The economic boom of the 1920s, the result of a thirty-year industrial revolution, was destined to weaken the economy long-term. There were massive technological changes and the 1920s was a period of great innovation. Automatic switchboards, conveyor belts and the concrete mixer were just a few examples of the new products that were available to use and to purchase within the economy. The most successful venture was the of conventional use of electricity; it provided a cheaper and more efficient source of power for factories and also led to the production of new consumer goods such as the refrigerator and radios. However, these new techniques meant that goods could be produced more cheaply and on a much larger scale such as Henry Ford’s car industry after introducing the assembly line, however, this meant that as everyone who could afford a car had brought one, the consumer demand decreased and over-production became problematic. This lead to unsold goods, which in turn saw profits falling. With no profit, staff were made redundant and unemployment began to rise. A short-term cause of the Great Depression was credit. Even though it made circumstances easier for consumers to buy goods, many did not have enough money to pay back the banks what they owed. This meant that when the depression did hit in October of 1929, Americans would rush to the bank where they had deposited all of their life savings only to find that there was not enough money for them to make a withdrawal. From 1930-33, depositors lost $2.5 billion in savings from banks that closed or went bankrupt.
The National output had been cut by half and was now less than in 1915 meaning that ‘boom’ of the 1920s had been lost. Investors lost as much money in October 1929 as the USA had spent fighting in the First World War. If 1920s America was looking bleak before 1929, the Wall Street Crash ensured the last bit of hope that remained was crushed. Over the weekend of 26th and 27th October, stockbrokers who had sold their shares ‘on the margin’ had borrowed money from banks to fund the initial purchasing of said share and the banks were now demanding repayment of their money. To repay the banks, the brokers in turn had to ask their customers for repayments of debts and the only way in which customers could do so, was to sell shares at any price. Panic-stricken brokers and investors sold 16 million shares in one day. Stock prices slumped by $14,000,000 on 29th October. On Wall Street, between 29th October and 13th November, over $30 billion disappeared from the value of the American economy.
President Herbert Hoover, a Republican, believed that the government should not try to manage the economy, strongly highlighting Hoover’s ‘voluntarism’ efforts. He tried to persuade businesses to take action to deal with the economic crisis without the government passing laws to force them to act i.e. not to cut production or lay workers off. When the depression hit, 8 months after his inauguration, Hoover waited 2-3 years – once the American economy was in a dire condition – to finally set up funds and organisations to get the US back on its feet. He authorised $2 billion for the creation of the RFC, the Reconstruction Finance Corporation in January 1932 which was intended ‘to make temporary advances to establish industries, railways and financial institutions which cannot otherwise secure credit, and where such advances will stimulate employment’. Similarly the Glass-Steagall Act gave $750 million of government gold reserves as loans to private businesses. Hoover’s most notable attempt to regulate trade was the Smoot-Hawley Tariff in 1930. He increased the price on over 20,000 imported goods to record levels with an average of 40% on agricultural and industrial items. This led to most other nations applying the same tariffs on American goods meaning that US exports dropped by half ensuring the depression lasted longer and affected more businesses. The US depression had reached its peak as world trade was practically halted.
The next step in Hoover’s plan was to create the Federal Farm Board, which administered loans and aimed to stabilise prices and to promote the sales of agricultural products. By the end of its first year, the FFB had loaned in excess of $148 million. However, the government’s involvement did not produce many results in the agricultural or business industry and did not solve the problem of unemployment. Hoover established the Emergency Committee for Employment as one of his last attempts to combat the depression, but he gave the committee, limited resources ($47 million) and so on such a small-scale and small budget, it never really had a chance at making a difference. The last memorable demonstration from Hoover was insensitively dealing with the Bonus Army in June 1932. The veterans of the First World War, who were unemployed and as a result their families were hungry, began a march in Washington demanding the payment of a veterans’ bonus approved by Congress in 1924 but to be paid 20 years afterward. The money, in the sum of $3,500,000,000, would clearly provide the much-needed lifeline to the veterans and their families. Congress rejected the 20,000 veterans their proposal to pay the money immediately and in protest, thousands of ‘bonus marchers’ and their families built a home of tents at the nearest Hooverville in Anacosta Flats in Washington and threatened to stay there until the proposal was passed. However, Hoover approved a plan to evict them. One thousand armed soldiers, equipped with tear gas, tanks and machine guns, drove the veterans from the camp and burned it to the ground along with all of their possessions. After this incident, Hoover lost public faith.
Hoover was not successful in combating the depression. A reflection of this was the beginning of ‘Hoovervilles’; the popular name for a town of homeless men who lived in cardboard boxes. The term was coined by publicity chief of the Democratic National Committee, Charles Michaelson named after Hoover. These people lived in shacks, in the worst living conditions possible and had to beg for food. Democrat’s popularised related terms such as the ‘Hoover blanket’; old newspapers used as blankets and the ‘Hoover flag’; an empty pocket turned inside out. After these events, Hoover, who returned unopposed as a Republican candidate was prepared for a defeat as well as the rest of the party. Hoover’s term as President saw the descent of the nation further into depression. He was reluctant to take action until the situation was exceptionally poor and when he did, it was with reluctant implying that any organisation or fund that he set up was to barely get below the surface of the problem as he had no confidence. This would suggest that he was not totally dedicated to bringing the USA out of the depression; an attribute that the next elected president Franklin D. Roosevelt was passionate about. However, some historians argue that while Hoover was not successful, he should not be labelled as a ‘do-nothing’ president. The Reconstruction Finance Corporation for example, was adopted by Roosevelt in the New Deal and was successful because of the massive scale and funding that went into it.
When discussing unemployment and business, Hoover’s actions can be seen as ‘too little and too late’. His handling of unemployment was a disaster, and not to mention ineffective; while millions of Americans were starving and left homeless, Hoover refused to take extensive government measures in response. Instead he upheld his firm belief in laissez-faire; the minimum input on the governments’ behalf and voluntarism; businesses to take action alone in order to deal with the economic crisis without the passing of any laws forcing them to act. The deciding factor of Hoover’s defeat and unpopularity was the way in which he dealt with the Bonus Army (The Shame of Anacosta Flats). America did not see Hoover as a compassionate leader in touch with their needs, who would lead them out of the depression. Instead, they saw failure.
Hoover’s time in office led the USA to desire someone new and passionate. They demanded an intelligent and effective government to revive the failing economy; a president who would be active and representative of his people – far from the Republicans of the 1920s. Roosevelt was elected in 1932 and would later become one of the most successful and passionate presidents America had seen. Roosevelt promised the New Deal, which in effect was the RFC authorised by Hoover, but on a much larger and more ambitious scale; what America needed during their time of need. This would help the economy in a much more effective way, and as the President connected with the people in a more personal way, the public finally felt that a political figure understood the extent of the damage and was not going to give up.