what was president herbert hoovers response to the great depression
Herbert Hoover was sworn in as the President of the United States on March 4, 1928, later on defeating Democrat nominee Al Smith in a landslide election. Hoover's campaign was based on continuing the policies and prosperity of the previous Republican administrations of Warren Harding and Calvin Coolidge that would, according to a GOP campaign circular, put a "craven in every pot and a car in every garage".
Little did the Hoover administration or fifty-fifty the American public for that fact imagine that the country was about to go through the worst downturn in its history.
The Wall Street Crash of 1929
On 24 October 1928, the New York Stock Exchange roughshod 11 per centum in an event known as Black Thursday. Immediately several leading banks including National City Bank and JP Morgan and Wall Street Bankers met to terminate the chaos and forestall the market from falling further. It was then decided that the Banks would utilize their financial resources to purchase large amounts of shares of well known and established companies to keep prices artificially high.
President Hoover famously said in a radio address on Friday,
"The fundamental concern of the country is on a sound and prosperous footing."
Earlier the crash on Blackness Thursday, the value of the US stock market had about doubled over the course of xviii months. This was largely due to the Federal Reserve keeping interest rates low throughout the 1920s.
Banks offered easy credit to people through investment loans with no regard for the ability of the borrower to pay back the money. The stock market had kept ascension as more and more people piled the acquired money into stocks, buying into the rampant belief that the market would only go up. Unfortunately, the speculative bubble did non concluding long.
The move by leading banks on Black Thursday, only worsened the condition, panic ensued on Monday morning time, every bit investors tried to go out of the market place and book profits.
Panic selling reached its breaking indicate on Tuesday, Oct 29, with millions of shares put up for auction with no buyers available at whatsoever price.
More than 16 million shares were traded and $ 14 billion dollars of investor wealth was wiped out in a single solar day, The event infamously went down in history as Blackness Tuesday and signaled the outset of the Great Depression.
The Great Depression
The market crash did not directly cause the low but acted as a catalyst. Even though simply 10% of American households had investments in the market, more 90 per centum of all banks were exposed to the stock market.
Banks faced huge losses with little in cash reserves, due to the lowering of the amount required by banks to be kept condom in vaults by the Federal Reserve. The state of affairs was exacerbated by the inability of borrowers to pay back the investment loans. Over the form of the adjacent four years, more 5,000 banks shut their doors.
The optimism of the 1920s crashed spectacularly, the Roaring Twenties, every bit the decade was fondly remembered, gave way to the Slap-up Low of the 1930s.
Since no safety provisions existed at that time that guaranteed the safety of deposits, millions saw their life savings disappear. Moreover, the low was prolonged by the passing of the Smoot - Hawley Tariff Act (1930) by Congress. American farmers facing increasing competition from Europe and Latin America lobbied Congress to pass for increasing tariffs on agricultural imports.
Nevertheless, the Tariff Human action drawn by Congress included tariffs on industrial goods likewise as agricultural imports, provoking other countries to impose retaliatory tariffs. Despite staunch opposition from Progressive Republicans, Hoover went alee to sign the Smoot-Hawley Tariff Act and the value of world trade fell in one-half in the next four years as countries imposed tariffs in tit for tat moves. Firms were already hitting domestically and saw their sales drop in international markets.
Consumer investment and spending dropped forcing industries to halt production and fire workers. Car factories that employed about of the workers in urban areas laid off thousands and were forced to close. The United States Steel Corporation (United states of americaSteel) went from 211,000 employees to nothing in the bound of 1932.
Between 1929 and 1933, industrial production savage 47%, GDP declined by 30% and unemployment skyrocketed to 20 pct. Soon, shanty towns and encampments came up for the homeless, mockingly called the Hoovervilles over the President'due south inaction to respond to the crisis.
The Hoover Administration's Response to the Crisis.
In the 1920s, classical economics was undisputed, and it was more often than not accepted that output and prices would return to a country of equilibrium in due time simply equally the low carried on, it was axiomatic that the classical school of thought did not work.
The Not bad Low countered the classical economical theory and propelled the acceptance of Keynesian economics, adult by British economist John Mayard Keynes in 1936. Keynes'south theory argues markets are unstable and the authorities tin stabilize it through intervention in the class of creating need for goods and services.
