Hoover & The Great Depression

Hoover & The Great Depression Unit 9.4

Herbert Hoover (1928-1932) • Economy- raised tariffs, encouraged businesses to cut wages, workers not to strike, and private charities to increase their efforts for assisting the poor • Society- supported prohibition • Government- took the traditional view that public relief should come from state and local levels, not the federal government

Wall Street Crash • From March 1928- September 1929, stock market prices kept rising and rising to all time highs in September 1929 • Millions invested in the stock market boom and millions lost their money when the stock market crashed in October 1929

Black Thursday & Black Tuesday • True panic did not begin until Thursday October, 24 when unprecedented volumes of selling occurred on Wall Street • A group of bankers attempted to buy millions in stocks to stabilize prices; worked for one business day on Friday • Frenzied selling resumed the next Monday, and the bottom fell out on Black Tuesday, October 29

Causes of the Great Depression:Uneven Distribution of Wealth • Wages rose very little compared to large increase in productivity and corporate profits • Top 5% received over 33% of the nation’s income

Causes of the Great Depression: Stock Market Speculation • Instead of investing to share in a company’s profit, people were speculating the prices of stocks in order to sell them off more quickly for profit • Buying on margin allowed people to borrow the cost of the stock, making down payments as they went • Assumed that the price of the stock would keep rising in order to allow them to repay the loan • When the market crashed and prices dropped, many lost everything they had borrowed and invested

Causes of the Great Depression: Excessive Use of Credit Overproduction of Consumer Goods • Consumers and businesses believed that the economic boom of the 1920s would be permanent • Led to an increase in buying on credit; largely a result of new, effective advertising techniques • Business growth (increased productivity + use of credit) produced a volume of goods/services that workers with stagnant wages could not afford to buy

Causes of the Great Depression: Weak Farm Economy Governmental Policies • Prosperity of the 1920s never reached farmers • Suffered from overproduction, high debt, and low prices • Severe weather and drought prolonged their suffering throughout the 1930s • Government put its faith in business and did little to control/regulate it • High tariffs protected U.S. industries but hurt farmers and international trade

Causes of the Great Depression:Global Economic Problems • Europe never fully recovered from WWI, but U.S. insisted that all its wartime loans be repaid in full (at the same time tariff laws reduced the sale of European goods in America) • The Dawes Plan is suspended after the stock market collapses • Economic problems in Europe contribute to the Great Depression

Effects of the Great Depression • The Gross National Product (value of all goods and services produced by a nation in one year) dropped from $104 billion to $56 billion in 4 years • Nation’s income declined by over 50 percent • Unemployment reached an all-time high • 4% in 1929 to 25% in 1933 (13 million)

Effects of the Great Depression • 10 million savings accounts were wiped out and suicide rates reached an all-time high • Those who had never fully shared in the prosperity of the 1920s suffered worse than anybody • Farmers, African Americans, immigrants • Poverty and homelessness increased; mortgage foreclosures and evictions were commonplace

Hoover’s Policies • Because of trade and the Dawes Plan, European prosperity was closely tied to that of the U.S. • Hawley-Smooth Tariff Act (1930) was one of the worst mistakes of Hoover’s presidency • Set a schedule of tariff rates that was the highest in history • Intended to protect U.S. businesses from foreign competition, but European countries enact higher tariffs of their own against the U.S. • Reduced trade for all countries  made the Depression a worldwide problem

Hoover’s Policies • Debt Moratorium on Dawes Plan: economic conditions were so bad in the U.S. and Europe that the Dawes Plan for collecting war debts cold not continue • Hoover proposed a moratorium (suspension) of international debts • The international economy suffered from massive loan defaults; many withdrew their money from the banks on both sides of the Atlantic

Hoover’s Policies • Federal Farm Board: created in 1929 before the stock market crashed but later enlarged to meet the needs of the economic crisis • Helped farmers stabilize prices by temporarily housing surplus grain and cotton in storage • Too modest to handle the continued overproduction of farm goods

Hoover’s Policies • Reconstruction Finance Corporation: Created by Congress in 1932 to prop up faltering railroads, banks, life insurance companies, and other financial institutions • Hoover: emergency loans from the RFC would stabilize these key businesses • Benefits would then “trickle down” to smaller businesses and ultimately bring recovery

Bonus Army/March on Washington • Summer of 1932- thousands of unemployed WWI vets marched to Washington, D.C. to demand immediate payment of the bonuses promised to them at a later date (1945) • Camped in improvised shacks near the capitol with their families

Bonus Army/March on Washington • Congress failed to pass the bonus bill the veterans were seeking • Two veterans were killed in a clash with police • Hoover ordered the army to break up the encampment • General Douglas McArthur used tanks and tear gas to destroy the shantytowns and drive the protestors away • Caused many Americans to regard Hoover as heartless and uncaring

Hoover & The Great Depression