Hoover vs FDR: The Great Depression On October 29, 1929, the United States fell in an unimaginable way. The stock market dropped nearly forty points and left the United States in the worst depression to this date. However, the United States was not the only county at this time in the depression. Almost all of North America and Europe were in the same position. The great depression came about when Federal employees thought that what’s good for banks is good for America. Some actions were taken to try to restore the U.S. to its normal state but nothing seemed to work because the depression lasted ten years: During the next three years stock prices in the United States continued to fall, until by late 1932 they had dropped to only about 20 percent of their value in 1929. Besides ruining many thousands of individual investors, this precipitous decline in the value of assets greatly strained banks and other financial institutions, particularly those holding stocks in their portfolios. Many banks were consequently forced into insolvency; by 1933, 11,000 of the United States' 25,000 banks had failed. The failure of so many banks, combined with a general and nationwide loss of confidence in the economy, led to much-reduced levels of spending and demand and hence of production, thus aggravating the downward spiral. (Nelson) The depression left millions unemployed and caused manufacturing output to fall as well. This arose when Herbert Hoover was president. He served one term and lost his 2 reelection and lost to Franklin D. Roosevelt in a landslide. Hoover was president for the first couple of years of the depression. Many people think Hoover didn’t try to do anything to get out of the depression. His original plan was to reduce prices to increase economic spending. However, this did not happen when Hoover designed the Smoot-Hawley Tariff Act. All the acts put into place by Hoover and Congress made the depression worse. The Smoot-Hawley Tariff Act, which raised taxes on all imports, did the exact opposite of what would help get the nation out of the depression. This tariff actually raised the prices of everything. The United States economy took a huge hit when this act was put into place: It provoked a storm of foreign retaliatory measures and came to stand as a symbol of the ‘beggar-thy-neighbor’ policies (policies designed to improve one’s own lot at the expense of that of others) of the 1930s. Such policies contributed to a drastic decline in international trade. For example, U.S. imports from Europe declined from a 1929 high of $1,334 million to just $390 million in 1932, while U.S. exports to Europe fell from $2,341 million in 1929 to $784 million in 1932. Overall, world trade declined by some 66% between 1929 and 1934. More generally, Smoot-Hawley did nothing to foster trust and cooperation among nations in either the political or economic realm during a perilous era in international relations. (“U.S.”) Despite the fact that Hoover tried to make the economy better, he still is “accused of being a do-nothing president who allowed the country to continue to slide into its worst depression 3 ever” (“America’s”). Even though his efforts fell short, Roosevelt used some ideas that were similar to Hoover’s. Roosevelt took over in 1932 when he became president. To resolve the depression, he built off the Hoover programs that increased spending. While these particular programs worked, Roosevelt also had a few programs that didn’t go as planned. The ones that didn’t work as planned ended up make the depression worse. The three that really stuck out were his minimum wage, Davis-Bacon and the Social Security Act. The Social Security Act was put in place to aid citizens who were in need because of their age, unemployment or sickness. But as Roosevelt said, “’[we] can never insure one hundred percent of the population against one hundred percent of the hazards … of life’” (Nardo 21). The minimum wage and Davis-Bacon plans “reduced price flexibility, often setting a minimum and thus continued to exacerbate the Great Depression” (“America’s”). Contractors would only pay favorable wages in high-wage areas, but when they were in a cheaper area the wages were not favorable. This was the case until it was amended in 1935 charging the secretary of labor with the responsibility of determining prevailing wage rates in advance of inviting bids for federal projects. This act did not work so it was dismissed and a set wage was made for federal projects. Thirty days later, the act was reinstated and the nation was back to its old ways with very little people realizing the change. Another big plan Roosevelt implemented was the Agriculture Adjustment Act (AAA). The general outline of the AAA was to “*provide+ the basic legislative framework for the New Deal agricultural relief programs until its production control aspects were ruled 4 unconstitutional by the Supreme Court on Jan. 6, 1936” (Chandler 215). This act was accepted by many farmers as soon as it was offered. However, the acceptance of it never lasted more than a few months. The first AAA of 1933 “gave the farmer the price supports he desired, and more…” (Nardo 121). It worked by paying farmers to reduce their total crop area. This would in theory, reduce crop supply and raise the value of it. If farmers were willing to reduce their crop areas, then the government would pay them subsidies. A major revision of the AAA was made in February 16, 1938 after the first had been declared unconstitutional. This dealt with the “concept of an ‘ever-normal granary’” (Chandler 221). The main idea was similar to the first one in many ways except one. The AAA would make loans to farmers in years of good crop yields and to store the surplus produce, which it would then release in years of low yield. The event that changed the depression was when Roosevelt’s plan for the New Deal. Roosevelt started signing all sorts of programs to get the nation jumpstarted again. This resulted in a series of ways to get the nation turned around: Based on the assumption that the power of the federal government was needed to get the country out of the depression, the first days of Roosevelt's administration saw the passage of banking reform laws, emergency relief programs, work relief programs, and agricultural programs. Later, a second New Deal was to evolve; it included union protection programs, the Social Security Act, and programs to aid tenant farmers and migrant workers. (“President”) These new programs started to turn the nation around. Many of the new programs that were a result from the New Deal are known by acronyms. For example, the Work Progress 5 Administration is better known as the WPA and the Civilian Conservation Corps are better known as the CCC. Ultimately the New Deal was successful when looked at as a short and long term perspective. As a short term perspective, it improved lives of the people that were struggling to get by during the depression. As a long term perspective, the rules said that government must take part in economic and social affairs that would happen in the United States. Each president handled this situation in a different way. Even though many people saw Hoover as a lazy president who didn’t care about making the nation better, he was the root of the programs to help America out of the Great Depression. Roosevelt simply took some of these same ideas and added to them. The original concept was already there, there were just a few revisions made to it and all the programs put together made up the New Deal. Roosevelt once said, “I pledge you, I pledge myself, to a new deal for the American people” (“President”). As a result he did just as he said he would do. He made a New Deal for the American people and got the nation out of depression. 6 Works Cited America's Great Depression. 10 May 2008 <http://www.amatecon.com/gd/gdoverview.html>. Chandler, Lester V. America's Greatest Depression. New York, NY: Harper & Row, Publishers, Inc., 1970. Nardo, Don, ed. The Great Depression. San Diego, CA: Greenhaven Press, Inc., 2000" Nelson, Cary. "About the Great Depression." Modern American Poetry. 10 May 2008 <http://www.english.uiuc.edu/maps/depression/about.htm>. President Franklin Delano Roosevelt and the New Deal." Great Depression and World War II, 1929-1945. 2 Feb. 2004. 10 May 2008 <http://lcweb2.loc.gov/learn/features/timeline/depwwii/newdeal/newdeal.html>. "U.S. Department of State." Smoot-Hawley Tariff. 10 May 2008 <http://future.state.gov/when/timeline/1921_timeline/smoot_tariff.html>. .
"Hoover vs FDR: The Great Depression"