University of Chicago
Type of paper: Thesis/Dissertation Chapter
Herbert Hoover And The Great Depression: The Tragic Presidency
The name of Herbert Hoover has always been attached to America’s Great Depression wherein one cannot be mentioned without noting the other. 1Hoover has been remembered as America’s President “at the eve of Great Depression.” It was an event that not just Americans would always remember but even the world outside the then World’s Economic Bull. For the Americans, “Hoover was one President who never cared for anyone” (Hughes, Patrick 1999). For others, he was a “Great Engineer” (Fausold, Martin I. 1985). For those whom he had helped during the Belgian crisis, he was “the savior of Belgium” (Nash, George 1988). Hoover among other things was a man of principle, a character he had lived the rest of his life even during the course of the Great Depression. This is one good reason to justify he was indeed “at the right place at the wrong time” (McElvaine, Robert S. 1984).
In this paper, we will try to look into the principles that Hoover held in his heart and how those principles affected the national policies he tried to implement during his term especially during the course of the Great Depression. We will also navigate briefly the earlier social and community services before his presidency because this writer finds it an important link to the “superhero” image he was tagged. This paper will be fair enough to examine the major policies implemented by Hoover and critically evaluate them whether as a success or a failure. Although this author believes that Hoover was one Great Man with reference to his principles and for his services he extended to the people, this paper holds that Hoover’s presidency was a tragic one.
There were still disagreements between economic analysts as to what caused the Great Depression although they all agree that were there was no single cause. There were those who attributed the crisis to the Treaty of Versailles after WWI in 1919. 1But many disregarded this argument since most analysts say that the Treaty was insignificant relative to economic impacts. One of the agreed cause was the problem on international monetary policies at the immediately before the depression. However, one economist explained one specific cause of the problem: the high percentage of stock market values is “bubble”.
“A range of evidence suggests that at the market peak in September 1929 something like forty percent of stock market values were pure air: prices above fundamental values for no reason other than that a wide cross-section of investors thought that the stock market would go up because it had gone up” (Delong, J. Bradford, 1997). It is to be noted that the stock market of the country is in boom in 1920, which Delong attributed to general optimism. “Businessmen and economists believed that the newly-born Federal Reserve would stabilize the economy, and that the pace of technological progress guaranteed rapidly rising living standards and expanding markets.”
Reports said that the stock market rose at about 82 points higher in September compared to its level in January of 1929. This market height might have signaled a bad omen, if anyone believes in such, for a disaster yet to come- an economic disaster that every American will forever remember. It was indeed a nightmare, which started on October 24 when radio stocks dropped 40% of their paper value. That day was marked in the calendar of every American as “Black Thursday.” On the 29th, the stock market totally collapsed wherein “16 million shares were traded—a record—and 30 billion dollars vanished into thin air” (Norton, Richard Smith and Timothy Walch, 2004). It was indeed worth marking as a “Black Tuesday.”
If someone knows a little of economics, he knows what will come next as implications of such marker plunge. Although not all Americans know what this actually means during those days, they felt how it is to be in a period of economic depression. Businessmen cut down on investment, reduce their production and consequently would be force to cut down costs like overhead a big part of which is wages or salary expenses not including employee regular benefits. The next item in the cycle would be unemployment and then families would naturally cut down on their expenses because they have little or nothing more to spend. This cut down will then reduce the purchasing power of the consumers and so products in the market will no more be sold as much as it was before. The result will be overproduction and we know that this will cause a loss on the part of the producer. The cycle then continues.
As we can see, it is not directly Hoover who caused the depression if anyone should be blaming him. In fact, it was only few months after he started in his office that the disaster happened. It was not Hoover’s nor any single person who caused the depression but it was the merely a combination of several economic problems which were complicated by the economists’ too much confidence on the stock market at the time of its peak and the fact that they too have treated the event as a part of the normal economic cycle.
It was indeed a result of a wrong economic speculation. Besides this, historians and economists have listed other 1causes of the Great Depression as follows: (1) unequal distribution of wealth, (2) overproduction and under consumption due to market saturation, (3) buying on credit, (4) weakness in the agricultural sector and farm foreclosures, (5) bank failures, (6) weakness in the real estate and construction sector since 1925 and (7) massive loans and investment in stock speculation and buying on margin.
Analysts and historians who wrote about Hoover’s presidency seem to agree with each other by concluding that the President’s actions to the Great Depression implied his life principles and in fact had rejected other policies and programs proposed by his advisors. As one have noted, “It is impossible to understand Herbert Hoover and his reaction to the Depression without seeing that he was that rarest of politicians, a man of principle. He was an idealist who firmly (and rightly) believed that means cannot be separated from ends” (Hughes, Patrick 1999). This principle however seemed to have been out of the context of the Great Depression as policies formulated and implemented by Hoover based on his principles were proven to be failures.
What Hoover and probably whoever was the President at that time did was to make statement to the nation give them the assurance that everything will be fine, everything is normal and what happened was temporary and soon can be settled. But the superhero was indeed troubled. On the 21st of November, the President called for a business conference with leaders from the business, labor and farm sectors to discuss the matter. Hoover sought the sectors’ help by making them promise “to hold the line on wages” on which Hoover initially succeed.
Collectively, the President on $1.8 billion commitment for new constructions and repairs, which should ensure the country of more available or at least alternative sources of income for the people should businesses forced to lay off workers. What was stressed in that meeting was the commitment of well-known businessman, Henry Ford, who committed to the President an additional $1.00 daily pay for its workers from its usual $6.00. Those who were in the railroad industry also made their pledges in cooperation with the President’s plea. On the other hand, then organized labor sector did their part by withdrawing their latest wage demands.
