholder.

HIGH TARIFFS HURT BOTH IMPORTS AND EXPORTS–During the 1920s, the United States maintained a high tariff (a tariff is a tax on imported goods), which raised the price of imported goods relative to American-made goods. This made it harder for foreign countries to export their goods to the United States and earn the dollars they needed to pay back loans or buy American goods. The lack of competition with foreign goods also weakened U.S. companies and led to other nations raising tariffs in retaliation on American goods, which hurt the ability of the United States to export goods. So the U.S. had fewer and fewer markets overseas for the mass-produced goods it was making. So U.S. tariff policy hurt the ability of the other countries to buy U.S. goods and to repay U.S. loans and the ability of American companies to export their goods to foreign markets.

BELIEF IN ENDLESS PROSPERITY–Through most of the 1920s, the United States economy as a whole enjoyed unprecedented prosperity. As a result of World War I, the U.S. had become the creditor to the world, and New York City the financial center of the globe. American corporations found ready markets for new inventions like the sewing machine and new cultural products like movies both at home and overseas. This prosperity was reflected in the rising stock market. Increasingly, Americans believed that this prosperity would never end. Their optimism led to widespread buying on credit and helped fuel some of the stock market speculation. However, too many Americans were living on the very edge of their means, vulnerable to any disruption in the economy because they did not have savings to fall back upon.

WEAKNESSES IN THE BANKING SYSTEM–Banks are the backbone of the economy. They supply the credit needed to build homes, farms, and businesses. But to maintain their stability, banks must be careful to ensure that their loans are sound–that there is a good chance that they will be fully repaid or that the value of the investment can be reclaimed if the lender fails to make the payments. But there were very few regulations governing bank loans in the 1920s. Many banks floated loans to stock brokers to support speculation in the stock market. Other loans were made to Germany so that it could make its reparations payments to France and Great Britain, which in turn repaid its war-time loans to American banks. Ultimately, these and other nonproductive loans weakened the banking system significantly.

DESTRUCTION OF NATURAL MARKET FORCES–In the nineteenth century, any gap between production and consumption was solved automatically by natural market forces like the law of supply and demand. Under this law, industry was forced to generate demand by lowering prices. But in the twentieth century, large corporations often manipulated rather than obeyed these natural market forces. Instead of lowering prices or redistributing income, they created artificial needs through advertising; they generated a continuous demand for new goods by bringing out new models or colors each year; and they compensated for a lack of consumer income through new credit mechanisms like installment buying. But these artificial efforts to boost demand were insufficient; by mid-1927, consumer demand had dropped steeply, and business inventories increased 300%.

AGRICULTURAL ECONOMY ALREADY IN DEPRESSION–World War I had created a huge demand for agricultural goods, which led to a sharp increase in farm product prices, and many farmers expanded their production, often taking out mortgages, during this period. But after the war ended, agricultural prices fell sharply. U.S. farmers also struggled with declining soil quality due to overplanting and erosion, especially in the American South. So while the rest of the economy seemed to be booming, agriculture was lagging behind. This also meant that large sections of the country, especially those that were rural, fell behind the rest of the country in terms of modernization and conveniences, such as electricity.

Banks start to fail big-time 1930

Revenue act 1932 - Huge deficits – 60% of federal expenditures - lead Hoover to ask for tax increases

believes it will stabilize Banking syystem and mke loans available for business –

critics call "trickle down" – want to spend directly on public works – but this is a minority view

Farms overproduce – people starving

WORLD DEPRESSION GREAT depression was not ours alone and had huge political effects.

GERMANY- earlier: Because of the punitive treaty: WEIMAR Republic saddled from birth with the ignominy of defeat and the harsh economic and psychological weight of the Versailles settlement staggered and reeled through the 1920s.

Germany defaulted on reparations payments in 1922 and France occupied the Ruhr, Germany's industrial heartland, touching off a fantastic spiral of hyperinflation that rendered the German Mark virtually worthless.

Instead of helping Europeans as in WWII, US had demanded repayment of loans because France would not link forgiveness of debt to cutting reparations

There were some major adjustments in payments mid 1920's so German economy would not be crippled.

Germany had recovered by the late 1920's thanks to loans from US

After WWI US world's biggest creditor BUT Lots of bad debts.

We lend $ to Germany to pay reparations to France & England -

which they use to repay war debt to us.

Delicate artificial house of cards.

