The First Years of The Depression 1929-­‐1932

A. The first years & Government actions to relieve economic hardships

i. Why was it called The Great Depression? • Herbert  Hoover  

•  An  a,empt  to  raise  morale.  Sounded  be,er  than  “panic”  or  “crisis”  

•  “Depression”  had  been  previously  used  to  describe  economic  slumps  

ii. Herbert Hoover and Attempts to Raise Morale •  Basic  Idea:  Use  the  Government  to  encourage  voluntary  cooperaBve  acBon  in  the  private  sector  

•  A,empts  to  make  Volunteerism  work:  •  Federal  Farm  Board  •  NaBonal  Business  Survey  Conference  -­‐  OpBmism  •  NaBonal  Credit  CorporaBon  –  Oct  1931,  the  last  test.    

•  OpBmisBc  Policy:  Adopted  from  the  Roaring  20’s  •  PECE  –  President’s  Emergency  Commi,ee  for  Employment  

•  Fall  1930-­‐  August  1931  •  Colonel  Arthur  Woods  •  Confidence  Campaign  

•  POUR  –  President’s  OrganizaBon  for  Unemployment  Relief  •  Walter  S.  Gifford  •  Focus:  AdverBsing  

•  Wage  Maintenance  Plan:  Hoover  held  conferences  with  companies,  where  companies  agreed  not  to  lower  wages  

•  While  trying  to  keep  wages  the  same,  businesses  only  decreased  payroll  •  Spending  power  lowered:  Directly/Indirectly  •  Fell  apart  in  1831  

•  Sept.  10-­‐  U.S.  Steel  announced  10%  wage  reducBon  •  Everyone  else  quickly  followed  

Focused  on  OpBmism,  not  staBsBcs  

iii. Other ideas on How to Deal with the Depression •  Grover  Cleveland's  “proven”  policy  

•  Sit  back  and  wait  for  natural  forces  to  bring  recovery  •  “Liquidate  labor,  liquidate  stocks,  liquidate  the  farmers,  liquidate  real  estate”            -­‐Andrew  Mellon,  Treasury  Secretary  

•  LiquidaBonists  •  Ideas  of  the  Well-­‐to-­‐do  

•  Business  was  the  cure  for  this  problem  among  business  •  There  is  no  depression  

•  There  is  not  five  percent  of  the  poverty,  distress,  and  general  unemployment  that  many  of  your  enemies  would  have  us  believe”  –Hoover,  1931  

•  There  is  a  depression,  but  it  would  be  best  if  we  ignored  it  •  “I  am  sold  on  America.  I  won’t  talk  depression”-­‐Bu,ons  of  CincinnaB  residents  

•  The  depression  is  beneficial  •  It  is  a  “good  thing  that  the  recovery  is  prolonged.  Otherwise  people  wouldn’t  profit  by  the  illness.”  –Andrew  Mellon,  1930  

iv. No Federal Relief Here!

• Hoover  and  his  commi,ees  insisted  that  local  &  state  governments  had  the  situaBon  under  control  

•  Based  on  governors’  reports  •  1932:  Only  8  states  provided  unemployment  compensaBon  • MisconcepBons  in  high  places  

•  “No  one  is  actually  starving”-­‐Herbert  Hoover  • Hoover  didn’t  want  to  provide  federal  relief  because  he  believed  it  would  be  demoralizing  

v. Hawley-Smoot Tariff Act

•  June  17,  1930  (Conceived  in  1929)  •  Raised  taxes  on  imports  in  an  a,empt  to  protect  American  businesses  and  farmers.  

•  Senator  Reed  Smoot  of  Utah,  and  RepresentaBve  Willis  Hawley  of  Oregon  •  Raised  the  average  tariff  by  about  20%  

"  US  IsolaBonism  (InternaBonal  conflict)  "  Worsened  the  world  economy,  Reduced  global  trade  "  Loss  of  confidence  on  Wall  Street  

•  Economists  pleaded  that  the  Act  should  not  pass  •  Last  Bme  we  see  the  New  Era’s  “every  man  for  himself”  principle  

h,ps://www.youtube.com/watch?v=uhiCFdWeQfA  

vi. Revenue Act of 1932

•  Fiscal  Policy:  Increased  Tax  rates  •  An  a,empt  to  balance  the  federal  budget,  in  order  to  maintain  naBonal  credit  

• Originally  was  going  to  include  intense  sales  tax,  which  most  affects  the  poor,  but  protests  and  le,ers  caused  burden  not  to  fall  directly  on  consumers.  

