Copyright © 2001 Oxford University Press, Inc.. All rights reserved.
America the Bountiful
The state of the world after the Great War ... was ... half-blind, half deaf, and chronically dazed.... It was shell-shocked besides.... Some of what had occurred was fundamental alteration from which we would never go back.
If it is tree, as historian Jacques Barzun once observed, that "whoeverwants to know the heart and mind of America had better learnabout baseball," the 1920 season serves as a revealing emblem ofboth the country's past and its future. The game was in disarray anddisrepute, wracked by internal bickering and reeling from the infamousBlack Sox scandal in which eight members of the Chicago White Soxhad been charged with accepting bribes to throw the 1919 World Seriesto the Cincinnati Reds. It had also been stunned by tragedy thatsummer when Cleveland Indians shortstop Ray Chapman died after beinghit by a pitched bailthe first and only major leaguer killed by aninjury on the field.
Yet in the midst of deep gloom there were clear signs of a new eradawning. Babe Ruth had opened the age of the slugger by smacking anastounding 54 home runs; the National League leader, Cy Williams ofthe Philadelphia Phillies, hit only 15. The dismal Black Sox headlinesfailed to dampen a thrilling World Series between the Indians and theBrooklyn Dodgers, which included one memorable, almost surrealisticgame in which three rare "firsts" were recorded. Outfielder ElmerSmith of the Indians hit the first grand-slam homer in a World Seriesgame, and his teammate Jim Bagby became the first pitcher to hit a Serieshomer. These impressive feats were dwarfed by that of Indians secondbaseman Bill Wambsganss, who in the fifth inning pulled off thefirst unassisted triple play. A month after the Indians won the Series,baseball took a giant step to restore its credibility by appointing JudgeKenesaw Mountain Landis as its first commissioner. Landis displayedhis new authority by issuing a controversial order banning the eightWhite Sox players from baseball for life even though a jury acquittedthem of charges.
The nation, like its favorite sport, was steeped in gloom during 1920and reeling from a series of shocks that in six short years had turned theworld upside down. The outbreak of war in Europe during the summerof 1914 caught nearly all Americans by surprise. The immediate financialturmoil forced the New York Stock Exchange to shut down for thefirst time in its history and remain closed for more than four months. Analready sluggish economy sagged even more from the dislocationswrought by war until a rising tide of orders from the allied nations inneed of food, war materials, and other supplies propelled it into a boomfrom which manufacturers and farmers alike prospered. Then cameAmerican entry into the war in 1917, which led to drastic measures thatreshaped the American economy, and ultimately society as well, to anunprecedented extent. Only then, as historian Preston Slosson observed,"did mine and factory, farm and home, school and laboratory,become so many cogs in a single war machine."
The wartime mobilization organized, standardized, and centralizedAmerican life as never before. Every male in America between the agesof 18 and 45 had to register for the army; the 4.7 million who werecalled to service learned firsthand the virtues and vices of regimentation.Businessmen were summoned to Washington to take charge of theeconomy through such new centralizing agencies as the War IndustriesBoard headed by Bernard Baruch. This service enabled them to redeemreputations that had been blackened by attacks from Progressive reformersand muckrakers since the new century opened. A Division ofPlanning and Statistics introduced Americans to the possibilities notonly of statistics but of government planning as well. The Committeeon Public Information, which produced propaganda in support of thewar effort, trained a generation of bright young minds in techniquesthat were later applied to politics, business, advertising, and a promisingnew field called public relations.
The controls placed on American industry exceeded anythingknown before. The War Industry Board exerted broad powers overmanufacturing, priorities, conversion of facilities, price fixing, andother areas. Two other bodies, the National War Labor Board and theWar Labor Policies Board, handled labor matters. Another agency, theFood Administration, organized the food industries; its dynamic leader,Herbert Hoover, emerged as the best known of the wartime managers.The War Finance Corporation took charge of financing war industriesas one of several government corporations created to handle specificproblems. This first extensive use of government-owned corporations,like so many other wartime measures, provided important precedentsin later years. When the nation's railroads gridlocked under the pressureof wartime traffic, President Woodrow Wilson nationalized themand created a government agency to run the roads as a coordinated nationalsystem.
Drastic measures were imposed to stimulate production, establish priorities,and standardize many types of goods for more efficient output.The variety of automobile tires was slashed from 287 types to 9, steelplows from 312 to 76, and buggy wheels from 232 to 4. Expenditures fornew manufacturing plants and equipment rose from $600 million in 1915to $2.5 billion in 1918. Valuable German patents, especially in dyes andchemicals, were confiscated and became sources of great profit to Americanfirms, many of which emerged as giants during the conflict. "Thelesson of the war," noted historian David Noble, "was that large-scalecontinuous operation and extensive organized research and developmentwere the essentials of financial success in the chemical industry, and thatthese demanded big companies, corporate organization, and stable markets."Firms in other industries learned the same crucial lesson and appliedit vigorously after the war ended.
