WEBVTT NOTE The 1920s 1 00:00:00.000 --> 00:00:12.000 Okay, so today we're talking about the 1920s, domestic and international and I've got some material I'd like to go over that is in the text that I'd like to elaborate on and some material that's not. 2 00:00:12.000 --> 00:00:28.000 I'd also like to note I shouldn't be recording this on the permanent recording but it can't be helped that we'll take a shorter break today and come right back and start our discussion early so that I can go slightly early today, maybe 10 minutes early and race out of here 3 00:00:28.000 --> 00:00:58.000 I have to get to Dawsonville, Georgia just three hours away and then I lose an hour because of the time zone difference to speak tonight so I have to get it before the traffic gets bad I have to get out here so we'll make up for it by just having a shorter break just everybody rush to the restroom or rush to get the coffee that I guess is not in here all right but any any event in the 20s were inevitably brought face to face with presidents Harding and Coolidge and historians feeling 4 00:00:58.000 --> 00:01:03.000 And I have a little commentary about that at the beginning of my chapter on the 20s, 5 00:01:03.000 --> 00:01:09.000 that we always get these polls of historians that presume to tell us who the great presidents were, 6 00:01:09.000 --> 00:01:15.000 and then they try to rank the presidents in order of their greatness, and then we're all supposed to accept that. 7 00:01:15.000 --> 00:01:21.000 And so every so often the American public has to endure another one of these polls of professional historians. 8 00:01:21.000 --> 00:01:36.000 This practice began in 1948 with Arthur Schlesinger, Sr., who polled 55 historians and published the results in Life Magazine, and then 14 years later he did the same thing for the New York Times Magazine. 9 00:01:36.000 --> 00:01:45.000 Then his son, Arthur Schlesinger, Jr., published yet another one of these polls in 1996, and then numerous other such polls have appeared. 10 00:01:45.000 --> 00:01:51.000 Polls have appeared. C-SPAN did such a poll, The Wall Street Journal did one last year, and it just goes on and on. 11 00:01:51.000 --> 00:02:00.000 Well, who comes out on top in these polls? And as I say, the occasion for bringing this up is the low ranking that the presidents we're talking about today consistently received. 12 00:02:00.000 --> 00:02:09.000 Well, the top three, you could probably guess, are George Washington, Abraham Lincoln, and Franklin Delano Roosevelt. Those are always the top three in these polls. 13 00:02:09.000 --> 00:02:17.000 Also toward the top in these polls are these three, Theodore Roosevelt, Harry Truman and Woodrow Wilson. 14 00:02:17.000 --> 00:02:22.000 So the great presidents are George Washington, Abraham Lincoln, Franklin Delano Roosevelt. 15 00:02:22.000 --> 00:02:27.000 The so-called near great presidents would include at least TR, Harry Truman and Wilson. 16 00:02:27.000 --> 00:02:35.000 Well, it's not surprising given that we know what the politics of most historians are, 17 00:02:35.000 --> 00:02:53.000 The great historians are that presidents who strengthen the Federal Government, either through new domestic initiatives or through war, typically find themselves exalted as great, whereas those who exercise their power more modestly are relegated to the designation of average or worse. 18 00:02:53.000 --> 00:03:02.000 Woodrow Wilson once said that the president, quote, is at liberty both in law and conscience to be as big a man as he can, unquote. 19 00:03:02.000 --> 00:03:09.000 Well, if he accepts this invitation, that president can expect to be richly rewarded by our court historians. 20 00:03:09.000 --> 00:03:16.000 Now, there was a time in American history when a powerful presidency was viewed with suspicion rather than held up as an ideal. 21 00:03:16.000 --> 00:03:23.000 And I'd like to quote here, if I may, the founder and president of this very institute, Lew Rockwell, 22 00:03:23.000 --> 00:03:26.000 who describes the older view of the president this way. 23 00:03:26.000 --> 00:03:32.000 He says the President is mostly a figurehead and a symbol, almost invisible to myself and my community. 24 00:03:32.000 --> 00:03:37.000 He has no public wealth at his disposal. He administers no regulatory departments. 25 00:03:37.000 --> 00:03:43.000 He cannot tax us, send our children into foreign wars, pass out welfare to the rich or the poor, 26 00:03:43.000 --> 00:03:46.000 appoint judges to take away our rights to self-government, 27 00:03:46.000 --> 00:03:51.000 control a central bank that inflates the money supply and brings on the business cycle, 28 00:03:51.000 --> 00:03:56.500 or change the laws willy-nilly according to the special interests he likes or seeks to punish. 29 00:03:56.500 --> 00:04:03.000 Likewise, elections and election campaigns were not the be-all and end-all of American liberty. 30 00:04:03.000 --> 00:04:08.000 And again, Lew Rockwell says, for those who do not vote and do not care about politics, in the old view, 31 00:04:08.000 --> 00:04:11.500 their liberty is secure. They have no access to special rights, 32 00:04:11.500 --> 00:04:15.500 yet their rights to person, property and self-government are never in doubt. 33 00:04:15.500 --> 00:04:19.500 For that reason and for all practical purposes, they can forget about the President 34 00:04:19.500 --> 00:04:23.100 And for that matter, the rest of the Federal Government might as well not exist. 35 00:04:23.100 --> 00:04:27.300 People do not pay direct taxes to it. It doesn't tell them how to conduct their lives. 36 00:04:27.300 --> 00:04:31.500 It doesn't send them to foreign wars, regulate their schools, pay their retirement, 37 00:04:31.500 --> 00:04:34.500 much less employ them to spy on their fellow citizens. 38 00:04:34.500 --> 00:04:37.400 The government is almost invisible. 