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Policies to end the Depression: Hoover vs. Roosevelt

Paper type: Essay
Pages: 17 (4004 words)
Categories: A Famous Person, America, Business, Economy, Finance
Downloads: 8
Views: 1

Introduction

“This campaign is more than a contest between two men. It is more than a contest between two parties. It is a contest between two philosophies of government. ” – H. Hoover W hen Wall Street crashed in 1929, it spelled the end of a decade of excess. In the 10 years preceding this dramatic event, life (for the middle class upwards at least) had been good. Businesses were booming, and new industries were growing rapidly at a time when consumer confidence was sky-high.

When the Stock market crashed on the 24th October 1929, consumer confidence slumped. No-one wanted to spend money anymore, choosing instead to horde it in wait for better times.

Even before the Crash, businesses had found that no-one would buy their goods anymore, because everyone who could afford them already had them! Faced with massive losses, bosses cut down production and laid off workers. This massive lay-off of workers caused a huge raise in unemployment which steadily increased until, in 1933, 1 in 4 workers was without a job.

Within 5 years, the illusion of wealth and happiness had been cruelly shattered, and was replaced by a general feeling of hopelessness and despair, which named one of the darkest chapters in American history: the great Depression.

Herbert Hoover and Franklin D. Roosevelt

The two Presidents in power during this time, Herbert Hoover (1919-1933) and Franklin D. Roosevelt (1933 -1945), had very different ideas of how this crisis should be handled. By comparing and contrasting their responses to the problems created by the Great Depression, we can evaluate the impact of their policies and their success in dealing with these problems. T o come to understand why Hoover and Roosevelt had such completely different attitudes and ideas in dealing with the Great Depression, we must first examine their backgrounds and personalities.

Herbert Hoover was a strong believer in ‘Rugged Individualism’, and believed that people should help themselves and not rely on others for their welfare. His government had adopted his predecessor’s ‘laissez-faire’ policies, which said that “… the sole function government is to bring about a condition of affaires favourable to the beneficial development of private enterprise. ” Yet what made Hoover believe in this government philosophy? To answer this question, we must look into his background before coming to power.

Hoover was orphaned at 8 years of age, and lived in poverty with an uncle until he was 17. His uncle had taught him to work hard for what he wanted, to have guts and determination, and to always stick to his principles, no matter how hard it got. Hoover climbed the social ladder under almost entirely his own steam, and was himself living proof that ‘Rugged Individualism’ worked. He worked in Europe after the First World War, rebuilding war-torn countries and seeing the poverty and destitution of the people, and came to believe that a ‘totalitarian’ system of government was to blame for these problems.

America, he said, had become a great nation because its people worked hard for their own goals and that the government should not interfere with what should be done by the people themselves. Franklin D. Roosevelt’s background contrasts completely with that of Herbert Hoover’s. Roosevelt was born into a rich New York family, and had everything he could wish for as a child: toys, a pony, and even a sailboat. He never knew hunger or poverty or failure and everything he tried he was successful in. He was a confident and dashing young man, who never had to work a day in his life.

However, Roosevelt had one perspective that Hoover didn’t have: In 1921, he contracted Polio, and it made him a cripple. He eventually recovered, but had to wear leg braces for the rest of his life. But this event had also taught him compassion: he knew what it was like to be completely helpless, and could therefore sympathise with others in such a position. Roosevelt possessed sophisticated speaking skills and an easy confidence, quite the opposite to Hoover’s stilted way with words and rather cold outer appearance.

It was this personality difference which made him so successful in selling his policies during the 1932 election and his later presidency. These different backgrounds greatly influenced their reactions to the Depression. Hoover had grown up with little money and hated wasting it on something untried or unproven. This is why he would later be so reluctant to put in place any public works projects or other schemes requiring government funds. Roosevelt however, had always treated money with a more casual attitude, and he had never experienced any lack of it.

