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US History – 1865 to Present
Unit 6 Overview: Roaring Twenties & Great Depression: 1920-39
6.1 Cultural and Social Changes of the 1920s
6.2 Economic Boom and Consumerism
6.3 Causes and Effects of the Great Depression
6.4 Hoover's Response to the Great Depression

The Great Depression hit America hard, and President Hoover's response was shaped by his belief in limited government. He initially thought the economy would fix itself, encouraging businesses to cooperate voluntarily and implementing small-scale relief efforts.

Hoover's approach proved inadequate as the crisis deepened. His reluctance to embrace large-scale intervention and provide direct aid to struggling Americans led to growing public dissatisfaction. This set the stage for a major shift in economic policy under FDR's New Deal.

Hoover's Initial Response to the Depression

Belief in Self-Correcting Economy and Limited Government Intervention

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  • Hoover initially believed that the economic downturn was a normal part of the business cycle
  • He thought the economy would self-correct without significant government intervention
  • Hoover's adherence to the principles of rugged individualism shaped his initial response to the crisis
  • His belief in limited government intervention in the economy influenced his early actions

Encouraging Voluntary Cooperation and Limited Relief Efforts

  • Hoover encouraged voluntary cooperation among businesses to maintain wages and prices
  • He hoped this would prevent a deflationary spiral and further economic deterioration
  • Hoover's early response included limited public works projects to provide some employment
  • He created the President's Emergency Committee for Employment to coordinate local relief efforts
  • The Smoot-Hawley Tariff Act of 1930, signed by Hoover, raised tariffs on imported goods
    • The act aimed to protect American industries from foreign competition
    • However, it ultimately led to retaliatory tariffs from other countries (Canada, Europe)
    • This resulted in a decline in international trade and worsened the global economic situation

Effectiveness of Hoover's Economic Policies

Reconstruction Finance Corporation (RFC) and Its Limitations

  • The Reconstruction Finance Corporation (RFC) was established in 1932
  • It provided loans to banks, railroads, and other businesses to stimulate the economy
  • The RFC aimed to prevent further failures and stabilize the banking system
  • It had limited success in restoring confidence in the short term
  • However, the RFC did not address the underlying causes of the Depression
    • It focused on supporting businesses rather than providing direct relief to individuals

Emergency Relief and Construction Act and Its Shortcomings

  • The Emergency Relief and Construction Act of 1932 authorized funds for public works projects
  • It also provided loans to states for relief programs to assist those in need
  • The act provided some temporary relief and employment opportunities
  • However, it was insufficient to counteract the severity of the economic downturn
  • Hoover's policies focused more on indirect relief through loans and business support
    • He was reluctant to provide direct aid to individuals and families struggling with unemployment and poverty

Hoover's Reluctance to Embrace Large-Scale Government Intervention

  • The effectiveness of Hoover's economic policies was hampered by his reluctance to embrace large-scale government intervention
  • He believed in the importance of maintaining a balanced federal budget
  • This limited his willingness to implement more aggressive measures to combat the Depression
  • Hoover's adherence to limited government intervention constrained the scope and impact of his policies

Public Perception of Hoover's Leadership

Growing Criticism and Dissatisfaction with Hoover's Response

  • As the Depression worsened and unemployment soared, public opinion turned against Hoover
  • He was seen as unresponsive to the suffering of ordinary Americans
  • The public criticized Hoover for his apparent lack of empathy
  • Many felt he was resistant to providing direct federal aid to those in need

Media Portrayal and Symbolism of Hoover's Perceived Indifference

  • The media portrayed Hoover as out of touch with the reality of the economic crisis
  • Newspapers and cartoons often depicted him as callous or indifferent to the plight of the unemployed
  • The term "Hoovervilles" emerged, referring to shanty towns occupied by the homeless and unemployed
    • Hoovervilles became a symbol of the public's dissatisfaction with Hoover's leadership
    • They represented the hardships endured by many Americans during the Depression