39 00:04:37.400 --> 00:04:45.700 Well, Alexis de Tocqueville, who was the 19th century's most perceptive foreign observer of the United States, observed in the 1830s, 40 00:04:45.700 --> 00:04:50.500 In some countries, a power exists which, though it is in a degree foreign to the social body, 41 00:04:50.500 --> 00:04:54.100 directs it and forces it to pursue a certain track. 42 00:04:54.100 --> 00:04:59.800 In others, the ruling force is divided, being partly within and partly without the ranks of the people. 43 00:04:59.800 --> 00:05:02.500 But nothing of the kind is to be seen in the United States. 44 00:05:02.500 --> 00:05:06.500 There, society governs itself for itself. 45 00:05:06.500 --> 00:05:11.700 The president has but little power, little wealth and little glory to share among his friends. 46 00:05:11.700 --> 00:05:15.700 and his influence in the state is too small for the success or ruin of a 47 00:05:15.700 --> 00:05:20.220 faction to depend upon his elevation to power. 48 00:05:20.220 --> 00:05:23.300 Well, that doesn't sound like the presidency today, needless to say, but that was how 49 00:05:23.300 --> 00:05:27.260 the presidency was viewed in those days, early 19th century. 50 00:05:27.260 --> 00:05:32.140 Bob Higgs, one of the great economic historians we have living, 51 00:05:32.140 --> 00:05:36.500 said this, the people who ratified the original constitution never intended the 52 00:05:36.500 --> 00:05:38.900 presidency to be a powerful office, 53 00:05:38.900 --> 00:05:45.300 Spawning, quote, great men. Article 2, sections 2 to 4, which enumerate the powers of the President, 54 00:05:45.300 --> 00:05:51.100 comprise but four paragraphs, most of which deal with appointments and minor duties. 55 00:05:51.100 --> 00:05:56.800 Well, in the 20th century, this minor position was transformed into a larger-than-life office 56 00:05:56.800 --> 00:06:03.300 whose occupant is expected to exude vision, leadership and greatness. 57 00:06:03.300 --> 00:06:07.900 Well, this view of the President is what we would expect to hear in Mussolini's Italy 58 00:06:07.900 --> 00:06:14.900 or in any fascist regime where the leader, capital L, is expected to exert bold leadership on behalf of the people. 59 00:06:14.900 --> 00:06:22.900 Now you may consider this to be a cheap shot, but I mention in this context that Adolf Hitler once told a New York Times correspondent, 60 00:06:22.900 --> 00:06:30.900 I have sympathy for Mr. Franklin Roosevelt because he marches straight toward his objectives over Congress, lobbies and bureaucracy. 61 00:06:30.900 --> 00:06:34.900 Hitler later described himself as the only European leader who expressed 62 00:06:34.900 --> 00:06:38.900 understanding of the methods and motives of President Roosevelt. 63 00:06:38.900 --> 00:06:42.900 The one idea that is absolutely anathema to all such regimes 64 00:06:42.900 --> 00:06:46.900 is that society is capable of running its own affairs 65 00:06:46.900 --> 00:06:50.900 without the paternal custodianship of a great leader and his vision. 66 00:06:50.900 --> 00:06:54.900 Now the historians who were consulted in the rankings, 67 00:06:54.900 --> 00:06:58.900 presidential rankings that tell us which presidents we're supposed to like, 68 00:06:58.900 --> 00:07:05.900 Conceive of the ideal president is a far-seeing demigod, rather than a humble executor of the laws. 69 00:07:05.900 --> 00:07:10.900 Now, Theodore Roosevelt is a president I've written very negatively about in the past. 70 00:07:10.900 --> 00:07:15.900 He's very, very popular among a great many Americans on the left and right, but I've been very critical of him 71 00:07:15.900 --> 00:07:23.900 because I believe he basically was almost single-handedly responsible for putting together this new kind of presidency 72 00:07:23.900 --> 00:07:28.100 Presidency, where the people are taught to have a kind of superstitious reverence for 73 00:07:28.100 --> 00:07:30.660 the occupant of the presidency. 74 00:07:30.660 --> 00:07:36.460 And there he is at number four in C-SPAN's 2000 poll of historians. 75 00:07:36.460 --> 00:07:42.380 That poll ranked the presidents on their, quote, vision, on, quote, setting an agenda. 76 00:07:42.380 --> 00:07:48.420 Other categories included public persuasion, crisis management, economic management, moral 77 00:07:48.420 --> 00:07:55.420 National Authority, International Relations, Administrative Skills, Pursued Equal Justice for All, and so on and on. 78 00:07:55.420 --> 00:08:02.420 Well, there's nothing on there. There's no ranking on how faithful was he to the Constitution or traditional American principles. 79 00:08:02.420 --> 00:08:11.420 And this is the main problem with these polls. They take for granted that there's some objective scientific standard for determining how great a president is. 80 00:08:11.420 --> 00:08:17.420 But, of course, there isn't. To evaluate whether a president is any good or not, you have to have a standard of measurement, 81 00:08:17.420 --> 00:08:22.380 management, philosophical, moral, economic, and constitutional, for instance, what constitutes 82 00:08:22.380 --> 00:08:28.140 good economic management? A Keynesian economist will say one thing and a free market economist 83 00:08:28.140 --> 00:08:34.180 will say another. So how can you, in a non-ideological way, rank the presidents on those grounds? 84 00:08:34.180 --> 00:08:40.140 Or what does equal justice for all mean? Well, that phrase has changed its meaning over time. 85 00:08:40.140 --> 00:08:45.740 Under Andrew Jackson, Andrew Jackson's philosophy of government, we're talking 1830s now, was 86 00:08:45.740 --> 00:08:49.740 It was called Jacksonian democracy and he used the phrase equal rights. 87 00:08:49.740 --> 00:08:53.740 But what Jackson meant by equal rights was that nobody gets anything from the government. 88 00:08:53.740 --> 00:08:58.740 We are equal in the sense that nobody, no big business, no lobbyist, nobody, 89 00:08:58.740 --> 00:09:03.740 is able to use the coercive arm of the state to exploit his fellow man. 90 00:09:03.740 --> 00:09:07.740 That's the sense in which we're equal. Nobody's getting any special privilege. 