The Hoover Administration Background:
raised in Iowa by aunt and uncle
Stanford graduate
engineer; self-made millionaire
believed in “rugged individualism” and laissez-faire economy
made reputation with Belgian Relief Fund and Food Administration; Secretary of Commerce under Harding and Coolidge
Causes of the DepressionEconomic depression had several causes
1. Overuse of credit; many people went bankrupt when jobs were lost.
2. Overproduction of goods, caused by credit buying; when buying stopped, inventories built up and people were laid off.
3. “Buying on the margin” – buying stock with only 10% down; when market fell, loans could not be repaid
4. Suspect banking practices, leads to bank failures when market crashes
Causes of the Depression (cont.)
5. Too little money put into circulation by the Federal Reserve.
6. Massive farm problems; prices too low, foreclosures high
7. Tariffs too high between US and Europe; could not trade excess goods
8. Expectations of a downturn in the economy; when market started going down, people overreacted.
October, 1929“Black Thursday”- Oct. 24th, market falls at a
record pace
“Black Tuesday” – Oct. 29th, market falls almost to zero; billions of $$ lost, millions lost life savings
The Depression BeginsCharacteristics of the
Depression:
homelessness, unemployment, despair
Unemployment reaches 25%
The Depression BeginsHoover sticks to laissez-faire as
the depression worsens; blamed for inaction
Unemployed line up for few available jobs
Hoover’s InactionHoover opposes all government aid, favors
private charity; why?
Seen as uncaring and aloof
Nation begins to demand action from government
The Reconstruction Finance Corporation Hoover finally responds by creating the Reconstruction
Finance Corp. (RFC); first “New Deal” style agency
Designed to aid banks, businesses, and local govts. with low interest loans to generate activity
RFC first agency designed to aid businesses; a prototype for FDR’s New Deal agencies later
The “Bonus Army”July, 1932: WW I veterans march on Washington
to demand early payment of promised war bonuses; Hoover rejects their demands. Why?
The “Bonus Army”Hoover orders Gen Douglas
MacArthur to remove Bonus Army camps; riots follow
Hoover blamed for the violence
1932 ElectionFDR campaigns on optimism and govt. action
on economy; wins in a landslide, worst defeat for an incumbent ever
Franklin D. RooseveltBackground:
TR’s 5th cousin and nephew-in-law
former state legislator, asst. Secretary of the Navy
1920 VP candidate
NY governor
FDR and PolioContracted polio in 1921; left
paralyzed; spent rest of life in rehab
Created illusion of “walking” by leaning on people, podiums, etc. Why?
“The Hundred Days”March 4, 1933: the inaugural speech of FDRThis is pre-eminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great nation will endure as it has endured, will revive and will prosper.
So first of all let me assert my firm belief that the only thing we have to fear. . .is fear itself. . . nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.
“The Hundred Days”Emergency powers granted to
FDR; employed the “brain trust” to take on problems of the Depression
First crisis: the failure of the banks and “bank runs”
“The Hundred Days”
FDR declares a “Bank Holiday”, closes banks for a week to stop the bank runs
First “fireside chat” to explain govt. actions
Bank runs end
Glass-Steagall Act:
creates the FDIC
The First New Deal (1933 – 35)
No set plan, experimented with new programs to solve the Depression
“Relief, Recovery, Reform”
Focused on jobs and
temporary relief
The New Deal
First New Deal Programs:
Civilian Works Administration
Civilian Conservation Corps
Public Works Administration
CWA
CCC
PWA
The New Deal
Economic Reforms:
The Securities and Exchange Commission
The Wagner Act
Joseph P. Kennedy, first head of the SEC
Strike at Ford Motor Co, 1937
The New Deal
The Dust Bowl: agriculture in the Midwest and Plains catastrophic; foreclosures, drought cause dust storms
Hardest hit states: Kansas. Oklahoma, Texas. Nebraska
The New DealThousands move west
The migration of the “Okies”
Impact on economy
Passage of the
Agricultural Adjustment Act (AAA)
Designed to aid farmers by paying some not to plant/limit livestock
The National Industrial Recovery Act (NIRA)
Most ambitious overhaul of the economy since WW I; used similar methods
Attempt to organize economy into partnerships of management, labor, and govt.
Creates “Codes of Fair Competition”
Administered by the National Recovery Administration
The National Industrial Recovery Act (NIRA)The Codes:
anti-laws suspended, allows for cooperation within industries to set prices, wages, and production
creates National Labor Relations Board to mediate disputes
minimum wage set
bans child labor
allows for unionization
sets maximum hours to 32 per week
The New DealSmall businesses were exempt but encouraged to show their participation by posting the NRA sign; govt. uses WW I-style propaganda campaign to promote Act
Problems with the ActAct fell short of accomplishing goal:
some businesses did not maintain the Code
hurt smaller businesses, could not compete
many saw it as socialism and too pro-labor
May 1935: Supreme Court declares it unconstitutional
The End of the First New DealReforms have mixed results on the economy
Positive:
some improvement in employment, economy
relief to most in need
optimism returns as government attempts aid to people
Negative:
depression still present
growing opposition from liberal and conservative forces
Supreme Court strikes down many New Deal programs; i.e. NIRA, AAA
Opponents of FDRFather Charles Coughlin: radio
priest, criticized FDR for being too “socialist”
Dr. Francis Townsend: advocated $2,000 annual pension for elderly; led to creation of Social Security Act (1935)
Beginning of the “Second New Deal”
Opponents of FDRSen. Huey Long (D-LA)
criticized FDR for not going far enough in reforms
“Share Our Wealth” – confiscate all fortunes over $1m and redistribute it to all; guarantee of $5,000 yearly income
Assassinated in Baton Rouge, Sept, 1935
The Second New Deal (1935 -37)Focused on reforms and long-
term securityi.e. Social Security; the Wagner Act
Centerpiece: the Works Progress Administration (WPA)
Designed to create large-scale public works projects and provide employment to thousands
Largest peacetime govt. expenditure
WPA and the Arts
Art, literature, and music projects included in the WPA; first govt. support for the arts
Kansas Cityfrom Politics, Farming, & the Law
Thomas Hart Benton,1936
Role of Eleanor Roosevelt
Acted as FDR’s “eyes and ears”; major influence on New Deal proposals
Led to inclusion of blacks in govt. programs; also created the WPA programs supporting the arts
Controversial First Lady due to her active role in FDR administration
FDR vs. the Court
“Nine old men”
Supreme Court biggest obstacle in implementing New Deal legislation
FDR tries to add six more Justices to create a Court more favorable to his proposals
FDR vs. the CourtPublic reacts very unfavorably to plan; FDR loses popularity
FDR stays with plan despite loss of support
FDR vs. the CourtFDR eventually withdraws plan, but too late to
regain support for more New Deal plans
Court begins to support New Deal programs, but the New Deal era comes to an end
The Legacy of the New DealPositive:
provided relief and temporary jobs for millions
kept US from embracing radical movements; restored confidence in America
ended laissez-faire as govt. policy
Negative:
only partially solved the Depression
led to govt. deficits in peacetime
led to growth of “Big Govt.”