.

Leaders know we should forgive debt to let our trading partners recover

but voters everywhere still angry about war

Voters disillusioned and disgusted – politically unpopular everywhere to forgive debt

Remember what General Pershing said last lecture?

"News of the war's end reached Lance Corporal Adolf Hitler in a military hospital in the town of Pasewalk, near Stettin in Pomerania. British rained gas grenades on the German trenches. By morning Hitler's eyes were "red-hot coals," and he was blind. ........

Hitler and his recuperating comrades were informed that a revolution had dethroned the kaiser. The civilian leaders of the new German republic had sued for peace, even while the German army was still intact in the field. For the good soldier Hitler this was "the greatest infamy of this century." Still half blind, he stumbled back to his cot, buried his head in his pillow and wept. Revolution and surrender, Hitler concluded, were the work of depraved Marxist and Jewish criminals. Their infamy must be avenged. "The flush of indignation and shame burned in my cheek," he wrote, and "in the next few days I became conscious of my own fate....I resolved to become a politician."

Hitler, the sulking and penurious Viennese art student, had abandoned his native Austria and fled to Munich to join the German army in 1914. In his military regiment he found the warmth of camradeship that had eluded him in the aching vacuity of his civilian life. The outbreak of war, he wrote, "seemed like deliverance from the angry feelings of my youth."

John Maynard Keynes wrote embittered and astute tract in 1919, The Economic Consequences of the Peace, contained three lethal flaws. It transferred important coal, iron, and steel properties from Germany to France and prohibited their utilization by German industry. "Thus the Treaty strikes at organization," Keynes declared, "and by the destruction of organization impairs yet further the reduced wealth of the whole community."

The treaty, Keynes concluded, insanely perpetuated in peacetime the economic disruptions of the war itself. To the military catastrophe of the fighting was now added the economic burden of a vengeful peace.

As German unemployment mounted to three million persons in 1930, Nazi Party membership doubled. When Germans went to the polls in September 1930, the Nazi vote vaulted to 6.4 million.

2-15-2006 Lecture 9 Birth Civil Liberties

Outline 2/15/2006 Lecture 9 – Conservative Backlash (notes on Zionism Ottomans & Vietnam)

Freedom of Speech fragile & much suppressed early 20^th century

not much celebrated or protected by courts in 1920

Story of American Freedom picks one glimmer of hope From excesses of repression around WWI

: backlash = pro-civil liberties later.

Courts move to construct legal basis to protect free speech.

modern Federal legal system 1933 till approx 1980

generally expands protections and opportunities implicit in the Bill of Rights

“incorporated” (made the states abide by) bill of rights.

Last lectuure – Progressive Idealism rules

Committee on Public Information – most successful advertising campaign in American history

beginning of “public relations” profession – marketing etc

BUT: not just propaganda - real difference German aristocracy - democracy and justice at home

solve problems of poverty justice oppression ridiculous gulf rich and poor

We make big moves toward “industrial democracy”

8-hour day living wages arbitration not class-war

Progressives believed in Federal government as an agent to rationalize society

national unity “unity” to support War effort and Progress

instead of class war – impose justice in labor relations

Maybe even disseminate progressive values around the globe with Wilson's vision

Disillusion:

failure of Self determination - not applied to “backward countries” -

Europe gets self-determination

Africa, Asia, Middle East – colonialism in disguise with “mandates”

Prohibition- government can do dumb stuff

Repression & conformity = other side of “Unity” or “communal purpose”

Labor rights – state courts in progressive era forbid public speech, picketing, distribute literature

Laws passed to limit anti-labor injunctions overthrown by courts

IWW main crusader for Labor rights - killed, turned over to vigilantes

they're “not Patriotic”

Workers After War

Capitalists want to reassert control - resumption of anti-union activities

Propaganda campaign – link unions and socialism – foreigners influence on American life

“Industrial Liberty” Business siezes on rhetoric of democracy

open shop – collective bargaining impedes personal liberty

Carrots :Private pensions , medical insurance, job security

Poison Pill in carrot

Scientific management – Fredrick W Taylor – efficiency experts –

rigid control work process

As Kramer found out in the cigar-roller's episode

People with the best special skills are worth a little extra $ - exploding crepes

