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The Great Depression and its impact Attempts to halt the depression …
The Great Depression and its impact
Attempts to halt the depression
Hoover Presidency
The Hoover Presidency
Background and beliefs
Encapsulated the American Dream:
Orphan raised by uncle in New Oregon on a small rural settlement
Hoover was a "self-made man" and believed that everyone the capacity to become one too
Became a millionaire before 35 by working for large mining corporations
Believed passionately in the values of hard work and dedication
Free enterprise
Thought the economy could fix itself
Retained conventional Republican economic ideologies retained by predecessors Harding, Coolidge:
o "Rugged Individualism" → as a "self made man", Hoover did not want individuals to become reliant on the government
Minimum government intervention in the economy
Considered the government to be a facilitator of cooperative and voluntary community service
Believed it was the responsibility of the state and local government and charities to deal with the problems created by the Depression and that the Federal Government should not interfere.
Problem is that the state governments had no money and therefore they relied on the funds from the Federal Government. However, since they are reluctant to involve themselves with the Depression, state governments could not do much to aid in solve the numerous problems the GD brought with it.
Believed it was the job of government to provide the circumstances within which self-help and community responsibility could thrive
Attempts
• Hoover cut govt spending by 10% and raised taxes by 30% in order to balance the budget. The result was a further reduction in spending and economic activity.
Agricultural Marketing Act (1929):
establishes the Federal Farm Board with funds of $500 million to create farmers marketing co-operatives
Attempted to ‘restore order’ to the agricultural industry
given the task of storing and eventually disposing of farm surpluses in an orderly way
however, they had no power to order restrictions in production and huge surpluses in 1931 and 1932 both in US and overseas saw prices plummet
Failed w/ the collapse of the Federal Farm Board in 1933 after having lost $350m+
Voluntarism (1930):
persuaded businessmen and state govts to continue as if no Depression – to solve it through own voluntary efforts
called meetings to dissuade businesses from laying off workers or cutting wages but instead maintain output and urge people to buy
urged state leaders to continue with public works but also start new ones
However, as the Depression worsened, business and states had little choice but to retrench workers and cut back - problems far too great for voluntarism to work
Smoot-Hawley Tariff (1930)
Aim → to protect US industries against foreign imports by raising duties to 40% (record high in the U.S.)
Effect → Resulted in the implementation of retaliatory tariffs by America’s trading partners
This effectively closed foreign markets to American exports
US exports plummeted 60% between 1929 and 1933
Emergency committee for employment (voluntarism) 1930
Established in October 1930
Attempted to institute and coordinate voluntary relief agencies
Drought relief (1930): $49 million given in loans to victims of the drought
Moratorium on war debts (1931): US would defer collection of its debts war debts from Europe for 18 months in hopes it would re-establish foreign demand for American exports but too little too late for Europe’s economies
National Credit Corporation (voluntarism) (1931):
Attempted to create a pool of credit to secure weaker financial institutions by petitioning stable banks to pledge funds
Began with capital fund of $500 million but as banks continued to fail it was admitted by end 1931 that it had only expended $10 million – showed bankers too ingrained in their ways to invest in failing concerns and that banks will put own interests ahead of their country
Federal Home Loan Bank Act (1932): provided federal loans to homeowners to prevent foreclosures but got bogged down in red tape
Reconstruction Finance Corporation (RFC) (1932): granted $2b to state and local governments for public works programs
Emergency Relief and Construction Act (1932): signed by Hoover which aids public construction works, aid the states and assist banks.
Criticism of Hoover
Portrayed as cold, callous, unimaginative and hardhearted by the public and press
Plummeting public support
Policy of individualism, limited government intervention met w opposition from the press
Bonus Army Incident of 1932
20,000 unemployed war veterans marched in Washington DC in May 1932, demanding the early payment of the veterans’ bonus which had been approved by Congress in 1924 but was to be paid in 20 years time
Proposal put to Congress suggesting the early payment of the bonuses but was rejected in mid-June
Total bonus payments worth $3.5b; an opportunity to pump prime the economy
Veterans protested by building settlements on Anacosta Flats in south west Washington DC, suggesting that they would stay there until their demands were met
President Hoover developed a plan to evict the ‘army’ by the end of July
1,000 soldiers equipped with tear gas, tanks, machine guns evicted the veterans, burnt the settlement
The result? 2 veterans were killed and up to 1,000 were injured
Public was shocked, distressed by the incident
It was from this incident that Hoover garnered the image of being cruel, heartless and insensitive
Summary
"Too little too late"
His beliefs halted the extent of his efforts
Victim of both his own mindset and of a crisis that would take herculean efforts to solve
Would consider all remedies short of direct federal intervention
Saw the government as the facilitator not the creator
However, Hoover did involve the government in more areas of life than ever before; for example, the RFC was seen as a forerunner of FDR’s New Deals initiatives, and the encouragement of public works schemes. In this respect, he may be described as the ‘first of the new Presidents and the last of the old’
On the other hand, the effectiveness of his measures was limited without massive govt spending and unemployment benefits for all to stimulate the economy (buying and selling again). As a result, what he offered fell far short of what was necessary – his principal philosophies of voluntarism and self-help were wholly inadequate to meet the magnitude of the crisis
Evidence of failure during the Hoover administration:
Unprecedented rise in unemployment
10 million (20%) unemployed by 1932
Unemployment rate approached 50% in cities such as Detroit, Chicago
High level of unemployment among African Americans
A third of the employed were part time by 1931
Collapse of the bank system in 1931
Banks failing at a rate of 500 a year by 1931
600 banks went bankrupt in the final 6 days of 1931
1352 banks in total had failed in 1931