He as therefore not at all reluctant to spend big amounts of government funds on his various schemes, and if they didn’t work, he just scrapped them and tried something different. He was generally more impulsive and willing to try new things, always believing that “… the best government is an active one. ” W ith these somewhat modern and more liberal views, Roosevelt would later come to shock his more conservative party-colleagues. Yet, during his election against Hoover, Roosevelt played down his innovative ideas, and stuck to the previously accepted policies.

‘Balancing the Books’

One of these policies was known as ‘Balancing the Books’, a principle which assumed that maintaining a balanced budget (i. e. the same amount of spending as income), would create a healthy economy. Hoover firmly believed in this principle, and always applied it, even during the Depression. When the economy slumped after 1929, he cut government spending and even raised taxes in order to maintain a balanced budget, hoping it would improve the economy. This approach was fully backed by the wealthy business moguls, who held great influence over Hoover’s decisions. Many conglomerates such as U. S. Steel, DuPont, Shell Oil, Gulf Oil and General Motors managed to expand in the depression.

After the crash they were able to buy businesses and properties at basement bargain prices. To them, the tightness of Hoover’s policies made perfect sense. Yet raising taxes and cutting government spending was one of the worst possible responses to the already very bad situation. By cutting government spending and demanding more of the money earned by workers and businesses, it meant that there was now even less money in the pockets of consumers (and therefore in the economy), causing further economic contraction.

Interestingly, during the 1932 election Roosevelt had also called for a ‘balance the budget’ approach. However, as soon as he took up office in 1932, he completely changed his tune. This may have been due to strong advice from his cadre of advisors (collectively known as the ‘Brain Trust’), which included some very bright young economists who were advocates of the ‘Keynesian Theory’ of government spending. They convinced Roosevelt that the government’s main aim should be to pump money back into the economy instead of taking it out, and that this, not ‘balancing the books’, would set the economy back on its feet.

The value of the American dollar

Another major error by Hoover was to maintain the value of the American dollar. The dollar at the time of the Depression was on the Gold Standard, making it one of the strongest currencies in the world, next to the British pound. Yet, at a time of over production of American goods, it made American exports less attractive on the world market, and the dollar was far too strong to effectively compete with less valuable currencies on the global money market. Hoover’s reluctance to take the dollar of the gold standard was due to the fact that he believed it would mean make the dollar worthless and mean bad credit.

He was also very proud and himself would not under any circumstances borrow money. He was therefore even more reluctant to tap into the national dept, for he feared it would prolong the Depression, since the government would have to pay interests on the loans. The Federal Reserve Bank decided to defend the value of the dollar, raising interest-rates to prevent it being turned into gold. This had catastrophic consequences for already heavily indebted consumers, who now could not repay their debts, triggering the collapse of many banks.

These actions by both the President and the Federal Reserve served to heighten the money crisis that was sweeping the country. The policies had the opposite effect of what had been hoped for, and even made the problem worse. When Roosevelt came to power, he immediately took the dollar off the gold standard. This caused, as predicted, a substantial devaluation of the currency, yet it did not have the disastrous effect Hoover had predicted. Instead, the dollar became more competitive with foreign currencies and made American exports more viable to overseas buyers.

This helped businesses to offload a small percentage of their excess goods overseas, and still make a moderate profit. While it did not completely cure the export problem, it was a definitive step in the right direction. During Hoover’s presidency, overseas-trade had virtually dried up due to a number of Tariff acts against foreign imports, the most prominent being the Hawley Smoot Act. Hoover saw the cause of the “under-demand” of American goods to be that they were beaten in the market by foreign imported goods.

Unfortunately, he did not see that there was virtually no-one who could afford to buy any goods at all, imported or not. His reaction to this perceived problem was to impose a number of trade tariffs against foreign goods. Naturally this caused many retaliation tariffs from the countries whose goods had virtually been excluded from the American market. These retaliation tariffs were catastrophic for American businesses. Industries had no way to sell their stockpiles of excess stock overseas, hence causing a further fall in prices one the already over saturated home market.