•  Increased  rates,  Bghtened  the  enforcement  of  income  tax,  increased  postal  rates,  and  taxes  on:  gasoline,  cars,  beer,  and  bank  checks  (hidden  sales  taxes).  

• Only  further  discouraged  spending,  but  most  secBons  of  the  Act  were  very  reasonable.  

vii. Glass-Stegall Act •  AKA:  The  Banking  Act  of  1933  •  The  Act  was  a  reacBon  to:  

•  The  failure  of  nearly  5,000  banks  •  The  resulBng  low  public  confidence  in  banking  pracBces.  

• What  did  the  Act  do?  •  Forced  a  separaBon  between  investment  and  commercial  banks  

•  Commercial  banks  couldn't  underwrite  securiBes,  investment  banks  couldn’t  receive  deposits.  

•  Result:  •  Restored  confidence  in  banks  •  Some  argue  that  the  act  was  never  even  necessary,  and  that  the  effect  of  the  previous  pracBces  on  the  already  devastated  economy  did  not  really  worsen  the  depression.  

B. Impact of Foreign Issues

i. Tariff War

•  1927  in  Geneva:  Tariff  truce  •  Countries  agreed  not  to  enact  anymore  treaBes  

•  1929-­‐  Hoover  calls  special  session  of  congress  to  create  the  Hawley-­‐Smoot  Tariff  Act.    

• US  IsolaBonism,  less  InternaBonal  Trade  •  Many  people  thought  the  depression  was  caused  by  events  in  Europe,  and  thought  cuong  ourselves  off  from  them  would  be  a  way  out.  This  only  made  the  depression  worse.  

ii.  Herbert  Hoover  contended,  un6l  the  day  he  died,  that:  The  United  States  was  almost  recovered  in  the  spring  of  1931,  un6l  the  Interna6onal  Crisis  hit  and  the  economy  plunged.

Here Lies Herbert Hoover

The depression is

not his fault, it should be blamed

on the International Crisis of 1931

iii. The International Crisis of 1931 •  Began  in  Austria-­‐  a  major  bank-­‐  The  Kreditanstalt-­‐  had  lost  an  amount  equal  to  their  capital  reserves  in  the  previous  year.  They  remained  open,  but…  

•  This  caused  a  banking  crisis  in  Germany:  •  Mid-­‐July:  All  of  the  banks  temporarily  shut  down  •  Why  did  the  US  care?  

•  Chase  bank  and  the  Guaranty  Trust  Company  had  invested  almost  half  of  their  capital  in  German  SecuriBes  

•  Hoover  issued  a  one  year  moratorium  on  all  intergovernmental  payments,  to  create  “breathing  space”  

•  Failed  •  People  thought  that  freeing  Germans  of  their  payments  would  allow  them  to  put  more  money  into  arms  (Context:  Pre-­‐World  War  2)  

•  SupernaBonalsim  

iv. The International Crisis of 1931 cont.

•  The  Final  Blow-­‐  September  of  1831  •  Britain  abandons  their  gold  standard  

•  Because  the  Pound  was  over-­‐valued  •  Causes:  

•  Everyone  tried  to  convert  dollars  to  gold  •  Fall  in  prices,  imports,  and  producBon  conBnues  

v.  Herbert  Hoover  cannot  say  that  the  Interna6onal  Crisis  prevented  our  Depression  from  ending  in  1831.  However,  the  Crisis  did  add  to  our  woes.

C. Impact of the RFC

i. Background

•  The  ReconstrucBon  Finance  CorporaBon  • Government  agency  established  on  January  22,  1932  • Hoover’s  boldest  move  • Based  on  the  belief  that  credit  was  essenBal  for  confidence  which  was  essenBal  for  recovery.  

ii. What did the RFC do? •  Made  government  credit  available  to  banks  and  financial  insBtuBons  

•  Hope:  this  would  loosen  credit  and  bring  about  recovery  •  However,  this  enlarged  supply  of  credit  didn’t  create  it’s  own  demand  

•  Given  the  state  of  businesses/banks  during  the  depression,  neither  were  looking  to  take  loans  •  Held  off  the  collapse  of  banks  unBl  the  final  weeks  of  Hoover’s  presidency.  •  The  Infamous  $90  million  dollar  loan  to  the  Central  Republic  Bank  of  Chicago  

•  A  few  weeks  before  this  loan,  the  RFC  denied  a  loan  to  the  city  of  Chicago  to  pay  teachers/municipal  workers  

•  To  the  public:  the  RFC  gave  a  huge  loan  to  a  bank  while  denying  a  smaller  loan  to  a  city  to  pay  its  workers.  