Armistice – 4 million workers back from war -lower demand labor -

1919 – postwar violence and paranoia –

Greatest wave of labor unrest US history 3000 stirkes 4 million workers

Workers had believed wartime propaganda – hopes too high

Steel Strike 1919-1920 crushing defeat of labor and progressive hopes

Political paranoia :

Boston Police strike – public safety threatened – outrage –

Governor Calvin Coolidge Calls out Nationa Guard to great Public approval

(Reagan and Air Traffic Controllers)

March 1919 - USSR creates Communist International “We will bury you”

and kill anyone with a few extra $ or a horse

Red Scare – labor unrest and Russian Revolution

deportation of aliens

“criminal syndicalism” is any advocacy of change in industrial ownership

Palmer Raids : arms, bombs ........... Bupkus

Black disillusion – had thought war would prove their loyalty and lead to rights

orgy of violence - 11 lynchings Ga 1918

NAACP driven out of South

African lack of Self-Determnation – WEBDuBois goes to Paris

disappointed hopes lead to separatist movement Marcus Garvey – demagogue

Women's Rights – Unified movement on fight for voting rights – splits afterward

“Difference” feminism based on Motherhood

against Equal Rights Amendment ERA –

would sweep away mothe's pensions and protective legislation

suffer setback in Conservative reaction after war -

courts overule federal child labor law in 1923

congress repeals 1921 federal assistance infant and child health in 1929

“Equality” or “egalitarian” feminism

– includes “lyrical Left” Dewey's “community of free inquiry” Isadora Duncan

free expression on matters economic, artistic, and sexual

feminiest, artists, socialists

Women's emancipation – autonomy, free sexual expression and reproductive choice

birth control information

“Obscenity “ regulations stop distribution of sex-education and birth control

political expression of new sexual mores

separate sex from reproduction -

women control own body – not control by men

Margaret Sanger – directly challenge laws banning birth control device & information

one of 11 children sees her mother suffering

Feminism degenerates into “lifestyle” - advertising and mass entertainment- no political content

Scandelous pursuit of sexual pleasure becomes device to market goods – fashions, cars, cigarettes

cigarettes “torches of freedom”

consumerism sapping engagement with public issues

PROGRESSIVE FUNDAMENTALS

Idea of conscious creation of now political order requires democratic self-directed citizen

IQ tests – large numbers not fit for self-government

Freud – we got sex on the brain and are easily manipulated

Advertising – emotions not rationality

Reagan turns every issue into an emotion

Lippman Public Opinion & The Phantom Public

government by expert

voters easily mnipulated “manufacture of consent”

Progressives rediscover danger in Government

– can do prohibition etc

Civil Liberties give protection against the state they had such high hopes for

ACLU – antistatist – Baldwin profound distrust of government power

Scientific Racism

“America must be kept American” Women who marry Asians forfeit their nationality

Cut off immigration Eastern Europe – Jews

more moving from Palestine to US than into Palestine until approx 1924

no Israel problem today if .... NO HOLOCAUST if .....?

Conservatives “Back to Normalcy” ascendent

Taxes shift back to Tariff – income distribuition back towards Guilded Age

lack of consumer power ---> Depression

Deflation = too few consumer dollars chasing too many goods

ZIONISM -

history of gruesome anti-semitism – Jews as "Christ Killers" and usurers

Jews think they are making serious progress toward assimilation

increasingly more secular European states – Napoleon 1800 Civil Code

until the late 1800's.

Assassination Tsar Alexander II Russia 1881 - huge new wave of anti-Semitism - "Pogroms"

Flight of Russian Jews increases anti-Semitism in the countries they're fleeing to

yiddish speaking insular clannish villagers didn't assimilate well.

France: Jewish officer framed as a spy – Dreyfuss Affair

Austria: populist anti-Semitism

attracts frustrated young artist, Adolph Hitler, Jewish artists get all the commissions.

New scientific racism anti-semitism

Jews couldn't escape even by converting to Christianity.

Populism in service to Tsarists & aristocrats &Religious power

Liberalism & science & enlightenment are enemies.

Jews are “Liberals”

Zionism – Jews need a refuge - their own nation just like many other people.

ZZ mostly secular, not religious Jews

25,000 Jews in Palestine

Balfour Declaration - Zionism gains support of a major power

Arthur Balfour, British Prime Minister 1917.

Jewish scientist Weizmann – invents chemical process to produce gunnite

gunpowder of the English navy – no raw materials access because of the war.