Taking the dollar off the gold standard

Roosevelt’s actions in taking the dollar off the gold standard somewhat helped the issue, yet he did not reverse the Hawley Smoot Act, and therefore trade was still greatly impaired. Yet this was certainly not one of Roosevelt’s most pressing issues, and he was therefore content to just let it be for a while. As several of his aides observed, he was very good of taking care of the surface problems, and leaving the more tangled and complicated issues to his advisors and subordinates. R oosevelt was essentially a “people-person”.

Jim Farley, his election organiser, said that Roosevelt was able to give the impression that he enjoyed meeting the people and shaking their hands. He had the ‘… common touch. ‘ Roosevelt was most comfortable with his role as the President when he was out mixing with ‘his’ people, and was sometimes quite bored with the endless sessions in congress and meetings with advisors. He was also good at tackling the most immediate problems such as unemployment and hunger, which was a very auspicious thing, as it won him instant popularity with thousands of people. When he replaced Hoover in 1933, 12. 3 million people were out of work.

Many thousands of families lived in absolute poverty, often in shanty-towns nick-named ‘Hoovervilles’, in an unmistakeable jab at the man whom many thought solely responsible for their plight. Hoover was seen by many as a cold old man with no compassion for the ordinary working man and completely in the pockets of America’s wealthy businessmen. This was by no means a true judgement of Hoover’s character, who was a very caring man, but was trapped completely in his own philosophy. It forbade him to actively interfere with people’s affaires, and instead relied upon them to help themselves.

The Bonus Marches

He also firmly believed that the Depression was just an economical hitch, and that it would right itself in time if just given a chance. The lowest point of his presidential popularity was the event known as the Bonus Marches, when thousands of WW1 veterans marched on the White House, demanding their retirement bonuses. Hoover did not listen to their demands to bargain with him, instead sending in the army in to disperse them. Hoover refused to acknowledge that people wanted aid from the government, refusing to give out any assistance on a national scale.

He believed it would demean the spirit of the American people. (This opinion probably stemmed from the fact that he himself was incredibly patriotic and proud.) Hoover’s handling of the Bonus marchers showed how very different he and Roosevelt really were. Roosevelt would never have acted in such a clumsy and brash manner, be it only because he would have seen that the act would very badly damage his popularity. Hoover was very inept at maintaining positive public relations, whereas that was one of Roosevelt’s main strengths.

The first action of Roosevelt when he came to power was to call an emergency session of Congress. In this marathon session which lasted a hundred days, Roosevelt managed to pass an incredible amount of new policies. These emergency policies were mainly to help the immediate problems of the Depression: the suffering and need of the people. This is another example of Roosevelt’s clever handling of public opinion. He was seen to be acting immediately to better the situation, a complete contrast to Hoover’s cautious ‘Wait and See’ policy.

The policies passed in the 100 Days set up numerous agencies, later nicknamed the Alphabet Agencies for their many varied acronyms. While many of the measures passed in the 100 days did not directly help the economy, they galvanised him politically and earned him the affection and respect of the people, giving him a powerbase form which to launch his ambitious New Deal recovery program. Among those were agencies to provide immediate emergency relief (FERA), much needed employment for workers (CCC and CWA etc. ) and to get struggling families and businesses back on track (HOLC, FHA and AAA).

Bank Holiday

He also passed a day Bank Holiday, in which he promised to clean up the crippled banking system, which had collapsed after many people had swiftly withdrawn all their savings for fear of more banks collapsing. This bank holiday was not really a “reform measure” as promised by Roosevelt, but a clever coup to restore people’s confidence in the banking sector. It would have been virtually impossible to check all banks and weed out the weak and dubious ones as Roosevelt had promised within the 4 days of the holiday. Yet, the people believed that after such a drastic measure, the banks were indeed ‘safe’ again, and began to re-deposit their savings.