•  DemocraBc  Propaganda  •  June  1932  

•  July  1932:  Emergency  Relief  Act:  expanded  powers  of  RFC  to  aid  agriculture  and  state/local  public  works.  

iii. Impact of the RFC

•  It  saved  the  American  banking  system  •  Held  off  the  banking  collapse  unBl  FDR  became  president.  

•  It  would  be  fully  uBlized  during  FDR’s  presidency  

D. Hoovervilles

i. President Hoover

Hoover  Flags  

Hoover  Blankets  

Hoover  Wagons  

Hooverville  

•  These  things  were  named  aser  President  Hoover,  the  man  that  the  impoverished  blamed  for  their  condiBon.    

ii. Hoovervilles • Where  homeless  families  found  refuge  in  shelters  made  of  salvaged  wood,  Bn,  bricks,  and  cardboard.  

•  Osen  located  near  soup  kitchens  or  rivers  •  SomeBmes,  police  were  ordered  to  raid  and  burn  down  Hoovervilles,  but  the  people  always  returned.  

•  The  Bonus  Army’s  Hooverville  •  1932,  Veterans  and  their  families  marched  to  Washington  D.C  to  demand  their  military  bonus  

•  They  set  up  a  Hooverville  of  15,000  residents  on  AnacosBa  Flats  

•  The  US  Army  drove  them  out.  Two  demonstrators  were  shot  and  many  were  wounded.  

iii. Psychological Strain

• On  the  American  Male-­‐  the  “Breadwinner”  • NaBonal  Work  Ethic:  ideas  of  self-­‐reliance,  the  dignity  of  earning  a  living.  

• At  first,  the  vicBms  blamed  themselves  •  Egoism  

• Many  began  to  develop  ideas  that  the  current  system  is  unfair,  not  moral,  and  unequal.  

“Prosperity  must  be  here–  there’s  our  first  burglar”  

iv. OPCVL

• Origin:  1934,  by  O,o  Soglow  • Purpose:  To  bring  to  light  a  problem  in  a  humorous  way.  To  say  that  people  are  so  impoverished  that  they  would  be  happy  to  see  someone  robbing  them.  

• Value:  Shows  the  mindset  of  people  during  the  depression.  It  was  a  great  thing  to  know  that  someone  was  worse  off  than  you.  

•  LimitaBon:  The  cartoon  is  exaggeraBng  and  over-­‐simplifying  a  situaBon.  No  one  would  be  happy  that  they  were  robbed.  Paints  the  people  in  Hoovervilles  as  “dummies”  (depicBon  of  the  character).  

E. Summary

i. Digging Our Own Grave •  The  economy  couldn’t  improve  with  businesses  liquidaBng  assets  and  “playing  it  safe”  

•  Businesses  doing  what  was  right  for  them  individually  was  detrimental  to  them  in  the  long  run.  

•  The  majority  of  government  officials  did  not  understand  the  depression,  and  therefore  didn’t  take  sufficient  acBon.  

•  Not  providing  federal  aid  •  Not  addressing  the  correct  problems  

ii. Herbert Hoover and his Administration

• What  did  Hoover  to  wrong?  •  He  was  right  that  confidence  is  important,  but  did  a  terrible  job  of  insBlling  it.  

•  Hawley-­‐Smoot  Tariff  •  Didn’t  provide  federal  aid.  

• What  did  he  do  right?  •  The  RFC  held  off  a  crisis  unBl  FDR  was  president.  

iii. By the Election of 1932, this was a Republican Depression • Congressional  elecBon  of  1930-­‐  Republicans  lost  seats,  and  their  dominance  in  the  houses  became  paper  thin/  nonexistent.  

•  72nd  Congress  Convened  in  1931,  Hoover  considered  leong  the  Democrats  organize  both  houses  

•  To  share  the  blame  •  Republicans  wouldn’t  give  up  seats,  Democrats  wouldn’t  take  the  bait.  

• By  1932,  rebellion  seemed  to  be  brewing  •  Ba,le  at  River  Rouge,  The  Bonus  Army  

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The  American  Depression  1930s:  Thousands  of  jobless  lived  in  shanty  towns  nicknamed  'Hoovervilles',  earning  a  few  cents  a  day    sorNng  bo^les  and  cans.  This  'Hooverville'  was  located  near  the  waterfront  in  Sea^le..  Photography.  Encyclopædia    Britannica  ImageQuest.  Web.  2  Jan  2016.      h,p://quest.eb.com/search/300_2292044/1/300_2292044/cite  

Woman  digging  in  soil  with  a  garden  spade.  Photo.  Encyclopædia  Britannica  ImageQuest.  Web.  28  Nov  2015.      h,p://quest.eb.com/search/167_4053176/1/167_4053176/cite