HERBERT HOOVER'S RESPONSE TO THE GREAT DEPRESSION
On October 24, 1929, nearly eight months after Herbert Hoover began his first and only presidential term, the U.S. stock market crashed, marking the beginning of the most devastating economic crisis in the 20th century. The Great Depression eventually hit both poor and rich countries around the world but in the United States, political opponents and the public blamed the president for the disastrous economic situation.
Although Hoover was a committed Republican who believed in minimal government intervention, low taxes, and the power of free market, he also assumed that the federal government should act when the national economy and the well-being of citizens were at stake. He called for collaboration between the state and the business sector. In response to Hoover's appeals, representatives of major industries promised to continue their operations without cutting wages and jobs. The president also convinced Congress and some state governments to increase spending. Furthermore, lowering taxes, public work projects, and loosening credit policies by the Federal Reserve aimed to energize the economy.
All these initiatives suggest that Hoover believed the economic crisis to be a temporary downturn. However, by early 1931, it was clear that situation worsened. With unemployment skyrocketing and banks on the verge of collapse, Hoover proposed a new plan. His advisers pushed for the creation of the Reconstruction Finance Corporation (RFC), a federal agency that would provide safe loans to banks, other financial institutions, and public utility companies (e.g., railroads). Congress created RFC in 1932 and for the first time in history, the federal government was able to intervene in the economy so directly. Also in 1932, Hoover signed the Emergency Relief and Construction Act, which authorized considerable funds for public works programs and direct relief programs.
Hoover's response to the Great Depression is also associated with three other critical pieces of legislation. First, in 1930, he signed the Smoot-Hawley Tariff Act that raised U.S. tariffs. While historians argue that the Act was responsible for the following significant decrease in import and export of American goods, Hoover opposed the legislation and in the end signed it under the pressure of his party and business leaders. Second, the Revenue Act of 1932, which was the largest peacetime tax increase in history, increased taxes across the board. Top earners were taxed as much as 63% on their net income. Finally, the 1932 Norris-La Guardia Anti-injunction Act supported the organized labor. The law curbed "yellow dog" contracts (hiring replacement workers to break strikes), curtailed the ability of federal courts to issue injunctions against non-violent labor disputes (e.g., strikes), and supported the right of laborers to organize.
FRANKLIN DELANO ROOSEVELT'S RESPONSE TO THE GREAT DEPRESSION
The 1932 presidential election campaign revolved entirely around the disastrous economic situation. Franklin Delano Roosevelt (FDR), the Democratic candidate, blamed Hoover for excessive government spending and claimed a small government to be the solution. In turn, Hoover accused Roosevelt of being a capitalist that would only worsen the crisis by decreasing taxes, reducing government intervention in the economy, promoting free trade, and cutting federal, state, and local government programs. While Roosevelt run on his New Deal platform, he offered no specifics of future reforms.
This changed immediately after he took over the office in 1933. Roosevelt's response to the Great Depression not only contrasted with his campaign rhetoric but also built upon some of the initiatives introduced by Hoover. His New Deal agenda - a series of relief and recovery programs designed to stabilize and energize the economy and directly support unemployed and poverty-stricken Americans - was a large-scale response built around the idea of the central government's intervention. In short, the federal government introduced many large-scale programs and laws that had direct impact on the life of Americans (e.g., creating jobs through massive public projects; providing direct financial support, etc.) and pushed vast legislation that regulated the market and labor relations as well as proposed social reforms. Major programs and reforms introduced under the New Deal were:
- All the banking transactions were suspended. The legislation that followed this Proclamation was the Emergency Banking Act, which enabled the government to close weak banks and reopen more stable banks. The initiative helped to rebuild trust in the U.S. banking system. Roosevelt also prohibited the export of gold from the United States and thus took the country off the gold standard (1933).
- The creation of the Agricultural Adjustment Administration (1933). Among many initiatives, AAA provided farm subsidies in exchange for curbed agricultural production (farmers would not cultivate all of the land on their farms) and manipulated farm product prices by buying and temporary withholding products from the market .
- The Tennessee Valley Authority (1933) was the first large-scale public work project. It created short- and long-term jobs by building and operating a hydroelectric project in the valley of the Tennessee River.
- National Recovery Administration (1933) allowed industries to create codes that would regulate and curb unfair competition. The Supreme Court declared NRA unconstitutional in 1935.
- Federal Emergency Relief Administration (FERA; initiated by Hoover) created government, mostly unskilled jobs. The program was replaced by the Works Progress Administration in 1935.
- The Civilian Conservation Corps (1933) put large numbers of men at work in natural resources projects (e.g., in national forests). The initiative combined conservation effort with creating employment.
- The National Labor Relations Act (1933), which established the National Labor Relations Board (1935). The NLRA supported the rights of workers to organize and bargain collectively.
- Civil Works Administration (1933/34) provided temporary jobs to millions of unemployed.
- The Social Security Act (1935) established financial support for dependent minors, the disabled, and the elderly. It also introduced unemployment insurance.
Photograph of Works Progress Administration Worker Receiving Paycheck, Records of the Work Projects Administration, National Archives
A Works Progress Administration worker receiving a paycheck in 1939.