Wartime demand also generated runaway inflation, an experienceunknown since the Civil War. Consumer prices doubled between 1914and 1920, and wholesale prices shot up 126 percent. Those who livedon fixed incomes or salaries found themselves becoming what Mark Sullivancalled the "new poor," while those who owned land, goods, or securitiesbenefited. The rise in land values and commodity prices, alongwith huge wartime demand, proved a bonanza for long-depressed farmers.As the price of wheat and cotton nearly tripled between 1913 and1919, farmers eagerly planted record crops and bought more land oncredit. Farm mortgage debt increased 79 percent between 1914 and1920. Overall, this experience implanted a fear of inflation that remaineddeep within American memories during the postwar years.
To pay the enormous cost of the war, the government imposed agraduated income tax along with new forms of taxation and increasedrates on existing typesincluding an excess profits tax on both corporationsand individuals. But these devices raised only about $10.7 billionof the $31.5 billion spent on the war (including $9.5 billion in loans tothe Allies). Between 1917 and 1919 the federal government borrowedabout $23 billion, mostly through the sale of bonds conducted througha series of vigorous public campaigns. The national debt, a paltry $1.2billion in 1916, mushroomed to $25.5 billion by 1919. The four LibertyLoan and one Victory Loan drives combined patriotism, publicity, publicspectacle, and peer pressure to goad every citizen into buying asmany bonds as possible. This experience, too, would have huge repercussionsafter the war. As one historian put it, the loan drives "taughtpeople to buy securities. More than 22 million individuals had discoveredthe magic of coupon-clipping and the desirability of bonds as aform of wealth."
The goal of all these efforts was to place the American economy onthe most efficient possible footing for winning the war. However forcedand fumbling it sometimes became, the attempt at wholesale organizationmarked the first time that massive central planning and economicmanagement had been applied to a national purpose. The war also set inmotion major changes in American society. It closed the great floodgatethat had fed a steady stream of European immigrants into the Americanpopulation since the 1880s. During six months of 1917 alone it also sentmore than 600,000 blacks (and even more southern whites) northwardin search of jobsthe first major shift in traditional American racial demography.
Scarcely had this mighty machinery of national mobilization sprungto life than the war came to an end in November 1918, leaving in itswake a ghastly spectacle of ruin. The known world of 1914 had beenblasted into oblivion, scattering shards of devastation, chaos, bitterness,and fear of the unfamiliar forces at work amid the debris. Two of theFour Horseman of the Apocalypse, war and death, had already trampledacross the face of a prostrate civilization. During the months just beforethe war's end the other two, famine and pestilence, began to spreadtheir misery across the globe. Hunger stalked the war-ravaged regionsof Europe, but its effects were mild compared to those of disease. During1918 and 1919 a pandemic of influenza, the worst ever known,killed an estimated 21 million people, including 675,000 Americans, inonly a few months.
The old world had died, and the new one struggling to be born borelittle resemblance to it. The war had lasted 1,563 days, taken the lives of10 million soldiers, wounded 20 million others, and squandered morethan $300 billion of the world's resources. Its outcome hurled empiresand dynasties alike into oblivion. Gone were the Hohenzollerns in Germany,the Hapsburgs in Austria, the Romanovs in Russia. Europe enteredthe war with 17 nations and emerged from it with 26. Newregimes claimed power in St. Petersburg, Berlin, Vienna, Warsaw, Budapest,Prague, and Dublin, some of them fueled by revolutionary doctrines.The Bolsheviks in Russia especially disturbed Americans becausetheir alien ideology attacked the three principles dearest to our nationalcredo: private property, freedom of religion, and individual freedom.
The disorder wrought by war went still deeper to the basic structureof the international order. For a century Great Britain had been the centerof world finance and had provided nations a system of trade throughits currency, its navy, its mercantile fleet, and its enforcement of internationallaw. But Great Britain and its European allies were physically andfinancially exhausted from a war that proved for them a Pyrrhic victory.The British no longer had the power or the will to rule the waves oreven (as the old joke went) to waive the rules. Nor could they maintainthe gold standard, which had stabilized international trade for decades.All the major trade routes had been disrupted or paralyzed; every belligerentnation had borrowed heavily to fight the war and was deeply indebt. Our "associates" (we never called them allies) spent some $19.8billion on American goods and loan servicing during the war. Much ofthe purchasing had been on borrowed money, and the status of theseloans became a raging controversy once the war ended.