Balfour tried to stop Jewish immigration - "Aliens Bill"

simulatneously ashamed at the treatment of the Jews by Christianity

in awe of the contributions of Jewish scientists and artists.

Right to decide who will fit into the "community" of a country.

English religious elements read Old Testament literally

the Second Coming of Christ and the end times

require Jews take “Holy Land” again & build Temple.

Ottomans

"Sick man of Europe" – falling apart – Russians, Brits, French Engl, Germans all want a piece –

geologists knew there was very serious oil under Iraq and discovered under Iran 1908

bullied by everyone and try to play the powers off against each other.

Wary of:

Russians to north - have always wanted a warm-weather port

French were the first to invade directly - around 1800. Napoleon came to Egypt

DeLesseps dug the Suez Canal –

became a point of contention between England and France.

Brits won 1880's thanks to machinations of one of their greatest Prime Ministers

Benjamin Disraeli – a very proud Jew, a writer of romantic novels,

English nationalist devoted to and loved in turn by Queen Victoria.

Help from?

Germans – late to the race for colonies

only unify1880' - agressively trying to make up for lost time.

Agressive Ship-building worries British.

French beaten and humiliated in war around 1870.

extracted reparations from French after war.

Ottomans and Germans treaty 1903 – Berlin to Baghdad RR

RR gets oil rights either side track

Winston Churchill – English naval minister

strongly focused on OIL - navy switching over cumbersome & less efficient coal.

Anglo-Persian Oil Company already concession in Iran.

1914 – WWI - Ottomans side with the Axis Powers – Germany & Italy & Austria-Hungary.

Brits invade – grab Iraq – (boundaries = oil concession)

Armies get as far north as Mosul (big oil city) -

Declare oil concession "enemy property"

"Our armies come not as conquerors or occupiers but as liberators"

Lawrence of Arabia - British agant among Arabs

Arab intellectuals & Turks see weakness of Ottomans

turn to nationalism

Faisil – elected rep – deal with Brits –

A. you can have Palestine for Jewish immigration (agreement Weitzman)

you can have Iraq and it's oil

B We get Syria – center of Muslim faith and Arab Nationalism

July 24 1920 – League of Nations announces Mandate –

Brits have another secret agreement with French Duble-crossed

France gets Syria & Lebanon (split for French religious reasons)

give Christians state they can control.

French kick Faisil out of Syria - 8000 Arab warriors on horses wiped out

-tanks and machine guns –

"YEAR OF CATASTROPHE" Christian infidel gets dominion over all Muslim Arabs

Jews get homeland Palestine

1800 - 90% Muslim Arab 8% Christian Arab 2% Jewish

Financial conquest – Jews purchase land with outside $

Faisil warns peace conference of long Jihad

Random example of colonialism:

Vietnam – troublesome colony for the French – but $ and pride in their "mission civilizatrix"

5000 Brits rule 300 million Indians – same # French needed to tame 1/10 the Vietnamese

Brits rule thru "association" : native institutions

French debate “association” – they have " a national history and ethnic identity far older than ours"

decide on assimilation "no greater honor could befall a people than to absorb ideas and culture of France"

CATHOLICS RULE!!!!

Young educated Viets study in Paris – enjoy freedom & comradeship of Latin Quarter

have books & newspapers confiscated by colonial police - possible subversives

treated as inferiors

Emperors had forbidden rice exports – feed deficit areas, save for bad years

French make it a "lucreative export"

commercial success impoverishes peasantry –

Rich French and Viets landgrab expand cultivated acreage –

– 70% landless peasants desperate – cheap labor for mines,

RRs & rubber plantations 30% uneconomical small plots

Interlocking companies – Bank of Indochina – colossus owned French govt & Paris banks

Labor recruited im manner reminiscent of abduction of black slaves by African tribal chiefs

Rubber – Michelin - indentured workers blighted by mlaria, dysentery, malnutrition

Protected market for French goods

French intransigence & primitive capitalism drives Viet nationalists from moderation to Communism

Ho Chi Minh – anti Japanese – they want colonies too –

"Drive the tiger out the front door while letting the wolf in through the back"

visits San Fran, Boston, New York – dazzled by skyscrapers –

in Harlem impressed that Chinese have rights of citizen –

decides when he declares Viet independence will quote Declaration of Independence

Goes to 1919 Peace Conference – begs US for Audience

Lenin “Imperialism: The Highest Stage of Capitalism”