91 00:09:07.740 --> 00:09:09.740 Whereas today when the phrase equal rights is used, 92 00:09:09.740 --> 00:09:12.740 it nearly always refers to some kind of a grant of special privilege. 93 00:09:12.740 --> 00:09:33.740 Now, Jeff Hummel, who's a professor on the West Coast, has argued that from the point of view of libertarians, many of whom occupy this very building, the greatest president in American history was actually Martin Van Buren. 94 00:09:33.740 --> 00:09:46.740 Well, I'm sure some people perhaps didn't know Martin Van Buren was a president, but elected in 1836, Van Buren had been vice president for a term under, a little over a term under Andrew Jackson. 95 00:09:46.740 --> 00:10:01.740 Another candidate who's been proposed as the greatest president from a libertarian point of view, I've heard William Henry Harrison, only because he died a month after he got in office so he didn't have a chance to do anything bad, so therefore he's the greatest, but Martin Van Buren has been proposed. 96 00:10:01.740 --> 00:10:06.740 And Hummel's argument is that Van Buren was the best president 97 00:10:06.740 --> 00:10:10.740 because he resolutely supported the free market and the Constitution 98 00:10:10.740 --> 00:10:14.740 at a time when every incentive existed for him to do otherwise. 99 00:10:14.740 --> 00:10:22.740 His banking policies introduced what is arguably the greatest banking system, 100 00:10:22.740 --> 00:10:25.740 monetary system the United States has ever had. 101 00:10:25.740 --> 00:10:29.740 He also managed to avoid not one but two unnecessary wars, 102 00:10:29.740 --> 00:10:34.060 One with Mexico and one with Britain, which is a fact of particular significance when 103 00:10:34.060 --> 00:10:40.380 we recall what the founders often said about war and its tendency to undermine free societies. 104 00:10:40.380 --> 00:10:44.200 Now where does poor Van Buren wind up in the presidential polls? 105 00:10:44.200 --> 00:10:48.920 Well he lacked vision, I suppose, but he kept the country at peace and was resolutely committed 106 00:10:48.920 --> 00:10:51.420 to the constitution, come what may. 107 00:10:51.420 --> 00:10:55.220 In 1948 he was number 15 out of 29 presidents. 108 00:10:55.220 --> 00:11:01.220 In 1962, he was 17 out of 31, and in 2005, he was 27 out of 41. 109 00:11:01.220 --> 00:11:06.220 Arthur Schlesinger Jr. complained that Van Buren lacked executive energy. 110 00:11:06.220 --> 00:11:10.220 Another historian described Van Buren's inaugural address as, 111 00:11:10.220 --> 00:11:13.220 quote, essentially a charter for inaction. 112 00:11:13.220 --> 00:11:16.220 Well, I hardly need to point out to you that those are bad things 113 00:11:16.220 --> 00:11:20.220 to the official historians who rank our presidents for us. 114 00:11:20.220 --> 00:11:24.220 Now, the consistently low rankings of presidents like Ulysses Grant 115 00:11:24.220 --> 00:11:28.220 are due in part to the corruption associated with their administrations. 116 00:11:28.220 --> 00:11:31.220 Now to a certain degree that's all well and good. 117 00:11:31.220 --> 00:11:37.220 But what is the Teapot Dome scandal compared to Woodrow Wilson's catastrophic decision 118 00:11:37.220 --> 00:11:42.220 in the face of strong popular opposition to involve the United States in World War I? 119 00:11:42.220 --> 00:11:44.220 A horrific conflict. 120 00:11:44.220 --> 00:11:47.220 At the very least, Wilson's decision, it has been argued, 121 00:11:47.220 --> 00:11:52.220 paved the way for the ultra-nationalistic policies of Adolf Hitler and the Nazis. 122 00:11:52.220 --> 00:12:22.220 Well, this brings us to the 20s and Harding and Coolidge, because what we'll find is, although they did do more domestically than 123 00:12:22.220 --> 00:12:34.220 The fact is that they were, by 20th century standards, relatively inactive and therefore were supposed to hate them and rank them low, but again, that's an ideological judgment. 124 00:12:34.220 --> 00:12:44.220 If you want to decide which are the best presidents, you have to decide that on the basis of your own views and what these people did when they were in office and whether or not they conformed to your views. 125 00:12:44.220 --> 00:12:49.220 Well, there's a lot of scandal-mongering we could talk about with Harding. 126 00:12:49.220 --> 00:12:54.220 Official scandals and personal scandals, but I hate to be a scandal-monger. 127 00:12:54.220 --> 00:12:58.220 You know, the guy's dead now. I mean, as it is, I already condemned him in the book. 128 00:12:58.220 --> 00:13:00.220 So let's not dwell on that too long. 129 00:13:00.220 --> 00:13:05.220 It is interesting to know that on two occasions when he confronted people 130 00:13:05.220 --> 00:13:11.220 who had been engaged in corrupt behavior under his presidency, 131 00:13:11.220 --> 00:13:21.220 People went and committed suicide after confrontations with Harding so apparently he could be quite rough on people apparently. 132 00:13:21.220 --> 00:13:27.220 But what I want to point out and focus on instead is what in fact he did, what he did do economically. 133 00:13:27.220 --> 00:13:33.220 So I want to focus on the tax policies of the 20s because they are worth revisiting. 134 00:13:33.220 --> 00:13:37.220 I mean it seems like nothing could be less relevant than the tax policies of the 20s. 135 00:13:37.220 --> 00:13:47.220 But let's remember that during World War I, the top income tax rate had been increased from 7% to 73%. 136 00:13:47.220 --> 00:13:57.220 Now, I've got students in an online course that I teach, and they're always flattering themselves about how wise they all are. 137 00:13:57.220 --> 00:14:05.220 They were saying at one point, well, we know that in our country, we would never tolerate tax rates of 50 or 60%. 