Attempts to halt the Depression: the Hoover Presidency, the FDR years Flashcards
Introduction
4 Subtopics
Hoover and Roosevelt
The Great Depression created problems with:
- Finance and banking
- Agriculture
- Industry
- Social welfare
These issues needed to be addressed through government intervention, seen during the
- Hoover administration (1929-1933)
- Roosevelt (FDR) administration (1933-1945).
Introduction
- Hoovers poor response, rugged individualism…
- FDRs new deals, restoring faith in democracy
Hoover’s response to the Great Depression was initially poor, but govt intervention substantially improved under FDR.
Roosevelt’s initiatives included the New Deals.
Hoover
- Rugged individualism and self-reliance
- Republican conservative economic policy
- Exacerbating problems of the GD
FDR
- Targeting and restoring faith in democracy and American capitalism improving confidence
- New Deals were overall an emphatic success
A - Finance and Banking
- Evaluation
- Overall problem
Govt intervention had varying degrees of effectiveness in resolving the financial and banking problems created by the Great Depression
Hoover’s laissez-faire approach was ineffective at restoring confidence in the American banking system
FDR’s increased intervention in the financial system effectively bolstered the financial sector to restart the economy.
Overall problem in the banking system
The financial and banking system of America was failing due to a sharp decline in confidence, individuals choosing to store raw currency rather than placing them in unstable banks for fear of further collapse.
This undermined the central role of financial institutions as the cornerstone of American capitalism, sinking America further into Depression.
A - Finance and banking
Hoovers response
Laissez-faire approach was ineffective at restoring confidence in the American banking system
- “Rugged individualism”
1. National Credit Corporation 1931 - Evidence of failure - 40% of banks went bankrupt between 1929 and 1933, caused by his refusal to address the issue of bank runs
- 9000 banks failed and 9 million bank savings accounts were destroyed
-
Revenue Act 1932 - Evidence of failure
* Unintentionally reduced disposable income of people with money to spending and precluded business investment
Overall these measures failed to address the key problem affecting the financial and banking system of the US, that being confidence in the economy.
A - Finance and banking
FDR’s Effective response
- Emergency Banking Relief Act 1933 - Evidence of success
- Within 300 days 5000 banks had been inspected and reopened.
- Overall 2/3 of US banks reopened as a result of this Act.
-
Glass-Steagall Act 1933
* Commercial banks that relied on small scale depositors were banned from involvement in the type of investment banking that had fueled some of the 1920s speculation - Taking off the gold standard - Evidence of success
- Tackled the financial crisis which was the most urgent of the problems FDR faced
- Money began flowing in as a result of a reduction in bank runs
- Solvent banks were reopened and other re-organised
Whilst the actions of Hoover were ineffective at recovering the financial and banking system of the US throughout the early stages of the depression
FDR’s New Deals achieved considerably more success at returning its functionality chiefly through reinvigorating confidence
B - Agriculture
Government intervention limited effectiveness in resolving the agricultural problem exacerbated by the Great Depression
Overall problem
Persistent issue of overproduction, driving down the prices of their goods
Mechanisation of agricultural sector paired with decrease in consumption by struggling households led to surplus of produce
- 30% of labour force in agriculture sector
- Banking problems involved farm repossession
- Dustbowl ravaged American prairies, drought destroying crop yields
- Social impacts and potentiality of revolt amidst growing tensions
B - Agriculture
Hoovers inneffective response
Largely ineffective agricultural policy failed to address the agricultural industry’s key problems
- Federal farm board 1929
Aimed to stabilise agricultural prices by purchasing surpluses of produce, driving prices back up to sustain farmers’ incomes
Some initial success:
- Wheat prices pushed up by 18c a bushel
- However, collapsed after the introduction of the Smoot-Hawley tariff
Evidence of failure
- Agricultural production only reduced by 6% compared to industrial production at 42%
- Hundreds of rural properties repossessed
- McNary Haugen Bill, an attempt for governments to subsidise farmers, never passed into law
B - Agriculture
FDR’s Effective response
Agricultural initiatives more effective than Hoover, but still only to a limited extent
- Agricultural Adjustment Administration - Innefective
Subsidise farmers to reduce their acreage and production voluntarily, raising commodity prices
- Millions of pigs, cows were killed and acres reduced but prices rose in the short term.
- Politically the sight of killing livestock while people starve is a huge problem.
