The USA in the 1930s

1
The USA in the 1930s

• Kevin J. Benoy

2
Approaching Disaster

• When Hoover became president in 1928, he was seen
  as ideal for the job.
• His outstanding reputation was richly earned from
  such work as heading post-war relief of war-torn
  Europe.
• Even his future opponent, Franklin Delano
  Roosevelt earlier said of him he is certainly a
  wonder and I wish we could make him president of
  the United States. There could be no better one.

3
Approaching Disaster

• Coolidge had been a hands-off president.
• Hoover was anything but.
• He was a tireless worker who saw government as
  having a role to play in creating business
  confidence and in maintaining a prosperity that
  was already slipping when he assumed office.

4
Approaching Disaster

• He turned out to be the right man at the wrong
  time.
• His belief in his own abilities rendered him
  inflexible.
• He noted of himself, when you know me better,
  you will find that when I say a thing is a fact,
  it is a fact.
• When a failing economy did not respond to his
  policies, he became increasingly frustrated.

5
Approaching Disaster

• Slumping sales in 1928 reflected a basic problem.
  American prosperity was not broadly based
  enough. Many workers really could not afford to
  buy the products they made.
• Huge levels of productivity required widespread
  wealth, yet too few earned enough to sustain
  consumption and perceived wealth was often just
  paper.

6
The Crash

• Despite the slump, stock prices continued to
  rise, fueled by borrowing. In 1929 2 of every 5
  borrowed went into buying stocks.
• Markets peaked on September 3, 1929. Banks
  failed, steel production dropped, home
  construction tailed off yet investors ignored
  it all.
• At the end of the trading day on October 23,
  prices plummeted.

7
The Crash

• When trading opened the following day, the plunge
  continued. Fear and panic set in.
• 13 million shares changed hands but at fire
  sale prices. The market lost 11 of its value.
• Herbert Hoover addressed the American public the
  following day, saying The fundamental business
  of the country...is on a sound and prosperous
  basis.
• Black Monday, October 28, made it clear that
  investors were not reassured.
• It is said that the opening bell the next day was
  not heard over the shouts of Sell! Sell! Sell!
  This was Black Tuesday. The market lost another
  12 of its value. Big investors tried to pump
  the market with major purchases at inflated
  values. They failed.

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Hoovers Response

• Hoover initially moved to cut taxes and ease
  interest rates.
• Inflation should spur spending and increase
  business confidence.
• In addition, the infamous Smoot Hawley Tariff of
  1930 was passed raising tariffs and wrecking
  international trade.
• None of these moves were enough to staunch the
  business bloodletting.

Effect of the Smoot Hawley Tariff on US Trade
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Hoovers Response

• US protectionism exported the Depression to
  Europe.
• In mid 1931, the largest Austrian bank Credit
  Anstalt collapsed, triggering a chain reaction
  with other European financial institutions.
• The downward spiral gathered momentum.
• Unable to pay their American loans, Europeans
  defaulted and put US institutions at risk.

Bank run in Berlin
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Hoovers Response

• In retrospect, Hoover seems to have mishandled
  the crisis.
• Easy credit fanned speculation when the marked
  clearly needed a correction.
• The 40 drop in share prices in the first weeks
  of the panic was made worse by there not being a
  smaller drop earlier.
• His attempt to reflate the economy immediately
  seemed to deny that a correction was needed.
• His tax cuts only made it necessary to increase
  taxes more two years later after public works
  spending put the US into deficit spending with no
  apparent end in sight.

11
Unemployment

• Unemployment rose from 3.2 of the workforce in
  1929 to 24.9 in 1933.
• 34 million people, roughly 28 of the US
  population, had no income.
• Tenants could not pay therir rent.
• Mortgageholders defaulted.
• Taxpayers couldnt meet their obligations.
• Authorities could not afford to pay their
  workers. In New York 300,000 children went
  unschooled because there was no money to pay for
  schools. The city of Chicago owed 20 million in
  back pay to its teachers.
• The entire capitalist system teetered on the edge
  of total collapse or so it seemed.

12
The Dust Bowl

• If the crash did not make things bad enough,
  nature conspired to increase human suffering.
• 150,000 square miles of Oklahoma, Texas,
  Colorado, Kansas and New Mexico saw light topsoil
  blown away when rains persistently refused to
  fall between 1934 and 1937.
• 60 of the population of these areas were turned
  into exodusters, refugees from environmental
  catastrophe.