The Confidence Campaign
Hoover thought that the economic panic was just a sort of psychological fears and this can only be pressed down through a confidence campaign. For Hoover, “confidence is the key” (Sobel, Robert 1975). In his statements addressed to the nation, Hoover was very confident that the crisis would end in sixty days. “As long as Americans didn’t let panic cause them to take intemperate and unwarranted action, the country would witness a brief and limited recession and then resume its economic boom. The consequence was that the nation’s expectations of the President naturally crashed down too when the 60th day was over and nothing better happened.
The confidence campaign, when we are to evaluate the implications, indeed plunged down the popularity of Hoover in the eyes of the people. It actually brought the people an impression that the President did not really care that much for the people since he appeared to be thinking and believing that everything is fine. It appeared for the people that Hoover did not realize how poverty had swept out their resources and that the President cannot feel the hardships and the hunger they were then experiencing. In the end, the policy of confidence campaign was unsuccessful in addressing the Great Depression.
The people did panic. They held their remaining resources, cut down on their expenses for fear of losing everything else should the situation get worse. The investors were not encouraged to take the risk of releasing their resources to create employment. Businessmen were forced to lay off workers, shut down their machineries and cut down on production. Financial institutions hoard money, refused to lend more money because of the fact that the people’s savings in their banks were literally withdrawn to the ebb. These reactions have actually worsened the situation.
The Voluntarism Policies
Hoover believes that it is not the responsibility of the government to resolve the situation and that the best solution he knows was to implement solid cooperation of the private sector and the people themselves. This is one of the effects of his principles that for a government to directly answer the crisis through relief will just demoralize the nation. The President insisted that the problem cannot be resolved by legislative action, instead “Economic wounds must be healed by . . . the producers and consumers themselves” (The Times, Issue 26, December 4,1929).
As part of the Voluntarism campaign, the President created the Federal Farm Board through the Agricultural Marketing Act in 1929. Its purpose was to negotiate with farmers and market cooperatives, offer loans and to purchase surplus production. The result however was opposite to Hoover’s expectations. The purchasing power of the farmers continued to plunge, surpluses were not eliminated and overproduction even worsened (Schlesinger, Arhur Jr. 1957, p.239).
Relative to unemployment, Hoover devised a similar move out of voluntarism and cooperation and thus created the Emergency Committee on Employment. The purpose of the Committee was to gather data and information that can be used by states, localities, businesses and private charities to help address the problem on unemployment. Primarily, the committee was tasked to bring together all concerned agencies that will deal with the unemployment relief. Sad to say, the program failed as well. The plunging economic situation forced businesses to lay off workers resulting to a 3.5 million counts of unemployed Americans by October of 1930 (The New York Times, Issue No.1, October 22, 1930).
The Idea of Progressivism
For Hoover, a progressive nation like America should not be handling unemployment relief. The President firmly believes that American government should keep its intervention in the private at the minimum level and that the sector should be left handling its affairs. Hoover felt that the private sector in the modern industrial world should learn to operate with the minimum supervision and intervention of its government. One writer regarded this principle as a “Jeffersonian heritage in a highly concentrated, urban industrial setting” that Hoover was unable to effectively apply in the modern yet depressed situation of America (Hughes, Patrick 1999).
There were demands from the federal government to “institute relief or welfare payments for the needy” which Hoover rejected. He stood with his belief that the matter should be left in the hands of the charitable institutions like Community Chest, United Way, the Salvation Army, churches, individual philanthropy and many others. In his view, federal relief will be very expensive on the part of the government. He feared that the massive expenses in relief would bring imbalance on the budget, then deficit and then losing the confidence of businessmen and other investors.
In evaluating this policy, Hoover might have been right for employing his principle of maintaining the minimum government intervention on matters of employment relief. However, this author believes that the time of the Great Depression was not the right time to employ such principle. Hoover may not be able to realize that the private sector naturally would protect themselves from losing much of their resources since there was no assurance on how long the crisis persist. Another thing is that the private sector had already lost much since they incurred costs on producing products that could not be sold since people held back their money.
The massive unemployment should have been a bold evidence for Hoover that the business sector can no longer take the risk of investing their resources since their products will just be rotten in the market. Moreover the private sector can no longer contain their social responsibility of helping relieve the problem. Still, Hoover’s position was not moved. HE did however increased the government spending through public works as a way of relieving unemployment and yet the effort was not enough to significantly lessen the 25% unemployment rate by 1931.
The Policy of Protective Tariffs
There is one economic policy employed by Hoover during the Great Depression which I would say was an evidence that the President cared much for his people and his country. The protective tariffs was then strictly implemented wherein tariffs paid for imported products were increased for the purpose of protecting the local business sector. Hoover may also have the policy implemented for the purpose of accumulating for revenues for the government. His confidence that the foreign investors would continue to trade with the country was however another failure since the high amount of tariffs discouraged foreign traders to do business with the American nation.
In 1930, President Hoover signed into the Congress bill and was called the Smoot-Hawley Tariff. History said that the said tariff rate was the highest in American history “with ad valorem rates jumping from an already high 33 percent to more than 40 percent” (Hughes 1999). For the foreign traders to back out on their business relationship with America due to the high tariff rates is indeed justifiable on the part of those who have risked their money and other resources only to find out that they will lose much from tariffs. It is another thing to consider that the American economic situation will not give them much benefit because the nation literally do not have that much money to buy their goods as compared before. To persist doing business with America therefore is a suicide.