138 00:14:05.220 --> 00:14:13.220 I said, not only would you, but you did for many years in American history that rates were very, very high. 139 00:14:13.220 --> 00:14:19.220 I gave the example of in Britain, the top rate at one point was 95% and that's a democracy. 140 00:14:19.220 --> 00:14:28.220 95% was the top rate, which is why in the song Tax Man, George Harrison says of the tax man, he's putting himself in his shoes, 141 00:14:28.220 --> 00:14:31.220 there's one for you, 19 for me. That's a 95% rate. 142 00:14:31.220 --> 00:14:38.220 In the 20s, as I suggested last time, as tends to happen in emergencies, they never quite come down to the level where they were before the emergency. 143 00:14:38.220 --> 00:14:47.220 They never come back down to seven. That will never happen again. I can say with absolute certainty that never in my lifetime will the top rate ever be seven percent again. 144 00:14:47.220 --> 00:14:54.220 But it did come down substantially in the 20s, and why is that? It has a lot to do with the fact that the rate of emergency is very high. 145 00:14:54.220 --> 00:14:59.340 Ever in my lifetime will the top rate ever be 7% again, but it did come down substantially 146 00:14:59.340 --> 00:15:00.860 in the 20s, and why is that? 147 00:15:00.860 --> 00:15:05.060 It has a lot to do with Secretary of the Treasury Andrew Mellon, because he was noting that 148 00:15:05.060 --> 00:15:10.100 we had more and more millionaires in America, you had a lot of wealthy people, but yet you 149 00:15:10.100 --> 00:15:13.020 didn't have a lot of investment going on, not a lot of business activity. 150 00:15:13.020 --> 00:15:15.560 It seemed to be, it seemed not to make sense. 151 00:15:15.560 --> 00:15:16.560 Why should that be? 152 00:15:16.560 --> 00:15:20.880 Why do we see people doing well, but yet we don't see enough business expansion going 153 00:15:20.880 --> 00:15:21.880 on? 154 00:15:21.880 --> 00:15:31.880 He concluded that the tax rates were too high, that if I start out something and I succeed then I get to keep 27 cents on the dollar and 73 will be taken away. 155 00:15:31.880 --> 00:15:37.880 If I fail, I lose the whole dollar. Well, who in his right mind would consider those to be good odds? 156 00:15:37.880 --> 00:15:43.880 So Mellon was of the opinion that the tax rates were so high they were actually stifling business activity, 157 00:15:43.880 --> 00:15:50.880 that what individuals were typically doing was instead of using their funds to open up businesses and get people working, 158 00:15:50.880 --> 00:15:58.880 working, they were taking their money and putting it in state and local municipal bonds because they were non-taxable. 159 00:15:58.880 --> 00:16:05.880 So states and localities were awash with cash for they had enough baseball stadiums to last them 80 years. 160 00:16:05.880 --> 00:16:07.880 They didn't know what to do with all the money. 161 00:16:07.880 --> 00:16:11.880 But meanwhile, the private sector was starved for capital, so what could be done? 162 00:16:11.880 --> 00:16:19.880 So Mellon believed that if the rate were lowered, people would be more willing to expose their income to taxation than they are now. 163 00:16:19.880 --> 00:16:23.880 Now they only get 27 cents on the dollar, there's no point in doing it. 164 00:16:23.880 --> 00:16:26.880 But if we make their reward greater, if we lower the rate, 165 00:16:26.880 --> 00:16:30.880 then it's worth taking your money and putting it into a business venture. 166 00:16:30.880 --> 00:16:33.880 So that was his proposal, that was in fact what was happening. 167 00:16:33.880 --> 00:16:36.880 Now this may sound a little familiar, if it sounds familiar to you, 168 00:16:36.880 --> 00:16:40.880 it may sound like something out of the Reagan years. 169 00:16:40.880 --> 00:16:42.880 It worked better in the 20s than it did in the Reagan years, 170 00:16:42.880 --> 00:16:48.880 but basically what's being proposed here is an anticipation of something called the Laffer curve 171 00:16:48.880 --> 00:16:56.880 The Laffer Curve, in the late 1970s, an economist named Arthur Laffer, L-A-F-F-E-R, proposed this relationship, 172 00:16:56.880 --> 00:17:02.880 and really what Andrew Mellon, the Secretary of the Treasury in the 20s, is doing is anticipating this relationship. 173 00:17:02.880 --> 00:17:10.880 Laffer, in the 70s, proposed a graph. Let's see if we can get one that is a little darker than that. 174 00:17:10.880 --> 00:17:16.880 And those of you who are listening in, I'm sure you can see a copy of this graph if you just do a Google search, 175 00:17:16.880 --> 00:17:46.880 put in quotation marks Arthur Laffer, this will come right up, he says let's imagine a graph here where we've got, we've got on the x-axis we've got the tax rate and on the y-axis we have revenue and Laffer said well suppose the tax rate is 0 obviously the government will collect 0 in revenue so the point 0, 0 is plotted on this and suppose the tax rate is 100% that for every additional dollar above a certain amount you have to pay 100% 176 00:17:46.880 --> 00:17:56.880 Well, in effect, the government will also get zero revenue there, because people would just stop working, or they would work under the table, or they'd engage in fraud, or they'd shelter their income, whatever necessary. 177 00:17:56.880 --> 00:18:01.880 But unless people say, oh, I'd love to be a slave, take all my money away, no one's really going to do that. 178 00:18:01.880 --> 00:18:08.880 So, in effect, the amount of revenue the government would get under a hundred percent rate is so negligible that it may as well be zero. 179 00:18:08.880 --> 00:18:13.880 So he says these are the only two points of this graph that we know with any certainty. 180 00:18:13.880 --> 00:18:17.880 with any certainty. We can't plot anything else with any certainty. 181 00:18:17.880 --> 00:18:25.880 But he proposed that if we were to connect these two points, we would wind up with a graph that looked perhaps something like this. 182 00:18:25.880 --> 00:18:31.880 Where for a while, the higher the tax rate becomes, the more revenue the government collects sensibly enough. 