13
A Banking Collapse

• In 1931-32, 5,096 American banks collapsed
  (compared to 700 in a normal year).
• Industrial production dropped by half.
• Housing construction fell in value from 8.7
  billion to 1.4 b. In 1933.
• Though real wages rose for those who had work,
  misery and deprivation fell to those who did not.

14
A Global Depression

• The international system, so dependent on
  America, fell also in no small part because of
  Americas tariff offensive.
• In June, 1931 Hoover announced a moratorium on
  reparation and war debt payments which likely
  saved the financial systems of several European
  countries, but was not enough to fix the problem.
• European and American investors sat on their
  money.
• Most countries abandoned the gold standard,
  seeking export relief by devaluing their
  currencies.
• It didnt work. World trade shrank and so did
  the prospect of global recovery.

15
Bonus Expeditionary Force

• Hoovers tarnished image took another hit when US
  war veterans, calling themselves the Bonus
  Expeditionary Force, numbering 20,000, camped out
  in the middle of Washington, calling for help in
  hard times.
• Hoover stood firm and called on the army to
  disperse the rabble.
• Cavalry major Patton, on the orders of General
  MacArthur, dispersed the crowd.
• Apocryphal stories spoke of bayonet charges into
  hungry, but peaceful, crowds while the President
  dined in luxury.

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1932 Election

• The cards were stacked against Hoover in the
  election.
• His opponent and former admirer, Franklin D.
  Roosevelt masterfully outflanked him.
• Formerly the reformist party, FDR now called for
  dramatic action to deal with the crisis.
• Though both men now understood intervention was
  needed, Roosevelt packaged his ideas brilliantly
  in his New Deal.

17
1932 Election

• Roosevelt was no doubt aided by the Republicans
  unfortunate choice of Rudy Vallees Brother Can
  You Spare a Dime as their campaign song.
• The Democrats used Happy Days Are Here Again.

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The New Deal

• The newly minted President moved fast.
• In the first hundred days he restored business
  confidence by strengthening the banking system
  with his Emergency Banking Bill.
• He directly addressed the public with his
  fireside chats on American radio, convincing
  them to put their savings back into banks.

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The New Deal

• Hoover favoured creating good credit conditions
  for banks and companies a top-down approach.
• Roosevelt preferred to stimulate consumption from
  the bottom-up through government relief
  programmes.
• In the height of Depression, American were
  prepared to accept direct state intervention.

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The New Deal

• Not all of Roosevelts ideas were accepted.
• The Supreme Court rejected his National Recovery
  Agency as unconstitutional, but the voters wanted
  action and felt they were getting it.
• The Tennessee Valley Authority and other
  so-called alphabet agencies the Agricultural
  Adjustment Act, the National Industrial Recovery
  Act, the Works Progress Administration and others
  -- offered hope.

21
The New Deal

• One of Roosevelts most popular moves was to
  repeal the 18th Ammendment.
• On the 22nd of March, 1923, Roosevelt allowed the
  sale of 3.2 beer and wine thought too weak to
  be very intoxicating.
• After securing the agreement of many states, the
  21st Ammendment was passed which repealed the
  18th.
• It took some time before all states were wet
  again. Mississippi was the last, in 1966.

22
The New Deal

• Republicans railed against Roosevelts big
  government some calling him socialist and
  others calling him fascist, but it was impossible
  to argue with his success.
• In 1936, he ran for re-election and won in a
  landslide.

23
Roosevelts Legacy

• FDR inherited a mess and, though he did not fix
  it, he did enough to win the confidence of the
  American public.
• The next 50 years would see government
  involvement in the economy grow in the form of
  regulation and in providing services and
  programmes.
• Inequality would shrink.

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Roosevelts Legacy

• He was much reviled in his time, as that
  megalomaniac cripple in the White House or that
  swollen-headed nit-wit.
• One Connecticut club forbade the mention of his
  name on their property, as a health measure
  against apoplexy.
• Today he is considered one of the top two or
  three presidents of all time.
• Even arch-conservative Conrad Black s biography
  of the man was sub-titled Champion of Freedom.

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Roosevelts Legacy

• In the final analysis, it was not Roosevelts New
  Deal that ended the Depression.
• Bad times were somewhat alleviated by government
  efforts, but the ten lost years continued.
• It took the massive spending of the World War II
  years to finally change things.

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