How did the Presidents deal with the crisis?
Two US Presidents – Coolidge and Hoover – played key roles in the economic collapse and the ensuing Great Depression that lasted throughout the 1930s. A third President, Franklin D Roosevelt was elected to lift America out of its economic rut.
Coolidge, who had been President for 6 years, failed to curb the speculative boom in the stock market, and to restrict easy credit, that led to the Wall Street Crash seven months after he left office.
Herbert Hoover, who had promised the American people ‘a chicken in every pot, a car in every garage’ when he took office in March 1929. Prior to this, he was the Secretary of State for Commerce under Coolidge and described as the ‘architect of prosperity’ in the 1920s. In 1933 Hoover’s failure to alleviate the severe hardships led to his defeat for the Presidency by Roosevelt.
What happened next?
Individuals and businesses lost billions. Thousands who had been well off lost their life savings or were in financial ruin or bankrupted. Those who remained solvent were often hard hit. They rushed to the banks to draw out their savings. Thousands of banks had to close. Credit collapsed. Loans were called in (had to be paid). New loans were refused. Stock, although greatly reduced in value, was taken as payment. No one, it seemed, was prepared to take financial risks. People could no longer afford to buy consumer goods or invest further. After the stock market losses, companies cut back on production, or collapsed altogether. Millions lost their jobs, while wages and prices dipped, as did public spending. The culture of American society changed.
Even after the crash, prices still stood higher than they had done at any time during the previous year. What had happened during the October crash was the gains that had occurred from January to October 1929 had been wiped.
he slide continued, setting off global chain reactions. European nations heavily dependent on American credit fell too. World trade suffered, and the protective tariffs (trading taxes) worsened the situation.
The Great Boom had suddenly turned into the Great Depression that rapidly affected not only the USA bit also foreign countries all over the world. However, the Wall Street Crash did not cause the Depression; it was just a symptom of a problem whose real causes lay much deeper. Many historians believe that the Great Depression was already on its way due to the problems of the 1920s. Moreover, stock markets had crashed before and have done so without any ensuring economic depression.
At the time, economic experts failed to see the severe damage caused. They believed that this was a temporary situation. It was not until 1932, when it was clear that the Great Depression was going to continue for a long time, that prices really plunged. Recovery was not, as President Hoover insisted, just around the corner.
‘In Hoover we trusted, and now we are busted’
The Depression is the name given to the period in the 1930s in which the United States’ economy collapsed. It began in the autumn of 1929 and was infinitely more severe than previous slumps. It affected more people and lasted longer. For 3 years the economy spiralled remorselessly downwards.
Misery and want stalked the entire country. Recovery was slow. The American collapse was psychologically damaging because it was in such contrast to what had gone before. During the 1920s Americans had enjoyed the highest standard of living ever attained anywhere. Then, almost overnight, the world’s richest country was plunged into destitution.
“We in America today are nearer to the final triumph over poverty than ever before in the history of any land. We shall soon be in sight of the day when poverty will be banished from this nation.”
Herbert Hoover, accepting the Republican Party Presidential candidacy in 1928
Herbert Hoover encapsulated the American Dream. An orphan, brought up in Iowa, he believed in hard work. He became a mining engineer and a millionaire before he was 35 years old. During the early years of war, he arranged repatriation for thousands of Americans. He organised relief for the Belgians. When the USA entered the war, Hoover became War Food Administrator. Both major political parties were considering him as possibly a future Presidential candidate. He chose to join the Republicans. Hoover became influential as the Secretary of Commerce; President Coolidge would accept his advice and disparagingly refer to him as ‘the Boy Wonder’.
Hoover was well qualified for the task of President. He was sworn in as President in March 1929 and Americans had high expectations of his administration. He told the American people that the nation’s prosperity was permanent and they had little reason to doubt him. Indeed, at the end of the 1920s, big business had seemingly solved many of America’s social problems. Living standards had risen. But as people bought less, more goods were stored in warehouses and businesses began reducing production and laying off workers. Hoover knew the economy was in trouble.
What caused the Great Depression?
Economists disagree but it is generally accepted that the prosperity of the 1920s had been built on shaky foundations. The most serious underlying weaknesses of the economy were:
People bought fewer goods
Overproduction of goods
Income was badly distributed. By 1929 5% of the population received 1/3 of the income. 71% of the population received incomes of less than $2,500 a year – the minimum generally thought necessary for decent comfort.
Profits and dividends had risen much faster than wages
Republican tax policies favoured the wealthy
Business confidence evaporated after the Wall Street Crash
Bankruptcies and bank failures multiplied
Families lost their savings and their homes
Wheels of industry slowed down
Farm prices fell and went on falling.