Herbert Hoover became the 31s President of the United States in 1928, having won an election based on a pro-business platform. He had previously served in the government as the United States Secretary of Commerce in the 1920s, under Presidents Warren Harding and Calvin Coolidge. A Quaker by religious background, he was a mining engineer by profession. American economic success during the 1920s had also helped him secure the Presidency, with Hoover beating Democrat Al Smith fairly convincingly, winning the electoral college by 444 to 87. A proponent of the Efficiency Movement, which looked to reduce waste in government expenditure, among other things, Hoover also believed in the key role played by volunteers and individuals in society. Despite coming into office on a tide of economic optimism, Hoover’s time as president would be largely defined by the Wall Street Crash, which occurred only months after he took office, in 1929. What would determine Hoover’s historical reputation is his reaction to this crash. This paper will examine in detail measures taken by Hoover during his time as president, and how the country as a whole reacted to them. Their effectiveness will be assessed, especially in the light of how they were perceived and accepted by Americans at the time. overall, Hoover is generally perceived to be of fairly average quality as a president, so a closer assessment of his policies may help to explain why this is so.
When Hoover was elected to office as president it seemed that he expected things to carry on much as they had for the previous eight years of the decade. America was enjoying an economic boom, but that was soon to end. The kind of optimism felt by Hoover and his supporters can be summed up with this quote from his inauguration speech. Hoover said, “Given the chance to go forward with the policies of the last eight years, we shall soon with the help of God, be in sight of the day when poverty will be banished from this nation” (Hoover, speech, 1928) This idea that things would continue very much as they had before was deeply flawed, as it turned out. It frames a context for the kind of thinking which Hoover used to try and solve the problems which came his way. The president was not a fan of ‘laissez faire’ economics, though he did believe that government should interfere as little as possible. His views revolved around the concept of ‘volunteerism’. This he envisaged as a cooperation between the private and public sector which could help to lift all Americans out of poverty. In his paper ‘American Individualism’ (1922) he had also set out a critique of the kind of laissez faire capitalism which many on the right of American politics enthusiastically espouse to this day. This was therefore a man who, although largely pro-business, also had an awareness of the kind of issues which might face working-class people. His abilities and ideas were about to be severely tested though, once the crash of 1929 occurred. His prediction from a 1928 speech, that, “We in America today are nearer to the final triumph over poverty than ever before in the history of any land,” would prove to be hubris of the first order.
The economic problems faced by Hoover often serve to obscure his progressive policies with regard to the working class. It is important to examine these before moving on to a more specific analysis of his policies during the Depression which followed the crash of 1929. Despite objections from Treasury Secretary Andrew W. Mellon, Hoover announced plans for tax reductions in the lower income brackets. He was also firmly placed against corrupt patronage practises, and always refused to countenance ‘red hunts’ for supposed Marxist sympathisers within government. (Tindall and Shi, p. 696). As well as focusing on class issues, Hoover was also sympathetic to the cause of African American progress, and he looked for extra funding for the African American college Howard University during his time in office too. This progressive mindset was also applied by Hoover in his treatment of the agricultural sector of the American economy. In order to open up markets for domestic agricultural producers, he wanted to impose higher tariffs on imported agricultural goods. After struggling with vested interests for over a year though, in the end Hoover was forced to settle for an upward revision of tariffs on manufactured as well as agricultural goods. The Hawley-Smoot Tariff of June 1930 pushed all duties to all time highs, with average rates rising from 32 per cent to 40 per cent. A petition by leading economists requested that this be reduced, as it was causing more harm than good, with prices paid by consumers rising. It was also felt that it would damage farmers and provoke retaliation from overseas. They were right, in the end, but Hoover believed that party loyalty was more important at the time. This was just one of his mistakes, for in the end it only made a bad economic situation much worse. This kind of result helped to hide Hoover’s progressive tendencies, with working class people paying most for the economic crisis in the end.
Before examining more of Hoover’s responses to the crash, and how they ultimately played out, it is worth examining the causes of the crash, and how it occurred. America had enjoyed a huge boom throughout the 1920s, with many people seeming to think that another depression was never going to occur. The parallels with the early 21st century are quite striking. “Throughout the 1920s the idea grew that American business had entered a New Era of permanent growth.” (Tindall and Shi, p. 697) There had been frenzied speculation by investors in projects such as the Florida construction boom, which had largely ended by 1926. Up until 1927, stock values rose in line with profits. After that point, their values rose much more rapidly, based on nothing more than speculation bordering on outright gambling. “One could now buy stock on margin – that is, make a small down payment (usually 10 per cent) and borrow the rest from a broker who held the stock as security against a down market. If the stock price fell and the buyer failed to provide more cash, the broker could sell the stock to cover his loan.” (Tindall and Shi, p. 697) Such a situation was a recipe for disaster, which was largely ignored by those people who were investing in and profiting from the stock market.
