America Dries Up

The general liberalization of morals that accompanied America’s entry into World War I fueled a temperance movement that culminated in the 18th Amendment to the Constitution, prohibiting the sale, importation, or consumption of alcoholic beverages anywhere in the United States. The Volstead Act, passed after ratification, provided for federal enforcement of Prohibition.

Gangster Culture

Greeted by some as a “noble experiment,” Prohibition was for a majority of Americans an invitation to violate the law. The 1920s, therefore, became by definition a lawless decade. Otherwise law-abiding citizens made bathtub gin, brewed homemade beer, fermented wine in their cellars, and frequented “blind pigs” and “speakeasies”—covert saloons that served booze in coffee mugs and teacups. Police raids on such establishments were common enough, but mostly, officials looked the other way—especially if they were paid to do so.

Corruption hardly stopped with the cop on the street. City and state governments were receptive to payoffs, and indeed, the presidential administration of Warren G. Harding rivaled that of Ulysses S. Grant for scandals. In this national atmosphere, mobsterism came to birth and flourished. Underlying the violence was the idea of crime as a business, and by the end of the decade, a quasi-corporate entity called the Syndicate would be formed to “organize” crime.

Countdown to Black Tuesday

If morals, mores, and ideas were freewheeling in the 1920s, so was spending. For most—except farmers and unskilled laborers—the decade was prosperous, sometimes wildly so. Americans speculated on stocks in unprecedented numbers, often overextending themselves by purchasing securities “on margin,” putting down as little as 10 cents on the dollar in the hope that the stock would rise fast and far enough to cover what amounted to very substantial loans.

Joy Ride

The fact was that so much stock had been bought on margin—backed by dimes rather than dollars—that much of it amounted to little more than paper. Even worse, although production in well-financed factories soared, the buying power of consumers failed to keel) pace. Soon, industry was making more than people were buying. As goods piled up and prices fell, industry began laying off workers. People without jobs do not buy goods. As more workers were laid off, the marketplace shrunk smaller and smaller. Companies do not make new hires in a shrinking marketplace. And so the cycle went.

Crash

Despite this cycle, stock prices continued to spiral upward. But the market showed warning signs of instability. During the autumn of 1929, stock prices fluctuated wildly, then, on October 24, the stock market was seized by a selling spree. Five days later, on October 29, “Black Tuesday,” the bottom fell out and stock prices plummeted. With prices falling, brokers “called” their margin loans, demanding immediate payment in full on stocks that were now worthless. Many investors were wiped out in an instant. A rash of suicides swept the business community; some investors actually leapt from Wall Street high-rise windows.

President Calvin Coolidge had declared during the booming mid-decade years that “The business of America is business.” Herbert Hoover, elected president in 1928, found himself nervously assuring his stunned and fearful fellow Americans that “prosperity was just around the corner.” As it so happened, that corner would not be turned for an entire decade.

The Least You Need to Know

Voice from the Past

Woodrow Wilson addressed Congress on January 8, 1918, and promulgated his “Fourteen Points”:

Stats

Stocks lost an average of 40 points on Black Tuesday. In 1930, 1,300 banks failed. By 1933, another 3,700 would fail, and 1 of 4 workers would be jobless.

A New Deal and a New War

(1930-1941)

In This Chapter

The Hoover administration during the Great Depression

FDR’s New Deal

An era of “organized crime”

Approach and outbreak of World War II

Herbert Clark Hoover was born on August 10, 1874, the son of a West Branch, Iowa, blacksmith. He learned the meaning of hard work practically from the cradle, and at age 8, he also came to know the tragedy of loss. Orphaned, Hoover was sent to live with an uncle in Oregon and enrolled in the mining engineering program at Stanford University, graduating in 1895. For some 20 years, Hoover traveled the world, earning a fortune as a mining engineer. The Quaker ideals acquired from his uncle prompted him to aid in relief efforts during World War 1, and Hoover earned a reputation as an effective humanitarian. During the period of U.S. participation in the war, Hoover served as food administrator, charged with promoting agricultural production and food conservation. At the end of the war, President Wilson sent Hoover to Europe to direct the American Relief Administration. Hoover served as U.S. secretary of commerce in the cabinets of Warren G. Harding and Calvin Coolidge.

When Coolidge declined to seek a second term (privately observing that an economic disaster was on the way, and he didn’t want any part of it), Hoover easily won election as the nation’s Best president. He ran on the optimistic platform that, if everyone would just put their heads together, poverty would be eliminated in America. The future looked bright. And who should know this better than a man justly hailed as “the great humanitarian”?