Don't Know Much About History, Anniversary Edition: Everything You Need to Know About American History but Never Learned (Don't Know Much About®) (55 page)

For Americans, it was love at first sight with the automobile. It is fair to say the Model T revolutionized American life. When Congress enacted highway fund legislation in 1916 and the country embarked on a massive road-building era, the American dream of freedom on the open road became a new reality. In a short time the auto industry became the keystone of the American economy, in good times and bad. New industries in roadside services—such as service stations, diners, and motels—sprang to life all over the country. The country cottage was no longer the exclusive preserve of the Vanderbilts and Morgans. The auto gave the working and middle classes a sense of accomplishment. The new, auto-induced sense of freedom, and the economic prosperity created by the automobile and related industries, helped to open up American society in the 1920s.

Henry Ford cared little for social improvements or the broad sweep of history. “History is more or less bunk,” he said. Autocratic and conservative, he tyrannized his workers. He fired anyone caught driving a competitor’s model. Gangster tactics were used to maintain discipline in plants, and unionizing efforts were met with strike-breaking goon squads. Unions were kept out of Ford plants until 1941. Ford’s attitude was that workers were unreliable and shiftless. In the midst of the Depression, he blamed the workingman’s laziness for the nation’s economic problems. “The average worker,” said Ford, “won’t do a day’s work unless he is caught and can’t get out of it.”

His conservatism spilled over into his political beliefs. An isolationist in foreign policy—although his plants won big defense jobs during both world wars—Ford was also an outspoken anti-Semite. Ford bought a newspaper, the
Independent
, that became an anti-Jewish mouthpiece. The paper was involved in the American publication of
The Protocols of the Elders of Zion
, an anti-Semitic propaganda tract that had first appeared in Russia in 1905 to castigate Jews. But Ford’s conservative, stubborn streak cost him in the long run. Unwilling to adapt to changing styles, Ford Motors later slipped behind more aggressive competitors like General Motors. Yet at his death in 1947, Henry Ford remained an American folk hero for personifying the rags-to-riches American myth.

What was so lucky about Lucky Lindy?

Lucky Lindy was the other great hero of the era. Like Ford, Charles Lindbergh (1902–75) invented nothing. The Wright brothers had begun their famous experiments at Kitty Hawk, North Carolina, in 1903, and the Lockheed brothers built their early commercial planes in 1913. Strictly speaking, Lindbergh wasn’t even the first to fly across the Atlantic. A pair of Englishmen had flown from Newfoundland to Ireland in 1919 (a route considerably shorter than Lindbergh’s).

But the war in Europe had given a real boost to the commercial potential of the airplane. While the air industry was not as economically crucial to the twenties as Ford’s automobile, it was symbolic of the venturesome spirit of the times. Lindbergh’s design of his aircraft, which he called
The Spirit of St. Louis
, allowed him to become the first man to fly solo across the Atlantic. It was an act of enormous daring, skill, and flying ability. The 3,600-mile flight began on Long Island on May 20, 1927. Attempting to win a $25,000 purse promised to the first pilot to go from New York to Paris, Lindbergh carried only a few sandwiches, a quart of water, and letters of introduction. He wouldn’t need those. When he landed in Paris thirty-three hours later, Lindbergh was smothered in the adulation of France and the rest of Europe. His hero’s welcome would be repeated around the world as he became, like Ford, the symbol of do-anything American inventiveness and daring. A reclusive personality, Lindbergh became best known by his newspaper nickname, Lucky Lindy, and he was the world’s most familiar celebrity.