By the middle of 1929, production and employment, as well as other economic gauges, were in decline, although stock market activity kept the bubble of false optimism in place. Over confidence was kicking in now, and, combined with greed, had created a economic fantasy world, much like the situation which occurred in 2008. Hoover himself sought to calm things down at this point, attempting to quell speculation in markets. More conservative financial experts were also counselling caution, but they were largely ignored in the rush to get rich ever more quickly. By September 1929, stock prices had begun to look a little wobbly though, and by October a downward trend was clear. A few good days were keeping the crash at the bay at this point. October 22, 1929, saw the president of the National City Bank telling the press, “I know of nothing fundamentally wrong with the stock market or with the underlying business and credit structure.” (quoted in Tindall and Shi, p. 698). Just how wrong that statement was would be made fully clear just the next day prices began to crash. During October, the value of stocks on the New York Exchange had tumbled by an average of 37 per cent. Hoover insisted that, “the fundamental business of the country” was still sound (Tindall and Shi, p. 698). Just how wrong he was would soon be made clear to him. In fact, the crash had shown America just how unsound its business and economic practises had been over the last decade or so.
Governmental policies had played a serious part in creating the crisis. Mellon had reduced taxes to such an extent that people began to ‘over save’. This diminished consumer demand, and a growing money supply, in turn, led to an increase in the frenzied level of market speculation which caused the crash. Some observers also state that a growing hostility towards labor unions had also worsened things, with a reduction in collective bargaining only serving to worsen growing inequalities in income. Anti-trust laws were not enforced, which caused “concentration, monopoly, and high prices.” (Tindall and Shi, p.699). Hoover therefore was faced with an incredibly difficult task, not helped by the attitude of many government officials, who failed to acknowledge the severity of the crash. Indeed, Mellon, a proponent of laissez faire economics, advised that the best course of action would be to “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” This, in his view, would “purge the rottenness out of the system.” (quoted in Tindall and Shi, p. 699). Hoover rejected this approach, highlighting his progressive and interventionist credentials once again. He would be limited in his actions by his own dogma though, which balked at direct invention. His first step was therefore to attempt to boost confidence and try to engender a spirit of togetherness.
His first measure was to make a series of speeches which insisted that it was important to carry on confidently and to feel hopeful. He urged business leaders not to cut wages or lay workers off, and also asked for a measure of moderation from trade union leaders in their demands. His aim was to let the shock of the crash cause consequences for corporate profits rather than consumer demand. More importantly than his calls for confidence and optimism, though, was the way in which he tried to boost demand in the economy by embarking on a series of publicly funded projects. These really were unprecendented in American history to that point. He even managed to persuade Henry Ford to raise his workers’ wages from six dollars a day to seven, not an easy task to accomplish with a rabid capitalist such as Ford. From American utility companies, Hoover managed to extract pledges that they would invest in new infrastructure to the tune of 1.8 billion dollars. The railroad bosses also made pledges to invest massive amounts of cash in infrastructure.
There was also an order issued to construction companies to speed up their current projects, while Hoover also made requests of all 48 states governors that they also begin to undertake similar levels of public works, to boost demand again in the economy. A 160 million dollar tax cut was announced, while resources were doubled for public works projects such as dams, highways and harbors. The Hoover Dam, located on the Colorado River, would be the most obviously memorable of these projects.
There was some gentle economic progress as a result, but not much, and the outward signs of a nation in depression began to grow. The rough and ready settlements occupied by the homeless on the edge of towns began to be termed ‘Hoovervilles’. An empty pocket turned out was called a ‘Hoover flag’. The man in office was taking the flak for the crash, even as he tried to act. While those in the media felt that he was doing a competent job, with the New York Times stating, “No one in his place could have done more.” (New York Times, 1929, quoted in Norton and Walch), public feeling was different. This was reflected in the way that the Democrats were able to win their first national victory since 1916, capturing control of both houses of Congress in 1930. In 1931, early optimism was crushed by a series of bank defaults in Europe though, making Hoover’s task even more difficult.