183 00:18:31.880 --> 00:18:38.880 But eventually as you approach 100%, some of the disincentive effects here of 100% rate begin to come into play. 184 00:18:38.880 --> 00:18:43.120 and people begin to withdraw their money, or as I say, put it in tax shelters, whatever. 185 00:18:43.120 --> 00:18:49.280 You start getting that, start getting the perverse effect, the rate goes up, but yet revenue starts going down. 186 00:18:49.280 --> 00:18:54.640 So he proposed that, let's imagine this as the peak point. 187 00:18:54.640 --> 00:19:00.320 He says that this here is what is called the prohibitive range, that even from the government's own point of view, 188 00:19:00.320 --> 00:19:05.920 you wouldn't want to tax in this range because you're actually getting lower and lower and lower revenue here. 189 00:19:05.920 --> 00:19:08.240 You wouldn't want to tax up to this point. 190 00:19:08.240 --> 00:19:11.600 You'd want to tax somewhere around here. 191 00:19:11.600 --> 00:19:14.920 So that's what Laffer is suggesting. 192 00:19:14.920 --> 00:19:17.920 Now, he was probably suggesting something that looked a little more like this. 193 00:19:17.920 --> 00:19:19.960 So there's a bigger prohibitive range. 194 00:19:19.960 --> 00:19:22.560 Now, as I say, he doesn't quite know where that is. 195 00:19:22.560 --> 00:19:27.640 And in the Reagan years, there were a lot of promises that taxes are so high right now 196 00:19:27.640 --> 00:19:31.720 that if we lower the rates, there'll be so much business activity encouraged 197 00:19:31.720 --> 00:19:36.560 that the tax cuts will pay for themselves because there'll be so much new business revenue 198 00:19:36.560 --> 00:19:52.560 coming in with people opening new businesses and stuff and I think it was like 17 to 20 percent was made up but the tax cuts didn't pay for themselves in the 80s and then all the people who proposed this later said we never said it would pay for itself, we said it would slightly pay for itself. 199 00:19:52.560 --> 00:19:57.560 Well, I don't know, maybe they turned the microphone off when they said slightly but in the 1920s they did pay for themselves. 200 00:19:57.560 --> 00:20:11.560 The rates were so high that they were actually punishing and discouraging business activity, so that in fact you did get more government revenue when over the course of the 20s the top rate was reduced from 73 to 40 and then later from 40 to 25 percent. 201 00:20:11.560 --> 00:20:19.560 You did get more government revenue. You actually got the national debt, not the deficit, the debt reduced by a third in the 20s. 202 00:20:19.560 --> 00:20:28.960 in the 20s. So this had tremendous consequences, and that's an important thing that Mellon has to show for himself. 203 00:20:28.960 --> 00:20:33.760 Now this is significant, and I think that although next time when we talk about the Depression, 204 00:20:33.760 --> 00:20:40.560 we're going to see some of the aspects of the 1920s economy that were unhealthy and not sustainable, 205 00:20:40.560 --> 00:20:46.960 I think it's safe to say that some of these tax rate reductions were responsible for some of the 20s prosperity, 206 00:20:46.960 --> 00:20:58.960 And I cite the fact that in 1926, the unemployment rate reached an unbelievable 1%, which is just unthinkable given that there are always some people who are in and out of work and yet it was only 1%. 207 00:20:58.960 --> 00:21:11.960 The United States became, in the 20s, solidified its position as a great economic power so that total world production, its share of total world production was 34%. 208 00:21:11.960 --> 00:21:22.960 So, that's an astonishing figure. The next closest country in share of total world production was basically tied with Britain and Germany, and they had with each 10%. 209 00:21:22.960 --> 00:21:30.960 So, it's an extraordinary achievement. And so, no, you know, they didn't, they weren't as interesting and exciting as Teddy Roosevelt. 210 00:21:30.960 --> 00:21:36.960 They didn't go on safaris or anything like that. But, well, you know, the country was prosperous and for the most part at peace. 211 00:21:36.960 --> 00:21:40.800 Peace. So, you know, it seems that probably in some ranking that would account for 212 00:21:40.800 --> 00:21:45.880 something. Now the second and last aspect I want to, I guess this is third, the 213 00:21:45.880 --> 00:21:49.920 first part was ranking the presidents and why that's difficult to do. The second 214 00:21:49.920 --> 00:21:53.840 part is this domestic stuff. The third part is just a brief thing about foreign 215 00:21:53.840 --> 00:21:58.320 policy because it's often said that in the 1920s the United States became 216 00:21:58.320 --> 00:22:03.960 isolationist, okay, and that that was a bad thing. That's actually not 217 00:22:03.960 --> 00:22:08.960 This is not true and most historians now are not really saying that anymore. 218 00:22:08.960 --> 00:22:13.960 First of all, the term isolationist is a ridiculous word that was invented to smear people. 219 00:22:13.960 --> 00:22:18.960 It does not shed light on anything. I have never known anybody who was an actual isolationist 220 00:22:18.960 --> 00:22:22.960 or just thought that we should just block our ears and everybody just sit in the corner 221 00:22:22.960 --> 00:22:25.960 and not have any interaction whatsoever with the rest of the world. 222 00:22:25.960 --> 00:22:30.960 To the contrary, isolation is typically somebody who just favors neutrality and foreign policy. 223 00:22:30.960 --> 00:22:34.460 It's nothing weird about it, it's all it means. 224 00:22:34.460 --> 00:22:37.240 Now the reason I think some people have believed 225 00:22:37.240 --> 00:22:40.760 that the country became isolationist in the 20s 226 00:22:40.760 --> 00:22:43.540 is, I think it's two reasons. 