United States: From Prosperity to Depression

From Prosperity to Depression

The country voted for a return to “normalcy” when it elected Warren G. Harding President in 1920, but the ensuing period was a time of rapid change, and the old normalcy was not to be regained. The Republican governments of the decade, although basically committed to laissez faire, actively encouraged corporate mergers and subsidized aviation and the merchant marine. Harding's administration, marred by the Teapot Dome scandal, gave way on his death to the presidency of Calvin Coolidge, and the nation embarked on a spectacular industrial and financial boom. In the 1920s the nation became increasingly urban, and everyday life was transformed as the “consumer revolution” brought the spreading use of automobiles, telephones, radios, and other appliances. The pace of living quickened, and mores became less restrained, while fortunes were rapidly accumulated on the skyrocketing stock market, in real estate speculation, and elsewhere. To some it seemed a golden age. But agriculture was not prosperous, and industry and finance became dangerously overextended.

In 1929 there began the Great Depression, which reached worldwide proportions. In 1931, President Herbert Hoover proposed a moratorium on foreign debts, but this and other measures failed to prevent economic collapse. In the 1932 election Hoover was overwhelmingly defeated by the Democrat Franklin D. Roosevelt. The new President immediately instituted his New Deal with vigorous measures. To meet the critical financial emergency he instituted a “bank holiday.” Congress, called into special session, enacted a succession of laws, some of them to meet the economic crisis with relief measures, others to put into operation long-range social and economic reforms. Some of the most important agencies created were the National Recovery Administration, the Agricultural Adjustment Administration, the Public Works Administration, the Civilian Conservation Corps, and the Tennessee Valley Authority. This program was further broadened in later sessions with other agencies, notably the Securities and Exchange Commission and the Works Progress Administration (later the Work Projects Administration).

Laws also created a social security program. The program was dynamic and, in many areas, unprecedented. It created a vast machinery by which the state could promote economic recovery and social welfare. Opponents of these measures argued that they violated individual rights, besides being extravagant and wasteful. Adverse decisions on several of the measures by the U.S. Supreme Court tended to slow the pace of reform and caused Roosevelt to attempt unsuccessfully to revise the court. Although interest centered chiefly on domestic affairs during the 1930s, Roosevelt continued and expanded the policy of friendship toward the Latin American nations which Herbert Hoover had initiated; this full-blown “good-neighbor” policy proved generally fruitful for the United States (see Pan-Americanism). Roosevelt was reelected by an overwhelming majority in 1936 and won easily in 1940 even though he was breaking the no-third-term tradition.

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