While the ‘weeding-out’ process really did take place and continued long after the end of the holiday, the actual crisis had been overcome by restoring the people’s confidence in the banking system, and persuading them that it was indeed “… safer to keep your money in a bank rather than under the mattress. ” R oosevelt’s calm and reassuring manner quickly gained the support and affection of many working class citizens, who felt as if the president took a special interest in their wellbeing. Roosevelt’s attitude towards the everyday man was indeed very different to his predecessor’s.

Hoover had been very much influenced by wealthy businessmen such as Ford and Rockefeller. These persuaded him to ignore the plights of the workers, emphasized by the frequent strikes of that time. Instead, he allowed these strikes and the increasingly louder calls for union rights to be brutally subdued by strike-breakers and informers who kept their bosses informed of any suspected union sympathisers in the workforce. The consequences of such sympathies were instant dismissal, often after a vicious cross examination with fists and clubs.

The National Recovery Agency (NRA)

The fact that this obvious injustice was ignored and allowed to continue under Hoover made him even more unpopular with the people. Roosevelt on the other hand was quite openly pro-workers and unions, and he introduced bills to set national minimum-wage and working hour standards and codes of fair practice in every industry. He also legalised unions and encouraged their expansion into every industry. The National Recovery Agency (NRA) was set up to police these new measures by setting up a ‘membership benefits’ scheme for those businesses who voluntarily adhered to the new codes of practise.

Unfortunately, Roosevelt’s outlook on these new measures’ effectiveness was far too optimistic. He relied upon business to adhere to the standards voluntarily in the spirit of fair trading and “… getting America back on track” He did not take into account that with these new and, for the business owners, very costly measures he was stepping on the toes of the giants of America’s business world. Some, such as Henry Ford, refused outright to adhere to the codes, and some found loopholes in the codes, ‘doubling up’ workers: they received double their original pay, but for this they had to work twice as hard in less time.

It was therefore said by some workers that the NRA’s codes had made conditions even worse for workers rather than making life easier. In 1935, the American Supreme Court declared the NRA unconstitutional in the ‘Sick Chicken Case” Schecter Poultry Corporation vs. United States. Although this was a set-back for Roosevelt, his reforms were a great improvement of conditions for many workers at the time, and laid the foundations for modern-day working standards and conditions. O e possible explanation for Hoover’s inaction in the face crisis and massive public outcries such as the Bonus Marches, was that he quite firmly believed that the Depression was just a hitch in the economy, and that, given time, everything would stabilise again and go back to the way it was. This explains why he was so reluctant to set any relief or adjustment measures in motion. He saw the unemployment situation (correctly) as a repercussion from the down-turn in business, and therefore thought that if businesses were left alone, this problem would sort itself out as well.

He therefore decided to do what governments had always done in the past: leave business to deal with its own affairs. But as the years dragged on, and the situation continually got worse, even Hoover was beginning to get a little uncertain and anxious for this economical recovery. He finally decided to take some action in helping the economy back on its feet. To accomplish this, he set in motion some public works programs, and established farmer’s assistance schemes help out the farmers whom rapidly falling crop prices had driven to a point of desperation.

The Reconstruction Finance Corporation (RFC)

Hoover also set up the Reconstruction Finance Corporation (RFC) to lend money to ailing businesses and help others to repay their loans. The RFC did help some businesses to stay afloat, yet generally it was seen to be giving pocket-money to businesses that were financially stable, and spending its money in entirely the wrong places. Hoover’s public works program set in motion the construction of the Hoover and Grand Coulee Dams, and provided jobs in the area, but did not pump enough money back into the economy to have any real effect.

These actions were like a drop of water on a parched field: they did far too little, far too late. It was unfortunate for Hoover that he had taken so long to be persuaded that government action was needed to help the economy. These measures also came too late to save his political career. The RFC was established in early 1932, and by the end of the year, all Hoover’s well-meant, if very belated efforts would be eclipsed by a much stronger, younger and enigmatic successor who was not afraid of experimenting.