That celebrity led to the great tragedy in his life. After his marriage to Anne Spencer Morrow, daughter of a U.S. senator and later a renowned writer, he lived in the glare of international publicity. In May 1932, their son, nineteen-month-old Charles Jr., was kidnapped, and a $50,000 ransom demand was met. But the child was found murdered. Like the Sacco and Vanzetti affair, the case of Bruno Hauptmann, the man electrocuted for the crime in 1936, has never quite gone away. More than sixty years after Hauptmann’s execution, there were many who claimed that he was innocent, the victim of a frame-up. There is little question that the country’s antiforeign frenzy at the time helped convict him, but the evidence in the case was always strong against him. The infamous kidnapping, which dominated newspapers in the midst of the Depression’s worst year, prompted congressional passage of the so-called Lindbergh Law which made kidnapping a federal offense if the victim is taken across state lines or if the mail service is used for ransom demands, a measure making kidnapping across state lines a capital crime.

Ford and Lindbergh shared something besides their fame and success. By the late 1930s, both men were notorious for their conservative, isolationist, and anti-Semitic political views. Lindbergh made several trips to Germany to inspect the German air force (Luftwaffe) and, in 1938, was presented with a medal by Hermann Goering, first leader of Hitler’s storm troopers, founder of the Gestapo, and Hitler’s air minister. Ford also received a medal from Hitler himself in 1938. After pronouncing Germany’s military superiority, Lindbergh returned to America to become an outspoken leader of the isolationist America First movement, funded with Ford money, that tried to keep the United States out of World War II. In one speech, Lindbergh nearly killed the movement when he warned Jews in America to “shut up” and borrowed the well-worn Nazi tactic of accusing “Jewish-owned media” of pushing America into the war. Although he was in the air corps reserve, Lindbergh’s criticism of Roosevelt forced him to resign his commission. During the war, he served as a consultant to Ford and later flew combat missions in the Pacific. After the war, he was a consultant to the Defense Department. His heroics kept his reputation intact.

Must Read:
Lindbergh
by A. Scott Berg.

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From
HERBERT HOOVER’S
“Rugged Individualism” campaign speech (October 22, 1928):

When the war closed, the most vital of all issues both in our own country and throughout the world was whether Governments should continue their wartime ownership and operation of many instrumentalities of production and distribution. We are challenged with a peace-time choice between the American system of rugged individualism and a European philosophy of diametrically opposed doctrines—doctrines of paternalism and state socialism.

. . . Our American experiment in human welfare has yielded a degree of well-being unparalleled in all the world. It has come nearer to the abolition of poverty, to the abolition of fear of want than humanity has ever reached before.

Why did investors panic in 1929, leading to the Great Crash?

When Herbert Hoover made that speech, America did seem to be a place of unlimited opportunity. Apart from a huge underclass of the unemployed and poor farmers that Hoover overlooked and prosperity bypassed, the bulk of the country probably agreed with Hoover’s sentiment. The year 1927 was one more in the prosperous years of the Roaring Twenties. Lindbergh’s 1927 flight to Paris came in the midst of the country’s “Coolidge boom.” An avatar of unlimited potential, Lindbergh added another boost to American feelings of confidence, invincibility, and Hoover’s “rugged individualism.”

With such good feelings in the air, Hoover was elected by a huge margin in 1928. But another factor in his election was the religion of his Democratic opponent, New York governor Al Smith, a Roman Catholic. “A vote for Smith is a vote for the Pope,” proclaimed campaign banners in 1928. Smith also favored repeal of Prohibition, and another slogan said Smith would bring “Rum, Romanism, and Ruin” to America. But more than anything else, the Hoover victory was made possible by “general prosperity.”

And nowhere was the prosperity more conspicuous than on Wall Street, home of the New York Stock Exchange. During the 1920s, new companies like General Motors had issued stock that was making many an investor, large and small, seemingly wealthy. An ambitious young man like Joseph P. Kennedy (1888–1969), unfettered by the restraints of any regulatory authority (the Securities and Exchange Commission was a later creation), could make a large fortune for himself with not always scrupulous means. In fact, a great number of the most successful men in those days were operating in shady territory. Working in “pools,” crooked manipulators bought cheap shares of stock, drove up the prices among themselves, then lured outside investors into the pool. The pool operators then dumped their stocks at artificially inflated prices, leaving the “sucker” holding a bag of overpriced stock.

