The Panic of 1921
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Immediately following the election of 1920, the Stock Market hit a series of dips. The booming market of the 1910’s slowed, and fears of drastic changes to the US economy caused that slow to turn into a drop. By 1921, the drops had become a full blown recession. The expense of maintaining a US presence in China was becoming a serious drain on the economy, and the added expense of new Socialist policies sent further ripples through the economy. This culminated in a panic in 1921 over energy industries. Leading socialists were attempting to pass a series of bills calling for a national energy department, which would control the growing supply and demand for power. As more and more people moved to cities, and more and more electricity was used, the energy companies became more powerful. But when the Socialist backed bill began to gain momentum, and the market continued to decline, investors became worried. The result was a mass-selling of energy stock. Stock in coal, oil and energy companies hit an all time low, and then went through the floor.
Hiram Johnson, with some creative use of his previous budget, went into action. The Department of the Interior, headed by John Barton Payne, suddenly found itself with a wildly raised budget, and instructions to buy up as much energy stock as possible. Through a rather dubious closing of the Market, Johnson ensured that the US government emerged in control of almost 40% of the nation’s energy companies. This shot up to 60% after congress passed the Nationalized Industry Bill in 1923. This trickery was the last straw between the Republicans and Socialists. Those Republicans at the top of the party declared any crossing of the isles to be counter to the Republican war, although the message was generally ignored. The result of the panic was a rise in unemployment, which was aided by a temporary slow down in the Great War. But Socialist programs for unemployment, as well as new public-work organizations helped pick up the slack. Although this almost doubled the expenditure of the government, the profits from the energy company and the Income Tax more than covered the new costs.
Secretary of the Interior Payne
All of this however took a backseat to a more pressing concern. The United States of Central America, seeing the shift from Republican jingoism to Socialist isolationism, pounced on the opportunity. Long oppressed by American industry, especially American fruit companies, the President of the USCA, José María Orellana, who’s coup had come with the promise of ridding the USCA for American influence, was ready to fulfill his promise. In December of 1921 he began raising new, heavily armed regiments. These existed under the guise of suppressing rebels in the North. But by January it was clear that these new forces existed for more sinister reasons. On January 22nd 1922, the army of the United States of Central America seized US owned fruit companies and packing factories and arrested the businessmen in charge. 7 divisions of Central American infantry rushed to the border between Costa Rica and American Panama, prepared to repel the oncoming invasion.
General José María Orellana, President and Dictator of the USCA
For two weeks, President Johnson attempted to diplomatically isolate and pressure the USCA into reversing its policy. But every day that passed without American intervention President Orellana became bolder. When he declared to the world that American dominance of Central America had come to an end, President Johnson’s hand was forced. On February 10th the United States declared war on the United States of Central America. General Chamberlain and Admiral Alfred Selway, a Socialist political ally, proposed to Johnson that a total-force policy be used. The 3 divisions in Panama could well hold off any assault from Costa Rica, but would be hopeless in an offense. General Chamberlain, whose primary experience had been fighting the vastly out-gunned Chinese, proposed a full assault. Johnson agreed, and a full 224,000 troops were deployed to Central America, combined with two fleets. It was the full might of the American army unleashed upon the hapless Central Americans.
Mobilization!
The initial assaults were a disaster of epic proportions. 15,000 American soldiers died in the first week of the war, as Costa Rican defenses were well prepared for the frontal assault. Disease ran rampant through the US lines, and Chamberlain was dumbfounded. The assaults, which had so quickly broken the back of Chinese armies in the past, were failing here in the jungles of Central America. On March 15th, a month into the conflict, Chamberlain was recalled and replaced him with General Charles P. Summerall. In an attempt to shoot new life into the army, Summerall replaced the command staff en masse. The old guard were swept away and replaced with a new group of officers, including the popular General Douglas MacArthur (who would lead the assault and capture of San Jose), and General Malin Craig. These new men, who had been trained in the combat styles of the Spanish American war, were more prepared for the trench warfare.
These new men shifted the focus on the war. Rather than long, extended offenses, it was to be directed fire and targeted assaults. Naval guns were unleashed with unique accuracy, and artillery strikes became more directed. The goal was to break just one whole in the line, and snap the moral of the defenders. The sheer weight of artillery and naval bombardment took its toll. One by one the Central American defenses crumbled to overwhelming American fire. On May 19th, the lines were broken, and the Central Americans were fleeing. By May 29th, Costa Rica had fallen, and the USCA army was preparing for another defensive stand. But it was too late, the firepower was too much for the outnumbered Central Americans. Although it would take a year to occupy the country and subdue the last remnants of Orellana’s army, the war was effectively over by July of 1922. The result was a radically different Central America.
Four independent governments were established over the ruins of the United States of Central America. The first was the Republic of Honduras, ruled by the long-time Honduran rebels who had plagued the USCA for many years. A new pro-American, pro-Socialist government was established in Tegucigalpa, and granted certain rights over American industry in the region. The other two Northern Socialist states established were Guatemala, with its capital in Guatemala City; and Nicaragua with its capital in Managua. The rest of the country was divided in two. Costa Rica was declared independent, with its capital in San Jose, but it was nothing more than an American economic zone. The final country was the Republic of El Salvador, which took over the remainder of the USCA. Its government was an extension of the Mexican regime of Álvaro Obregón, a very pro-American President. The Mexicans were granted control over their new puppet with the understanding that American oil interests in Mexico would go un-disturbed. The treaty was signed May 29th, 1923, and the United States of Central America ceased to exist.