Hoover's Response To Great Depression

Submitted By jtrasatto
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Hoover’s Response to Great Depression: He believed it was a crisis of confidence not of capitalism. The market is self-correcting. Hoover had a Laissez-Faire approach to the economy. He encouraged organizations of farmers, industrialists, and bankers to share information, bolster one another’s spirits, and devise policies to aid economic recovery. He urged farmers to restrict output, industrialists to hold wages at pre-depression levels, and bankers to help each other remain solvent. The federal government would provide them with information, strategies of mutual aid, occasional loans, and morale-boosting speeches. He relied heavily on volunteerism. Bread and soup lines were very popular during this time. He enacted the Smoot Hawley Tariff in 1930 which raised tariffs by 30%. The idea was that it would protect American farmers from international competition. Because of this world trade plummeted and it deepened depression in Europe, which hurt the US because they were paying back the US for war debts. Then Hoover declared a 1 year moratorium on European war debts which deepened the US depression. He also tried to balance the budget by raising taxes and the US GDP went down. He then created the Reconstruction Finance Corporation in 1932. It gave $2 billion loan to banks, railroads and state governments. He did not give money to the poor. It was a form of trickle-down economics and it was too little too late for Hoover.
Roosevelt’s Response to Great Depression: FDR believed strongly that action needed to be taken immediately. He started off with The First New Deal. It was a dizzying array of laws, agencies and programs to bolster the economy. It was experimental in nature not ideological. Its three basic components were Industrial recovery, agricultural recovery, and short term relief for the jobless. One of the first things he did was put a 4 day bank holiday, and called an emergency session of congress. If after the 4 days the bank reopened, then it was deemed in good shape. This restored confidence to the American people and ended bank runs. For industrial recovery he created the National Recovery Act which had many different components for everybody. Examples were lifting anti-trust laws for business, Created jobs by giving money for public works, right to collective bargaining for workers, created the FDIC and SEC for regulation and confidence. For agricultural he created the Agricultural Adjustment Act which extended credit to farmers. It also bolstered crop and livestock prices by reducing production, by paying farmers to plow over crops and kill livestock. For the jobless he created the Civilian Conservation Corps which created jobs for young men. The built state parks, roads, playgrounds etc. There was also the Tennessee Valley Authority which used dams to create electricity for poor people throughout the Tennessee valley area. There was some criticism of The First New deal and the Supreme Court ruled the NRA and AAA unconstitutional, this led to the Second New Deal. Started out with direct aid to the needy and created the Works Project Administration, which employed 8.5 million people. They were concerned with public works projects, as well as, writing, theater, art and youth projects. Another part of the Second New Deal was the Social Security Act to protect the elderly. It was just the very beginning of Social Security and it excluded many professions.
Why Hoover responded that Way: Hoover was a strong believer in Lassiez-Faire economics. He believed that the economy has periods of ups and downs and that when the economy goes down it will eventually come back up again. He believed that the government must intervene as little as possible. As Secretary of Commerce did not want government to control industry but he wanted the government to persuade corporations to cooperate and make things better for industry as a whole. Another reason he may have responded that way is
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