Hoover's Handling of the Bonus Army and Its Impact on Public Perception

  • Hoover's public image was further damaged by his handling of the Bonus Army in 1932
  • The Bonus Army was a group of World War I veterans who marched on Washington, D.C.
    • They demanded early payment of their service bonuses to alleviate their economic hardships
  • Hoover ordered the U.S. Army to forcefully disperse the Bonus Army from the capital
  • This heavy-handed response was seen as unsympathetic to the struggles of veterans and ordinary Americans
  • The incident contributed to the growing perception of Hoover as disconnected from the needs of the people

Limitations of Hoover's Approach vs Political Standing

Hoover's Commitment to Limited Government Intervention

  • Hoover's commitment to limited government intervention hindered his ability to implement more aggressive measures
  • His belief in the power of the free market to self-correct constrained his response to the Depression
  • Hoover's emphasis on voluntary cooperation among businesses and local relief efforts proved inadequate
    • The unprecedented scale and severity of the economic downturn required more substantial action

Inadequacy of Hoover's Policies in Alleviating Widespread Suffering

  • Hoover's reluctance to provide direct federal aid to individuals limited the effectiveness of his policies
  • His opposition to large-scale public works projects failed to address the urgent need for employment and relief
  • The perception of Hoover as unresponsive to the needs of the American people eroded his political support
    • This contributed to his defeat in the 1932 presidential election against Franklin D. Roosevelt

Lasting Impact on Hoover's Legacy and the Shift Towards New Deal Policies

  • Hoover's handling of the Great Depression had a lasting impact on his legacy
  • Many Americans associated him with the failures of the era and the inadequacy of his response
  • The limitations of Hoover's approach paved the way for the more expansive and interventionist policies of FDR
    • Roosevelt's New Deal programs marked a significant shift towards greater government involvement in the economy
    • The New Deal aimed to provide direct relief, stimulate economic recovery, and implement structural reforms

Key Terms to Review (17)