227 00:22:43.540 --> 00:22:45.640 One is that it certainly was not as involved 228 00:22:45.640 --> 00:22:47.640 in world affairs as it is today. 229 00:22:47.640 --> 00:22:50.560 So by that standard, yes, it did retreat somewhat, 230 00:22:50.560 --> 00:22:53.600 but maybe that's not a reasonable standard of measurement. 231 00:22:53.600 --> 00:22:55.560 But the second thing is that there are a couple of things 232 00:22:55.560 --> 00:22:57.520 that the U.S. government did that did have 233 00:22:57.520 --> 00:23:00.840 a kind of isolationist flavor to them. 234 00:23:00.840 --> 00:23:04.160 The first one was an increase in protective tariffs in the 20s. 235 00:23:04.160 --> 00:23:10.440 Tariff rates went up substantially, and in a way you could say that's sort of an isolationist thing. 236 00:23:10.440 --> 00:23:16.000 You're cutting yourself off from international trade when you do that, so arguably that was somewhat isolationist. 237 00:23:16.000 --> 00:23:23.640 And the reductions in immigration that occurred in the 20s have been argued as evidence of isolationism. 238 00:23:23.640 --> 00:23:29.880 Immigration was restricted to 150,000 people per year, which by international standards is still fairly generous. 239 00:23:29.880 --> 00:23:34.580 This is supposedly the meanest, angriest, wickedest decade of all in immigration. 240 00:23:34.580 --> 00:23:42.580 You're still talking about 150,000 per year, which is about 150,000 more immigrants than, say, Japan admits to this day. 241 00:23:42.580 --> 00:23:44.080 But those are the arguments there. 242 00:23:44.080 --> 00:23:46.480 But beyond that, you don't see isolationism. 243 00:23:46.480 --> 00:23:49.180 You see internationalism, for better or worse. 244 00:23:49.180 --> 00:23:52.580 I'm not endorsing or knocking any of the things I'm about to disclose to you, 245 00:23:52.580 --> 00:23:57.280 but just telling you that the myth of isolationism in the 20s does not hold. 246 00:23:57.280 --> 00:24:03.820 So, for instance, the Washington Naval Conference, which was held in 1921 to 1922, brought together 247 00:24:03.820 --> 00:24:09.080 the major naval powers of the world, which would be the U.S. and Britain and France and 248 00:24:09.080 --> 00:24:14.320 Japan and Italy, and they reached agreements on the limitation of armaments. 249 00:24:14.320 --> 00:24:16.760 Now, this conference had real consequences. 250 00:24:16.760 --> 00:24:21.920 The major powers actually blew up some of their largest ships that were called capital 251 00:24:21.920 --> 00:24:32.920 and it was based on a kind of a Wilsonian idea that large stocks of armaments tend to lead to war and so therefore disarmament was a key to peace. 252 00:24:32.920 --> 00:24:36.920 So that actually occurred. Now the United States led that and it occurred in the United States. 253 00:24:36.920 --> 00:24:42.920 So it doesn't seem like something that an isolationist country would do, leading an international disarmament campaign. 254 00:24:42.920 --> 00:24:50.920 Of course this is a time when air power is beginning to be more important in wars and of course the Washington Naval Conference doesn't deal with air power. 255 00:24:50.920 --> 00:25:04.560 The United States also joined what were called the Four Power Pact and the Nine Power Pact. 256 00:25:04.560 --> 00:25:10.640 The Four Power Pact, which consisted of the U.S., Britain, France and Japan, urged signatories 257 00:25:10.640 --> 00:25:15.360 to consult with each other on matters pertaining to security in the Pacific, because all of 258 00:25:15.360 --> 00:25:20.840 those powers had Pacific possessions, the United States had the Philippines for example. 259 00:25:20.840 --> 00:25:26.960 The Nine Power Pact consisted of these four, along with China and four other European countries, 260 00:25:26.960 --> 00:25:31.480 aimed at securing what was called the open door in China, in other words, ensuring that 261 00:25:31.480 --> 00:25:37.240 trade with China would be open and free to all nations and would not be characterized 262 00:25:37.240 --> 00:25:42.920 by exclusive privileges for one country that a lot of countries had sometimes tried to 263 00:25:42.920 --> 00:25:47.040 acquire in defiance of the weak and frustrated Chinese government. 264 00:25:47.040 --> 00:25:53.000 So these are two examples of a pact in which the United States enters in which it agrees 265 00:25:53.000 --> 00:25:55.320 to engage in consultation with other powers. 266 00:25:55.320 --> 00:25:59.080 Now isolationism means you don't give a darn what other powers have to say. 267 00:25:59.080 --> 00:26:02.600 So again these tend to overturn that myth. 268 00:26:02.600 --> 00:26:06.520 But that's sort of international diplomacy or politics but in international economic 269 00:26:06.520 --> 00:26:10.640 policy the United States was also internationalist. 270 00:26:10.640 --> 00:26:15.900 Some of you may know in 1923 Germany experienced one of the most destructive bouts of monetary 271 00:26:15.900 --> 00:26:21.540 monetary inflation in history, monetary inflation so bad that there's a special word for it 272 00:26:21.540 --> 00:26:26.160 called hyperinflation, that the inflation is so bad that the currency unit collapses 273 00:26:26.160 --> 00:26:31.460 all together, that people would go to a bar and order two beers at once, because if they 274 00:26:31.460 --> 00:26:34.380 drink one and then order another one, the price will have doubled by the time they order 275 00:26:34.380 --> 00:26:40.380 a second one. I mean, that's how fast it's going. As soon as you get paid, you have to 276 00:26:40.380 --> 00:26:44.220 in fact, workers were getting paid twice a day, because they'd get paid one time, then 277 00:26:44.220 --> 00:26:52.220 You've got to throw, just whatever, buy anything, buy anything with it, but just get it off your hands and it just sort of leads to a vicious circle. 