Hoover also used the resources of government to help shore up financial institutions. January 1932 saw the establishment of the Reconstruction Finance Corporation (RFC) with a 500 million dollar fund. It was also given the authority to borrow an extra 2 billion dollars if required. This money was to be used primarily for emergency loans to banks, building and loan societies, railroads and other financial institutions. It certainly staved off bankruptcies, but was viewed as being on the side of business at the expense of labor, by certain people. (Tindall and Shi, p. 701). The Glass-Steagal Act followed on this initiative in February 1932. This was designed to make commercial loans more widely available. This enlarged the amount of credit available in the economy, and also released around 750 million dollars in gold reserves which had been previously used to back Federal Reserve Notes. The Federal Home Loan Bank Act of July 1932 created a range of discount banks to make home mortgages easier to obtain. Critics of Hoover though felt that too much help was being given to corporate interests, rather than helping ordinary Americans through a time of crisis. As New York Senator Robert G. Wagner stated, “is there any reason why we should not likewise extend a helping hand to that forlorn American, in every village and every city of the United States, who has been without wages since 1929?” (quoted in Tindall and Shi, p. 702). Hoover hung back from taking this kind of direct government intervention though, with it clearly contravening his ideas about volunteerism. In July 1932, the president did sign the Emergency Relief and Construction Act. This was not a direct Federal ‘dole’, but was instead intended to provide the RFC with 300 million dollars to make relief loans available to states. It also authorised loans of up to 1.5 billion dollars for further local and state public works. There was also an appropriation of 322 million dollars for more public works. Measures for farm relief were conspicuous by their absence though. By 1932, cotton prices had declined to 4.6 cents per pound. Before 1929, farmers could expect to get a price of 41.75 cents to the pound. In the four years between 1930 and 1934, almost a million farms passed from the owner to the mortgage holder. (Tindall and Shi, p. 702)
This level of dispossession among the agricultural sector led to the protests which in the end did for Hoover’s presidency. Farmers were becoming desperate and angry. In rural areas, mobs prevented re-possessions of farms and judges were threatened with lynching. Corn was burned and milk dumped in ditches as protest. World War One veterans were also feeling increasingly marginalised. In the spring of 1932, a ‘Bonus Expeditionary Force’ converged on Washington. Made up of around 15,000 World War One veterans and their families, their aim was to make sure that the government paid them the veterans’ bonus for which Congress had voted in 1924. The Senate vetoed payment of the bonus, despite the House voting for it to be passed. Some veterans returned home at his point, but the majority stayed on, camping in sight of the Capitol and in vacant government buildings. By July, authorisation had been given to the Army to clear out the squatters. General Douglas MacArthur led a force of 700 soldiers who violently drove the unarmed protestors away in a show of force which Hoover was disgusted with. Hoover had ordered restraint, but MacArhtur, helped by junior officers Dwight D. Eisenhower and George S. Patton, junior. One of the evicted veterans was actually a New Jersey soldier who had been decorated for saving the life of Patton during the war. (Tindall and Shi, p.703) MacArthur’s later assertions that the protestors were a mob of criminals and extremists was not borne out by the subsequent findings of a Grand Jury. Whatever Hoover’s personal views on the matter though, the significance could not have been lost on him. It was certainly not lost on his opponent in the 1932 Presidential Election, Franklin D. Roosevelt, who said, on hearing the news, “Well, this elects me.” (quoted by Norton and Walch).
Overall, Hoover was found wanting as a president at a very tough time in American history. Hubris and short-termism combined to wreck the economy just as he was elected. His measures, although largely adopted by those that came after him, did not go far enough to combat the serious issues with which he was faced. A reluctance to embrace full intervention and instead rely on the creation of credit may well have done for him. He had organised flood relief efforts in the past, and a similar level of interventionist leadership could perhaps have increased his support. Hidebound by non-interventionist principles though, he paid the price at the ballot box. So, while Hoover in any other era may have emerged with great credit from his actions, the unique nature of the crisis which faced the country served to test him to a level that he was not skilled enough to cope with. The judgement of history that he was an average president is therefore perhaps harsh, but also justified. As Norton and Walch state, “From hero to scapegoat: Hoover’s failure to dramatize himself was his greatest strength as a humanitarian and his greatest flaw as a politician.” (The Ordeal of Herbert Hoover). Perhaps the best summing up of his time in office came from the man himself though, when he said, “I am so tired that every bone in my body aches.” (quoted in Tindall and Shi, p.704)
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