The American retrenchment of the 1920s had its roots in a number of different factors. The bloody en-gagement of World War I provoked an emphatic re-sponse from the American public which subsequently recoiled from the idea of further costly entanglements in European problems. The failure of President Wood-row Wilson’s proposed League of Nations to garner decisive support in the U.S. Congress seemed only to confirm this shift away from the domestic indulgence of international commitments and collective security.
Second, the considerable expansion of government structure and expenditures incurred by World War I produced deficits that were, for the time, impressive and prompted a perceived need to get the country’s budget and finances back on track.4
The retrenchment of the period was not merely a redefinition of America’s international commitments
and activities; it contained a re-scoping of America’s domestic governance structure as well. Domestically, it represented the political reaction to 2 decades of energetic progressive political reforms and policy experimentation. Characterized by one historian as an illustration of Newton’s third law of physics, the republican policies of the 1920s reflected a dramatic political swing away from the heady reformism, trust-busting, state-interventionism, and grass-roots activ-ism of the prior 20 years.5 Another argues that “with the war over, traditional fears of big government had reasserted themselves and been spurred along by tax-payers and regulated interests who believed that they stood to gain from shrinking the public sector.”6 With the collapse of the Russian state to Bolshevism and the embrace of socialistic policies in other European countries, there was also a desire to defend the valid-ity of the capitalist model of economic development, to avoid anything that resembled state-socialism, and to seek out alternative models for handling modern problems in a non-statist fashion.
The New Era retrenchment strategy entailed a number of distinct policy positions that were more-or-less consistently carried out by a succession of Re-publican administrations, culminating with Hoover’s presidency in 1928. This “New Era” in American his-tory has been seen as a period of international with-drawal so radical that it has often been characterized by the term isolationism. As one European scholar has argued, it is difficult to understand what isolationism could mean if it is not descriptive of this rather dra-matic shift in U.S. foreign policy.7 On the other hand, some historians have been at great pains to point out that the 1920s—in contrast with other decades, and the 1930s in particular—was a period of
impres-sive and energetic growth in American international economic and cultural engagement. While there re-mained a hard-core of “stand pat,” isolationist conser-vatives in the Republican party, the administrations of Warren Harding and Calvin Coolidge turned away from only the most formal and symbolic international political and security instruments, namely the League of Nations, and instead pursued normal international relations and tackled major issues through the less formal mechanisms of conferences, disarmament, and
“economic diplomacy.”8 Some have suggested that this represented a clever and pragmatic maneuver by internationalists within the Harding and Coolidge administrations to continue international engagement by other means in spite of the lack of domestic politi-cal support. The retrenchment strategy of the 1920s was not a unilateral withdrawal on all fronts, but en-visioned a substitution of more profitable economic engagement for the riskier political and security engagements of former times.9
The most significant aspect of the retrenchment of the 1920s was the rejection of the League of Nations by the U. S. Congress. They promoted “. . . peace through disarmament as an alternative to Wilson’s program of peace through world government.”10 The Wash-ington Conference of 1921 was a masterful hat-trick of retrenchment diplomacy, successfully refining U.S.
obligations and interests through the Four- and Nine-power treaties governing spheres of interest in the Far East. The conference also saw the most dramatic international downsizing of military force structures for almost half a century in its culminating effort, the Washington Naval Treaty. This retrenchment of defense expenditures proved fatal to the long-term maintenance of British Imperial interests, and thus is
often looked at as a prime example of how retrench-ment can readily be provocative of decline. While not fatal, the treaty also proved to be problematic to the United States, as it was not matched with a political resolution of the status of the Philippines. Left ambig-uous, America’s force posture was sufficient to sug-gest that the Far East remained a “core” interest, while nonetheless providing insufficient means to protect that interest.