Here was a power vacuum begging to be filled. The war had completelytransformed America's position in world affairs. Having alreadyemerged as the largest industrial power, the United States in 1918 wasthe only major power left standing in almost every sense. Americanshad suffered little loss of life and treasure compared to that of othercountries, and no physical damage. Where other economies lay exhaustedfrom the demands of war, the American productive engine continuedto hum at high speed. Most significant of all, the United Stateshad gone from being a debtor to a creditor nation. Throughout the nation'shistory foreign investment had underwritten its economic development.On the eve of war in July 1914 American debts to foreignersstill exceeded those of foreigners to Americans by nearly $3.7 billion.By the end of 1919, however, a stunning reversal had occurred: the balancehad shifted in favor of the United States by $12.56 billion.
This historic change required rethinking of the American role notonly in trade but in the broader realm of world affairs. With all the majorEuropean powers physically, economically, and morally spent by theGreat War, the United States was the logical choice to assume a leadershiprole in rebuilding fractured world relationships. President Wilsonrecognized this when he made the bold decision to lead the Americandelegation to the peace negotiations. Sailing to France in December1918, he became the first American president to cross the Atlantic whilestill in office. Wilson hoped to use his influence to create a new worldorder based on his Fourteen Points and embodied in the League of Nations.But his mission turned to ashes. The Versailles Treaty thatemerged in the spring of 1919 did contain provisions for the League,but it was a harsh, bitter, punitive document that perpetuated ratherthan solved the problems underlying the war and its outcome. In DavidKennedy's words, it "sowed the wind that would eventually lash theworld with gale fury."
In 1917 Wilson had sold the conflict to Americans as a great nationalcrusade, the war to end all wars and make the world safe for democracy.That vision turned sour in 1919 as the treaty became a political football.When opposition in the Senate threatened its defeat, Wilson undertook aspeaking tour to rally public support. The effort strained his already fragilehealth; a severe stroke in October immobilized him for two months.The treaty died in the Senate, leaving the United States out of the Leagueand technically still at war. Instead of exerting leadership in a new worldcommunity, a distracted and disillusioned nation retreated from the worldstage to tend its own affairs. The crippled, embittered Wilson yielded hisoffice to Warren G. Harding, who had proclaimed in May 1920 that"America's need is not heroics but healing; not nostrums but normalcy;not revolution but restoration ... not surgery but serenity."
Normalcy may have been urgently needed, but it was hard to comeby. The momentum built up by the national mobilization crusade couldnot be slowed or shifted as quickly as the war had ended. The conversioneffort produced serious dislocations. Government agencies canceled$2.5 billion in outstanding contracts at a time when a quarter ofthe civilian labor force was engaged in making war-related goods.Within six months after the Armistice 2 million discharged servicemenwere thrown onto the job market of a contracting economy. The elaboratesystem of government controls and agencies created to push thewar effort was dismantled as quickly as it had been put together in azealous effort to restore the "normalcy" of as little government controlover business as possible.
Despite these moves, economic conditions remained deceptivelycalm until the spring of 1919, when consumer and business spending increasedsharply along with demand for exports. Sparked by a briefworldwide boom, the economy seemed back in high gear again by autumn,and a speculative mania seized the stock market. This brief euphoriasent wholesale prices up 25 percent by May 1920; then theeconomic roller coaster suddenly plunged downward as the demand forboth manufactured and farm products withered after the initial postwarsurge to replace depleted inventories. Within a year the wholesale priceindex dropped 45 percent, with farm products and raw materials takingthe hardest hit. While manufacturers quickly cut production to keeptheir prices from falling as severely, farmers could not control their outputand depended on high prices to pay the mortgages they had incurredduring the war.
"What happened," recalled Alexander Noyes, "was simply that demandfor goods by the larger consuming public suddenly stopped ... atthe moment when the extraordinarily high prices had greatly stimulatedsupply." He had watched inflation send prices of clothing, fuel, andhousehold goods in 1920 soaring 40 to 70 percent above November1918 levels. The impact literally hit home for Noyes; in September1920 the lease on his New York apartment expired and the rent of$2,500 a year, which he had paid for six years, was hiked to $4,500.Throughout the nation consumers reacted to what they called HCL(high cost of living) by boycotting purchases and organizing "old-clothesclubs." Noyes believed the organized resistance helped "put astop very soon to rising prices."