However, Second AAA in 1938 (Second New Deal) - Successful
- Instituted a system of Federal crop insurance and parity payments’ to stabilise prices
- Set quotas on acreages and payments
- Addressed the problems with overproduction and allowed the market for agriculture to stay afloat
- Tennessee valley authority (TVA) - Effective
Harness River Tennessee through dam works (25) to change topography of the river whilst millions of trees and grasses were planted to reduce erosion
Productivity increased, accounting for a large source of employment for the region increasing average incomes by 200%, modernising and improving living standards
Provided cheap electricity, employment, built key infrastructure and controlled flooding in the valley
C - Industry
- Evaluation
- Overall problem
Industrial restructuring largely ineffective under Hoover, but substantially improved under FDR’s New Deals
Overall problem
Industrial collapse was attributed with unemployment and low consumer demand
Unsustainable working conditions within industries
C - Industry
Hoover
“Trickle-down economics” theory accelerated loss of faith in capitalism and democracy which underpinned industry
- Reconstruction finance corporation
$500 million funding ($2 billion promised) gave emergency loans to banks, railroads, insurance companies, amongst others at the top of the economic system
Theory that injections into top of the economic system would have a “trickle- down” effect to consumers was only partially successful
- Public infrastructure projects
Doubled spending on public infrastructure projects $1.5 billion was spent on the Hoover Dam to give jobs to the unemployed and kick-start the economy
Expenditure measures were only marginally effective at reducing unemployment
- Smoot-Hawley tariff
42% tax on imports increased tariffs on European goods, designed to get Americans to buy domestic-made products, protecting US businesses from foreign competition
However, caused retaliatory tariffs by European countries
US exports reduced 61%, and GDP fell by $30 billion after tariff was imposed
Self-centred response to the Depression ensured that foreign economies could not support each other due to stringent protectionist policies
Evidence of failure
Though providing the foundation for FDR’s New Deal policies, expansion in government intervention came too late to be effective
At the end of 1932, unemployment reached 23.6%, with 28 million Americans without any meaning income
C - Industry
FDR
Considering FDR came into industrial collapse, though his industrial reforms were only somewhat effective in the short term, the New Deals set up long term success in the recovery of American industry.
- National recovery administration (New deal)
557 codes central planning of business, wages and prices through reducing unfair competition, improving working conditions and a minimum wage
Evidence of Success
- Two million joined scheme, 13 million helped by NRA
- 40-hour maximum working week
- Abolished child labour
Evidence of failure
- Voluntary nature meant codes could not enforceable
- Small companies could not substantiate requirements, while big businesses had the power to determine their own conditions
- Struck down by Supreme Court as unconstitutional
- Public world administration (PWA)
- $6 billion for pump priming by incentivising construction of large- scale public works
- Well planned in providing employment, stabilising purchasing power and infrastructure to revive the economy
Evidence of success
- Indirectly served as work relief, Improved infrastructure, well planned.
- 13,000 schools and 50,000 miles of road built, helped employment
- Wagner act (National labour relations act) 1935
Guaranteed workers ‘collective bargaining’ through Unions of workers’ choice providing workers with protection in terms of working conditions and industrial relations
- Defined unfair working practices and improved wages
- 7.8% 1929 of workers in unions increase to 21.9% in 1938
D - Social welfare
- Evaluation
- Overall problem
Hoover was ineffective at providing relief through social welfare due to his conservative views rooted in Republican economic views, while FDR was somewhat effective.
Overall problem
Population disenfranchised from the economy and lacking a stable source of income, required federal support in order to alleviate their rapidly decreasing quality of life.
D - Social welfare
Hoover
The social requirements of US society contradicted Hoover’s belief in voluntary action and rugged individualism
Hoover was unwilling to help individuals directly with relief because he believed it encouraged laziness, not requiring people to work for their money.
Hoover’s unsympathetic attitude to the social problems affronting US society, one that was impractical for the emotional and physical needs of the American populace at that time, exacerbated its effect on individuals
Key points
Relied on local governments and charities to provide relief to unemployed and homeless
Shantytowns that appeared were named ‘Hooverville’, expressing disapproval with the administration’s inaction
Hoover’s inadequacies in supplying the infrastructure of a welfare state led to hunger riots such as the Ford Hunger March and Chicago riots
Hoover’s insensitive response to the social wellbeing of American citizens was therefore ineffective at resolving the problem of relief, based in his opposition toward federal intervention for individuals
D - Social welfare
FDR
Differed greatly from Hoover in his active response and willingness to provide relief
Policies saw some effectiveness
- Federal emergency relief act (FERA)
$500 million to states to provide relief to unemployed
FERA only paid out $25 per month whereas $100 was required for minimum cost of living
Despite limited success, it set an important precedent for government relief
- Works progress administration and civilian conservation corps
Work relief for workers with stable source of income
Overall a social and political success as well as an economic success
- Social Security Act 1935
Gave old-age benefits financed by employee and employer payroll tax.
Later broadened to include disability benefits and child welfare and eventually unemployment benefits.
Basis of welfare capitalism, most long-standing change, acknowledging public responsibility for old age and unemployment provision
- Relationship with people
Took advantage of the capacity of radio to deliver “fireside chats”
Established trust in the government once again, and the public respected and admired him
To this extent, Roosevelt was successful in getting the US through the depression without a loss of faith in American capitalism and democracy
However, despite success of these acts, the major target of unemployment remained at 19% in 1938
Would not recover fully until WW2 when the US was fully mobilised.