278 00:26:52.220 --> 00:26:57.220 Everybody's got to get rid of it. People panic that it's going to be worth less and less and less. 279 00:26:57.220 --> 00:27:09.220 There's a story of somebody, this may be an apocryphal story, but had a wheelbarrow full of German marks to go out shopping and just set it down to look in a shop window to see if there's anything worth buying. 280 00:27:09.220 --> 00:27:12.220 and then turned around and found that the money was still there 281 00:27:12.220 --> 00:27:14.220 but somebody had made off with the wheelbarrow. 282 00:27:14.220 --> 00:27:16.220 There's no point in trying to run off with this money. 283 00:27:16.220 --> 00:27:17.220 It's not worth anything. 284 00:27:17.220 --> 00:27:24.220 There are photographs of children who are gluing the worthless marks together 285 00:27:24.220 --> 00:27:27.220 to fly them as kites or putting them together as blocks 286 00:27:27.220 --> 00:27:29.220 and making pyramids out of them. 287 00:27:29.220 --> 00:27:31.220 People burning the currency to keep warm. 288 00:27:31.220 --> 00:27:33.220 It was a complete disaster. 289 00:27:33.220 --> 00:27:37.220 The German government had been recklessly inflating its currency 290 00:27:37.220 --> 00:27:44.220 in order to make its reparations payments in inflated and therefore less valuable currency. 291 00:27:44.220 --> 00:27:48.220 But the strategy spun out of control and led to this hyperinflation. 292 00:27:48.220 --> 00:27:56.220 At the height of this hyperinflation, it took over 4 trillion German marks to equal one American dollar. 293 00:27:56.220 --> 00:28:02.220 So, in one of the government business partnerships that was increasingly common in the 20s, 294 00:28:02.220 --> 00:28:10.220 It was banker Charles Dawes who, encouraged by the White House, put together a reconstruction plan for Germany called the Dawes Plan. 295 00:28:10.220 --> 00:28:16.220 Dawes established a new payment schedule in line with Germany's ability to pay. 296 00:28:16.220 --> 00:28:28.220 He developed a plan to put German currency on a more stable footing and managed to raise $110 million in emergency loans that were issued by private bankers, not the US government, 297 00:28:28.220 --> 00:28:31.220 in order to see the German government through the crisis. 298 00:28:31.220 --> 00:28:36.220 Dawes was also able to secure French withdrawal from the Ruhr, 299 00:28:36.220 --> 00:28:39.220 which was a resource-rich industrial area of Western Germany 300 00:28:39.220 --> 00:28:43.220 that the French had occupied in 1923 out of frustration 301 00:28:43.220 --> 00:28:47.220 with half-hearted German compliance with reparations payments. 302 00:28:47.220 --> 00:28:51.220 So again, that's not something that an isolationist power engages in. 303 00:28:51.220 --> 00:28:54.220 Dawes ended up winning the Nobel Peace Prize for that 304 00:28:54.220 --> 00:28:57.220 and became the Vice President in 1924. 305 00:28:57.220 --> 00:29:18.220 Now then in 1928 we have something called the Kellogg-Briand Pact, some of you may know about, signed by dozens of countries, and this was an international initiative, a lot of pacifists were involved in it, and the purpose of it was to try to outlaw war as an instrument of policy, and it declared aggressive war to be illegal. 306 00:29:18.220 --> 00:29:22.220 Well, you know, all right, nothing is easier than to ridicule this document. 307 00:29:22.220 --> 00:29:27.220 I mean, how are you going to enforce war being illegal? 308 00:29:27.220 --> 00:29:28.220 I mean, obviously you have to go to war. 309 00:29:28.220 --> 00:29:33.220 That would be okay because they're only declaring aggressive war to be illegal. 310 00:29:33.220 --> 00:29:36.220 If somebody engaged in aggressive war, you could still go stop them. 311 00:29:36.220 --> 00:29:40.220 But the thing is that no aggressor who engages in aggressive war ever says, 312 00:29:40.220 --> 00:29:42.220 I'm an aggressor, engaged in aggressive war. 313 00:29:42.220 --> 00:29:46.220 They always claim they're acting in self-defense or they're liberators or whatever. 314 00:29:46.220 --> 00:30:04.220 and there was no enforcement mechanism, but whether we think this was a valuable document or a silly document or naive or whatever, the point is that an isolationist country unconcerned with world affairs would not have spearheaded an international campaign on behalf of an initiative like this. 315 00:30:04.220 --> 00:30:09.220 In the culture, culturally we see an internationalist sort of spirit. 316 00:30:09.220 --> 00:30:14.220 The United States never joined the League of Nations, as I'm sure you know, 317 00:30:14.220 --> 00:30:19.220 but it did take part in certain League activities and joined a number of League committees. 318 00:30:19.220 --> 00:30:25.220 There was a League of Nations Committee on Intellectual Cooperation. 319 00:30:25.220 --> 00:30:29.220 This League on Intellectual Cooperation was formed because intellectuals, 320 00:30:29.220 --> 00:30:36.220 intellectuals, thinkers and journalists and writers were oftentimes ashamed of the way they had acted during World War I. 321 00:30:36.220 --> 00:30:41.220 They had just been shills for their governments. They had repeated obviously false propaganda. 322 00:30:41.220 --> 00:30:46.220 They had demonized the enemy as being subhuman. And then they looked and thought, gee, we're the intellectuals. 323 00:30:46.220 --> 00:30:50.220 You know, we're the ones who are supposed to be above all this. And we got right down in the muck as well. 324 00:30:50.220 --> 00:30:55.220 And so a lot of intellectuals wanted to form an international group like this, 325 00:30:55.220 --> 00:31:01.060 The League's Committee on Intellectual Cooperation to foster international scholarly communication, 326 00:31:01.060 --> 00:31:05.780 to hold international conferences on various subjects. 327 00:31:05.780 --> 00:31:11.060 So this League Committee looks to try to bring about, for example, things like textbook revision, 328 00:31:11.060 --> 00:31:15.400 that if there's a French textbook that says, you know, all the Germans are barbarians, 329 00:31:15.400 --> 00:31:19.460 well we should probably not do that if we want to foster international understanding. 