One of the major international institutions sup-ported by the Republican retrenchment of the 1920s was the international monetary gold standard of ex-change. “It was widely assumed that there was sim-ply no other workable basis on which currencies could be rendered reliable and on which the international economy could function. . . .”11 Without a gold stan-dard, Hoover noted, “No merchant could know what he might receive in payment by the time his goods were delivered.”12 With 59 countries on the gold stan-dard before World War I and the total global supply of gold filling only a modest two-story townhouse, “few people realized how fragile a system this was, built as it was on so narrow a base.”13 Aggravating this situa-tion was the imbalance of gold reserves between the world’s major powers after the war, with the United States controlling over 60 percent of the total.14
Reinforcing America’s support for a return to the international gold standard and hopefully a return to profitable economic growth by Europe and the United States was a policy of dollar diplomacy. Reflecting a preference for the private backing of international fi-nance, dollar diplomacy:
. . . hoped to mobilize private American capital for Eu-ropean reconstruction without engendering domestic
inflation, sacrificing conservative fiscal policies, com-promising anti-statist principles, or risking the politi-cization of economic relationships.15
Investment expanded rapidly beyond Europe, and the Republican administrations of the 1920s im-plemented a level of “voluntary” State Department review of these otherwise private loans. Intended to encourage better behavior in both investors and re-cipients, the system proved confusing and opaque. It produced the worst compromise between self-regula-tion and oversight. The system “. . . did not preclude unproductive loans; yet, it engendered the belief that the government had a responsibility to protect loans it did not formally disapprove.”16 Unfortunately, the sheer volume of investment abroad proved itself to be a source of instability.
Economically, the Americans were anything but isolationist during the 1920s, investing as much as $80 billion across the globe and almost doubling the vol-ume of foreign trade by 1929.17 The State Department and Department of Commerce established a number of fact-gathering agencies and commissions of experts.
They promoted international conferences and consul-tation to support the efforts of American businesses to expand. The Bureau of Foreign and Domestic Com-merce alone expanded from six to 23 offices across the country during that period.18 While U.S. trade was ex-panding at a remarkable pace, Europe’s significance as a trading partner declined relative to Latin America and the Far East.
Tariffs were, in part, a response to uncertainty within the American business community about how the nation should best protect its economic and commercial needs in an increasingly interdependent
world.19 They were also a necessity borne of the rigors of domestic politics. Policymakers justified this policy, so contradictory to their international economic goals, by arguing a prosperous domestic market would increase the total market for imports regardless of tariffs. The prosperity and economic growth of the 1920s was such that conditions did not immediately contradict this assertion. But as one scholar noted, “It was impossible to sell to the world, lend to the world, and refuse to buy from the world without eventually courting disaster.”20
Cultural exchange was a significant side effect of the economic exuberance of the 1920s. The most popular products of commercial trade—motor cars, films, radio—were not only useful items in and of themselves, but also proved to be influential vectors for artistic expression and a major medium of Ameri-can cultural transmission to the rest of the world.21 Less tangibly, in their travels American businessmen brought with them their professional values, ideas, and organizational models. One historian notes that concepts of business efficiency, professional organiza-tion, and voluntary cooperation were exported almost as vigorously as American films and music.22 In addi-tion to culture and the arts, the pursuit of diplomacy and engagement by indirect means also produced a powerful wellspring of grass-roots organizations and values activism on such topics as women’s rights, pro-hibition, disarmament, and peace.
A major domestic objective of the post-war Repub-lican retrenchment was domestic tax relief. Secretary of Treasury Andrew Mellon focused on the outsize rates applied to the wealthy, reducing them from 73 percent to 25 percent, and reduced estate taxes to better support bequests given by wealthy donors to
public institutions, charities, and schools.23 There was, at the same time, a strong desire to reduce the total level of public debt in the United States. These two domestic priorities directly influenced America’s un-willingness to contemplate European war-debt relief for almost the entire decade.24
The retrenchment strategy of the 1920s was also plagued by a number of contradictions. While the United States was not keen to take a leadership role in the international economy, its size and weight ensured it would have an influence regardless of its desire.
Without proper recognition of that fact and respon-sibility taken, the directional influence of the United States on the international system was haphazard, as often destabilizing as it was constructive. There were also a number of tradeoffs implicit in the retrench-ment policies of the 1920s, defending the repayretrench-ment of war debts so as to relieve the domestic tax burden, for example. These tradeoffs were rarely reexamined as global conditions shifted and changed. America’s approach further suffered from a basic lack of coordi-nation due to the diffusion of responsibility within the executive branch, the small size of the federal govern-ment, and the deep professional and political divide between Washington, the political capital, and New York, the financial capital.25
HOOVER AND AMERICAN INDIVIDUALISM