The most notorious of the wealthy crooks of the day was the “Swedish match king,” Ivar Krueger. Claiming to be an intimate of the crowned heads of Europe, Krueger built a huge financial empire on credit granted by some of the era’s leading financial institutions. Featured on the cover of
Time
as a giant of business, Krueger was a con man of the first order, whose empire was based on deception. He issued worthless securities and later counterfeited Italian government bonds. Equally notorious was Samuel Insull, a “self-made” millionaire who used millions put up by working-class investors—many of them public employees caught in the spell of Insull’s magnificent wealth—to build a public utilities empire, all the while manipulating stock prices to his benefit. Before the crash, Insull controlled an empire of holding companies, and he personally held eighty-five directorships, sixty-five board chairmanships, and eleven company presidencies.

The paper wealth being acquired masked a rot in the American economy. American farmers continued to struggle following the postwar collapse of agricultural prices. Before the Great Depression, unemployment was already high as factories became mechanized and the worker at the bottom was let go. Housing starts fell in 1927, always an ominous sign in the American economy. The problems were not only America’s. International production intensified, but demand slackened and warehouses filled up. The wealth of the world was concentrated in the hands of a small class at the top. The wealth trickling down from the top was not enough. The great bulk of the population simply couldn’t create the demand needed to keep up with the increasing supply. The American consumer could not consume all goods that American manufacturers were producing.

Yet thousands of Americans were drawn to the lure of fortunes made in the market. Like moths to the flame, people pulled their life savings from banks and put them into stocks and securities, like Insull Utilities Investments. The easygoing rules of the day meant that investors had to put down only ten to twenty percent in cash to buy stock; the rest was available on cheap credit. The Federal Reserve fed the frenzy with artificially low interest rates set by old-line Republicans beholden only to their corporate pals. Banks loaned millions to feed speculative schemes. The American public was in enormous debt and their “wealth” was all on paper.

By late 1929, barely a year after Hoover had spoken about the abolition of poverty, the cracks in the foundation began to show. Steel and automobile production, two centerpieces of the American economy, were in decline. Yet still the stock market rose, reaching its peak in late September 1929. But the house of cards was about to tumble. Skittish European investors began to withdraw their investments in the United States. When brokers called customers to pay off the amounts owed on stocks bought with borrowed money, these investors had to sell off their stocks to raise cash. This created a wave of fear—the fear of losing everything—that quickly gained momentum. As stock prices fell, more brokers called on customers to put up more cash, and a vicious cycle was unleashed, sending prices on the stock exchange plunging. On October 24, Black Thursday, 13 million shares of stock were sold off. A combine of bankers led by John P. Morgan Jr. set up a pool of cash to prop up prices, as Morgan’s father had done in 1907 during a similar panic in the market. This attempt to inspire confidence failed. By the following week, on October 29—Black Tuesday—more than 16 million shares were sold off as panic swept the stock exchange. (In today’s world, hundreds of millions of shares change hands daily. But in 1929, the market was much smaller and there were no computers recording deals.) Within days, the “wealth” of a large part of the country, which had been concentrated in vastly inflated stock prices, simply vanished.

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F
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L
EWIS ALLEN,
in his social history of the period,
Since Yesterday
:

The official statistics of the day gave the volume of trading as 16,410,030 shares, but no one knows how many sales went unrecorded in the yelling scramble to sell. There are those who believe that the true volume may have been twenty or even twenty-five million. Big and small, insiders and outsiders, the high-riders of the Big Bull Market were being cleaned out: the erstwhile millionaire and his chauffeur, the all-powerful pool operator and his suckers, the chairman of the board with his two-thousand-share holding and the assistant bookkeeper with his ten-share holding, the bank president and his stenographer. . . . The disaster which had taken place may be summed up in a single statistic. In a few short weeks it had blown into thin air thirty billion dollars—a sum almost as great as the entire cost of the United States participation in the [first] World War, and nearly twice as great as the entire national debt.