330 00:31:19.460 --> 00:31:24.460 So there was that type of thing. Or it encouraged countries to learn to institute things like 331 00:31:24.460 --> 00:31:29.420 Like the study of the history and languages of, in the United States for instance, Russia, 332 00:31:29.420 --> 00:31:30.940 China and Japan. 333 00:31:30.940 --> 00:31:35.460 Now you had official, at the college level, you had departments teaching the languages 334 00:31:35.460 --> 00:31:40.060 and cultures of these places on the understanding that the more we know about the countries 335 00:31:40.060 --> 00:31:45.080 of the world, the more we understand them, the less likely there will be misunderstandings 336 00:31:45.080 --> 00:31:46.080 that lead to war. 337 00:31:46.080 --> 00:31:48.100 So that was the internationalist spirit behind this. 338 00:31:48.100 --> 00:31:51.860 It wasn't just a coincidence that these academic departments got started, the thinking was 339 00:31:51.860 --> 00:31:56.860 The more we know about other cultures, the more we will encourage peace. 340 00:31:56.860 --> 00:32:00.620 It was also during the 1920s that the Student Exchange Program got started, 341 00:32:00.620 --> 00:32:03.820 which is now, it's a familiar staple of American education. 342 00:32:03.820 --> 00:32:08.940 In my own high school we had a Swedish guy named Johan, 343 00:32:08.940 --> 00:32:12.860 and he was sort of, you know, slightly, a little slightly clueless, you know, 344 00:32:12.860 --> 00:32:16.980 and so it was kind of cute to watch him try to cope with American life and culture. 345 00:32:16.980 --> 00:32:20.940 But the idea of the program was that to know them is to love them. 346 00:32:20.940 --> 00:32:25.440 You get to know some guy from Sweden, well you're less likely to go to war with Sweden. 347 00:32:25.440 --> 00:32:29.940 Well I guess in that sense it's worked, right? We've had complete nothing but peace with Sweden over the years, 348 00:32:29.940 --> 00:32:34.440 but the idea was that Americans would go study here, and foreigners would go study other places, 349 00:32:34.440 --> 00:32:37.440 again fostering international understanding. 350 00:32:37.440 --> 00:32:45.440 And in fact we have an addition to that, that in the 20s there was a tremendous bout of what became known as revisionist history. 351 00:32:45.440 --> 00:32:50.440 Now this term revisionist history has been used so many times that it almost loses all meaning. 352 00:32:50.440 --> 00:32:55.440 I've had people come up to me and say your book is great, meaning the one that you folks have. 353 00:32:55.440 --> 00:32:59.440 Your book is great because it goes after the revisionist historians. 354 00:32:59.440 --> 00:33:03.440 And I've had other people say your book is great, it's a great work of revisionist history. 355 00:33:03.440 --> 00:33:07.440 So people don't know if I'm attacking revisionism, if I am a revisionist. 356 00:33:07.440 --> 00:33:10.440 Well there isn't a fixed or stable meaning of what the term means. 357 00:33:10.440 --> 00:33:15.440 A revisionist simply is somebody who looks at the received version of history 358 00:33:15.440 --> 00:33:19.440 and then goes back and reexamines it to see if it actually is true 359 00:33:19.440 --> 00:33:49.440 or whether it's propaganda, and particularly revisionism, for example, revisionism after World War I would go back and look at some of the claims made by the victors and say that did some of these things really happen, did these atrocities that were claimed really happen, or was Germany as the peace treaty claimed, was Germany really exclusively responsible for the outbreak of the war, I mean does Russia bear no responsibility, does France bear no responsibility, is that really true? 360 00:33:49.440 --> 00:34:02.440 And the thinking oftentimes among revisionists who are engaged in their work not only after wars, but a lot of times after wars, is that sometimes wartime is not the best moment to make impartial judgments. 361 00:34:02.440 --> 00:34:06.440 Nobody's impartial during a war. You've got to go after the enemy. Who's going to be impartial during those years? 362 00:34:06.440 --> 00:34:15.440 But now when passions have cooled, we've got to go back and re-evaluate all these claims we made and all the bogus history we wrote, and we've got to look at the documents and see what they tell us. 363 00:34:15.440 --> 00:34:30.440 and that's what they tell us and in the 20s you already began to see revisionist looks at history like Sydney Fay was writing articles in major historical journals arguing that Germany was not exclusively responsible for the outbreak of the war. 364 00:34:30.440 --> 00:34:36.440 Later on you had Harry Elmer Barnes writing that in fact Germany was perhaps the least responsible for the outbreak of the war. 365 00:34:36.440 --> 00:34:43.440 Now this is all debatable but the point is the fact that these debates were occurring is an example of revisionism and whether you support revisionism or not 366 00:34:43.440 --> 00:34:46.440 The point is they thought of themselves as internationalists. 367 00:34:46.440 --> 00:34:52.440 What motivated them was the idea that you cannot foster international understanding on the basis of myths. 368 00:34:52.440 --> 00:34:57.440 And if we're led to believe that World War I was caused solely by some wicked devils in Germany 369 00:34:57.440 --> 00:35:03.440 and that none of us bore any responsibility, well, this is no way to base international peace, 370 00:35:03.440 --> 00:35:06.440 to demonize one group who are going to resent that forever. 371 00:35:06.440 --> 00:35:12.440 We have to look at everything impartially and then make our judgments on that basis. 372 00:35:12.440 --> 00:35:17.000 So those are, I think, some examples of an internationalist spirit at work in the 20s.