Roosevelt continued what Hoover had so belatedly begun, but expanded greatly on the original ideas. He significantly enlarged the powers and funding of the RFC. It gave loans to foreign governments, provided protection against war and disaster damages, and engaged in numerous other activities. When it was abolished in 1953, it had made loans of approximately $50 billion since its creation in 1932. Roosevelt also commissioned hundreds of public works programs, the most spectacular among them the Tennessee Valley Authority, which built a staggering 21 massive dams in an area straddling 7 states.

This enormous building project pumped huge amounts of money back into the economy, and significantly improved the lives of 4. 5 million people living in the area by supplying electricity, irrigation and preventing the floods which had so often ravaged the area. Other agencies such as the PWA and the WPA spent over 11 billion dollars creating jobs for people in building schools, hospitals, bridges and roads, and sponsoring art projects such as plays, murals and music performances.

These government funded work projects also drew criticism from some people, who compared it to the government work schemes of socialist countries such as Russia and Germany. Some also said that some of the agencies created silly and entirely unnecessary jobs, such as counting the total number of dogs in the state of Pennsylvania. Yet these were trivial concerns by people who were very biased towards Roosevelt’s new and drastic actions. His alphabet agencies were generally very successful in their aims, providing employment for millions of people, and pumping billions of dollars back into the economy.

The New Deal

The New Deal has been described in both extremes: either socialist and catastrophic in its large deficit spending policies and not really benefiting anyone at all; or, the best thing before sliced bread (which was commercially marketed from 1943 onwards). Yet both views do not see the whole picture. It is entirely correct that many groups did not benefit from the New Deal policies. Women, coloured people, many farmers, and the desperately poor were all left behind. Yet unemployment did drop from 24. 9% to 14. % in the seven years from 1933 to 1940, and businesses were finally beginning to recover some of their old strength. It is quite clear however, that Roosevelt’s policies were substantially more adequate to the situation in the Depression than Hoover’s. His actions in the cases of “balancing the books”, the gold standard, trade tariffs and the plain ‘Wait and See’ policies show that his perceptions of the problems and his subsequent actions were fundamentally wrong, and that they sometimes aggravated the situation even more.

Yet, we must also give him the benefit of the doubt: had he been, by some miracle, able to stay in power for another term, would he have begun to take some action similar to Roosevelt’s? Would he have continued and expanded what he had begun in the RFC and Hoover Dam? We can only speculate. Roosevelt had several advantages over Hoover: Some lay in their different upbringings and personal beliefs. Hoover was cautious with money, because he knew what it was to go without. Roosevelt had never had to, and was therefore casual about spending $11 billion on one project alone.

Roosevelt, no doubt also had the advantage of learning from Hoover’s mistakes. Had he been in Hoover’s boots in 1929, would he have acted the same way? Hoover was influenced by mighty businessmen who saw it in their best interests to lobby the president into some of his most disastrous actions (for example ‘balancing the books’). Roosevelt surrounded himself with a core of innovative and contemporary advisors, who helped him construct and implement many of his policies (eg. The Keynesian Theory of fiscal spending and government regulation of the economy).

Conclusion

It can therefore be said that both Hoover and Roosevelt acted with America’s best interests at heart. Unfortunately for Hoover, his beliefs were outdated and no longer adequate for the current situation, and he was, just like in the animal kingdom, replaced by a stronger and more competent successor. Roosevelt’s responses to the Depression greatly improved the situation and laid the foundations for the modern system of government, which plays an active part in the country’s social well-being, and regulates its economic development. He can therefore be safely declared the winner of this contest.

Cite this essay

Policies to end the Depression: Hoover vs. Roosevelt. (2020, Jun 02). Retrieved from https://studymoose.com/policies-end-depression-hoover-vs-roosevelt-new-essay

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