The depression that followed lasted well over a year. During 1920-21the gross national product fell 6 percent, stocks lost a quarter of theirvalue, manufacturers cut their workforce by 25 percent, unemploymentsoared to 4 million, half a million farmers lost their homesteads, and100,000 businesses went bankrupt. The purchasing power of farmers fellabout 25 percent and never recovered. Although the price of manufacturedgoods remained 66 percent above the levels of 1913, the drop wassevere enough that even giant corporations struggled to survive. GeneralMotors wrote off an appalling $85 million in inventory losses, whileHenry Ford averted disaster by forcing his dealers to buy cars they couldnot sell. Montgomery Ward took a loss of nearly $7.9 million for 1920and in 1921 wrote off S5.6 million as "loss on inventory, loss on accountsreceivable, and depreciation." Julius Rosenwald of Sears kept that companyfrom default only by dipping into his personal fortune.
Society was no less out of joint. The froth of hatred and intolerancewhipped up by wartime propaganda could not be turned off like waterfrom a spigot. The rabid campaign against all things German fannedother forms of prejudice against people and things foreign or different.The volatile new racial mix in northern cities unaccustomed to largeblack populations triggered a series of bloody race riots during the summerof 1919. The Ku Klux Klan rose from the grave of history with amore ecumenical message of bigotry. Centered more in the lower Midwestthan in the deep South, the "new" Klan denounced not only blacksbut Jews, immigrants, Catholics, radicals, and anyone or anything itdeemed not "100 percent American."
Labor unrest gripped the nation as workers, hurt by prices that hadrisen faster than wages, demanded pay increases and went on strike inrecord numbers. A series of unexplained bombings in the spring of1919, coupled with a record number of strikes, escalated existing fearsover bolshevism into an ugly bout of public hysteria that swept the nationlike the flu during 1919-20. The "Red Scare" turned into a sweepingassault on labor militants, radicals, and foreigners, who were an easy targetas the source of all things and ideas considered un-American. Then,like the flu pandemic, the Red Scare departed as abruptly as it hadcome, leaving in its wake a bitter legacy of bigotry.
Ironically, the bloodiest single event came after the hysteria had subsided.At noontime on September 16, 1920, amid the lunchtime crowds,a wagon filled with iron sash weights pulled up outside the offices ofJ. P. Morgan & Company at 23 Wall Street. Suddenly it exploded, hurlingiron like shrapnel in all directions and blowing out windows withina half-mile radius. Thirty-eight people were killed and 300 wounded.Inside the House of Morgan one employee lay dead, another fatally injured,and dozens more seriously hurt. On Wall Street the blastknocked to the ground a young passerby named Joseph P. Kennedy. Atthe New York Stock Exchange shards of glass burst through the heavysilk curtains, sending traders into an unfamiliar kind of panic. The NewYork Curb Exchange, which still operated outdoors on Broad Streetonly a couple of hundred feet from the site of the blast, found its placeof business transformed into a battlefield strewn with stunned andwounded brokers.
In later years the fortress-like exterior of the House of Morgan wore itsblast scars like battle ribbons. The source of the explosion remains a mystery,though many suspected then and later that it was the work of an anarchistsending a message to the inner circle of Wall Street. None of theMorgan partners was hurt. Four of themThomas W. Lamont, DwightMorrow, George Whitney, and Elliott Baconwere in conference on thesecond floor away from the blast. With them was a French general whohappened to be there as Morrow's guest. As the blast died away andsmoke billowed skyward in the street amid the tinkle of still falling glass,the general asked his hosts politely, "Does this happen often?"
Mercifully it did not. Nevertheless, the war to make the world safefor democracy had failed even to make the United States safe fordemocracy. Victory had brought not elation but relief tinged with bitternessat having wasted so much time and energy on a fool's errand thatmost Americans vowed never to repeat. "The average man," observedMark Sullivan, "felt ... a discontent with the post-war commotion ... awish for settled ways ... for routine that remained set, for a world that'stayed put.'" Small wonder, then, that so many people embraced Harding'ssiren call for normalcy. The problem was that so much hadchanged in the postwar world that no one knew what was normal anymore.By any measure it could be labeled a new era, even if no onecould figure out exactly what that meant.
* * *
To most eyes the tensions and hysteria of 1920 and the depression of1921 showed few signs of brighter times ahead. Yet the change camewith unexpected swiftness. From the depths of gloom and depressionAmericans moved into what Frederick Lewis Allen called "the seven fatyears," a golden age of business prosperity that in many ways markedthe beginning of the modern era. With only brief interruptions in 1924and 1927, the economy performed at unprecedented levels, bringing anew standard of livingand a new lifestyleto more Americans thanever before.
Excerpted from Rainbow's End by Maury Klein. Copyright © 2001 by Oxford University Press, Inc.. Excerpted by permission. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.