Hoover was a bourgeois Republican who believed in limited Government intervention and letting the natural process of supply and demand ensure in the market place. He was convinced that Regime handouts would weaken private grapheme and plow people away from work and refused to intervene. Hoover was a firm believer in rugged individualism , that people are responsible for their own success or failure and it is not the responsibleness of the government. Instead, the administration decided to leave the relief work to volunteer organizations and charities, the consequence was that these charities also saw their donations dwindle.
In 1931, Hoover formed the President'south Arrangement of Unemployment Relief (POUR) which assisted state and individual charities such every bit the Red Cantankerous and Conservancy Army in coordinating relief programs and forming employment councils that tied the unemployed to job opportunities. The organization did not see much success as Hoover refused to spend regime money and by the terminate of 1932, the organization was dissolved, creating barely 100,000 jobs at a time when 15 million were unemployed. Congress also proposed the Federal Emergency Relief Bill which would have provided states $375 million to provide nutrient, wear, and shelter to the homeless but Hoover opposed the bill stating that it would harm the residuum of power between states and the Federal regime.
By the end of the twelvemonth, nonetheless, Hoover realized that drastic action was necessary if he had to salvage his presidency and the nation. On Dec 8, he addressed Congress and proposed multiple programs to help the economy which Historian David Kennedy has referred to as Hoover's 2d program or as others chosen it Hoover'south New Deal.
The Reconstruction Finance Corporation (RFC) was established in early January of 1932 and provided loans to banks, firms, and other institutions in need. An executive club was signed that temporarily halted immigration and created a Public Works Administration to coordinate and expand infrastructure projects.
The Revenue Act of 1932, raised income taxes and corporate income taxes dramatically with the bracket ranging from 36% to 63%. The most important and consequential of these policies was the Glass-Steagall Act of 1932, that approved lending of credit by the regional Federal Reserve Bank to private banks. These policies reformed the style in which the Federal Government responds to an economic crisis, but besides the Public Works Administration, none of the policies improved the status of American workers. His signing of the Smoot-Hawley Tariffs Human action and opposition of the Emergency Bill had created an image that cast Hoover every bit uncaring about the anguish of his people and his new programs were viewed as likewise petty or as well late and his popularity had already nosedived.
The 1932 Presidential Elections.
Equally the 1932 election rolled in it was evident that Hoover was going to lose the election, running against Democrat Nominee Franklin D. Roosevelt, who spurred optimism in crowds through his uplifting oratory. Roosevelt compared Hoover's Presidency to the Four Horsemen of Apocalypse: Destruction, Delay, Despair, and Doubt and charged that the Federal Authorities was direct responsible for ensuring the welfare of the American people.
During Hoover's campaign trails, his train was pelted by eggs and rotten fruits, in 1 incident, the Secret Service had to remove spikes placed past a disgruntled citizen on the tracks of the President's railroad train. Unsurprisingly, Hoover lost the election in a landslide, losing in 42 out of the then 48 states. To his credit, withal, Hoover had to face up a crisis no American President had faced before. His initiation of big Public Works Programs and expansion of the role of Federal reserve, though securely structurally flawed, was the most radical step that a President had ever undertaken in response to a recession.
Even so, the primary problem was that the Regime did little to help the unemployed and homeless directly. Hoover, despite being bandage equally uncaring was the only President besides John F. Kennedy who refused his salary as President, and annually contributed $25,000 to private charities. President Hoover was an ideologue rather than a pragmatist but his approach failed to work during the economic downturn.
According to Prof. Robert McElvaine,
"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".
Historian David Kennedy wrote that Hoover's 1932 2d Program,
"helped lay the groundwork for a broader restructuring of the government'south role in many sectors of American life, a restructuring known equally the New Deal."
Even Roosevelt'southward advisors grudgingly admit that almost of the features of Roosevelt'south rescue package for the economy, popularly chosen the New Bargain, owed its origins to Hoover's policies. Yet Hoover is still regarded as one of the worst Presidents of the United States. History judged him harshly and his poor reputation is not what he deserved.
Lee Ohanian, Professor of Economics at UCLA said it best,
"Hoover was the wrong homo for the job, at the exact incorrect time."
Source: https://tidingsmedia.org/blog/analyzing-president-hoovers-response-to-the-great-depression
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