Deflation: Deflation is the decrease in the general price level of goods and services, often resulting from a reduction in the supply of money or credit. It can lead to increased purchasing power but can also cause economic stagnation, as consumers and businesses delay spending in anticipation of falling prices. This economic phenomenon is crucial to understanding the struggles faced by farmers and laborers during periods of financial crisis, particularly when they were burdened with debts that became harder to pay as prices dropped.
Smoot-Hawley Tariff Act: The Smoot-Hawley Tariff Act was a U.S. law enacted in 1930 that raised tariffs on over 20,000 imported goods to historically high levels. This legislation aimed to protect American industries during the Great Depression, but it ultimately led to retaliatory tariffs from other countries and contributed to a decline in international trade.
Insufficient Response: Insufficient response refers to the inadequate measures taken by leaders, specifically Herbert Hoover, during the onset of the Great Depression to alleviate the economic crisis. This term encapsulates the perception that Hoover's policies were too limited and not aggressive enough to address the widespread unemployment, bank failures, and overall economic despair faced by millions of Americans during this time.
Republican Party: The Republican Party, also known as the GOP (Grand Old Party), is one of the two major political parties in the United States, founded in 1854. It emerged as a coalition of anti-slavery activists and modernizers, seeking to oppose the expansion of slavery into the territories. The party played a significant role during the Great Depression, especially under the leadership of Herbert Hoover, who was the last president from the party before the Democratic landslide in 1932.
Rugged individualism: Rugged individualism is a belief in the importance of self-reliance and personal independence, particularly during times of hardship. This concept emphasizes the idea that individuals should be responsible for their own economic well-being and that government intervention should be minimal. It connects deeply with the American ethos of personal responsibility and the notion that people should work hard to overcome obstacles without relying too heavily on assistance from others.
Unemployment: Unemployment refers to the condition in which individuals who are capable of working, but are unable to find a job, remain actively seeking employment. This term is significant during economic downturns, particularly during the Great Depression, as it highlights the challenges faced by workers and the economy as a whole.
Emergency Relief and Construction Act: The Emergency Relief and Construction Act was a U.S. federal law enacted in 1932 aimed at addressing the severe economic distress caused by the Great Depression. This legislation authorized the federal government to provide direct relief to the unemployed and fund public works projects, marking a significant shift towards government intervention in economic recovery efforts.
Poverty rate: The poverty rate is the percentage of a population that lives below the poverty line, which is defined by the federal government as the minimum income needed to secure basic necessities like food, shelter, and clothing. This statistic helps in understanding the economic well-being of a society and highlights the disparities in income distribution, especially during times of economic turmoil. The poverty rate can fluctuate due to various factors including economic conditions, government policies, and social programs.
Federal Home Loan Bank Act: The Federal Home Loan Bank Act was a law enacted in 1932 aimed at providing a stable source of funding for home mortgages, which became crucial during the Great Depression. This act established a system of Federal Home Loan Banks that offered low-interest loans to banks, enabling them to provide mortgage loans to struggling homeowners and promote home ownership. This legislation was part of Hoover's broader efforts to combat the economic crisis and stabilize the housing market.
Herbert Hoover: Herbert Hoover was the 31st President of the United States, serving from 1929 to 1933, and is often associated with his response to the onset of the Great Depression. His presidency began just before the stock market crash of 1929, which marked the beginning of a severe economic downturn. Hoover's policies and actions during this period are widely debated, as he believed in limited government intervention and encouraged voluntary efforts to address the economic crisis, leading to criticism for not doing enough to help those suffering from poverty and unemployment.
Economic stimulus: Economic stimulus refers to government actions aimed at encouraging economic growth and increasing consumer spending during periods of economic downturn. It often involves measures such as increased public spending, tax cuts, and monetary policy adjustments designed to inject liquidity into the economy and promote investment, job creation, and overall demand.
Bonus Army March: The Bonus Army March was a significant protest that took place in 1932 when thousands of World War I veterans and their families converged on Washington, D.C. to demand early payment of bonuses that had been promised to them for their military service. This event highlighted the struggles faced by veterans during the Great Depression and reflected broader economic hardships, as many participants were homeless and unemployed. The Bonus Army's encampment near the U.S. Capitol became a symbol of desperation and the demand for government assistance during a time of widespread suffering.
Reconstruction Finance Corporation: The Reconstruction Finance Corporation (RFC) was a government agency created in 1932 during the Great Depression to provide financial support to banks, railroads, and other businesses in distress. Its primary purpose was to stimulate economic recovery by ensuring that crucial industries had access to capital, ultimately helping to stabilize the economy and mitigate the effects of the depression.
John Maynard Keynes: John Maynard Keynes was a British economist whose ideas fundamentally changed the theory and practice of macroeconomics and economic policies of governments. He is best known for advocating for government intervention in the economy, especially during periods of economic downturns, which became a key response to the challenges faced during the Great Depression. Keynes argued that increased government spending and lower taxes could help stimulate demand and pull economies out of recession.
Hoovervilles: Hoovervilles were makeshift shantytowns that sprang up during the Great Depression, named derisively after President Herbert Hoover, who was blamed for the economic crisis. These communities were primarily constructed from scrap materials and housed the unemployed and homeless, reflecting the widespread poverty and desperation that characterized the era. The existence of Hoovervilles highlighted the failures of governmental policies and the social impact of the economic downturn.
New Deal: The New Deal was a series of programs, public work projects, financial reforms, and regulations enacted by President Franklin D. Roosevelt in response to the Great Depression. It aimed to provide relief for the unemployed, stimulate economic recovery, and implement reforms to prevent future economic downturns. This transformative period reshaped the role of the federal government in American life and established a safety net for citizens.
Stock market crash of 1929: The stock market crash of 1929 was a dramatic decline in stock prices that occurred in late October 1929, marking the beginning of the Great Depression. It was characterized by widespread panic selling as investors lost confidence, leading to a rapid loss of wealth and triggering economic turmoil. This event played a crucial role in the economic boom and consumerism of the 1920s, revealing the fragility of the economic system and setting the stage for massive unemployment and hardship.
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