Large-Scale State

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Why did the Depression last so long?

  1. Foreign economic crises

When the American Depression spread to Europe, Hoover said it was vice versa. He blamed foreign countries; it was their weakness that stifled trade. In 1929 American credit dried up so the value of international trade fell. But historians would say that American tariffs restricted trade. Germany was badly affected and stopped paying her reparations. Tensions grew in Europe.

  1. Nature of business

Non-Government intervention meant that industries often came under the control of individuals or small groups who could control wages, prices and output to maximise profits. The country was left with a problem of overproduction. Relatively low wages and an unequal distribution of prosperity meant that the population was under-consuming and that, unless new forms of demand could be found, the economy would continue to stagnate.

  1. Totality of the Depression

    1. No sector of industry remained immune. There was therefore an absence of alternative employment opportunities. Usually as one area contracts, the rise of another takes the workforce, this did not happen.

    2. Because both rural and urban areas suffered, neither could help the other.

  2. Lack of Government expansion

Too many goods were being produced and too few consumers could afford to buy them – unregulated capitalism. It was argued by some economists at the time that if capitalist economy could not maintain a balance between the power of consumption and earnings, then, the Government should intervene to do so. This would involve a far greater role to be played by Government – increasing the tax of the rich, to undertake public works to increase employment and to kick-start the economy. Prevailing Governments in America had been opposed to this.


Post Wall Street Crash jingle:
Mellon pulled the whistle

Hoover rang the bell

Wall Street gave the signal

And the country went to hell.

erbert Hoover had served under Presidents Harding and Coolidge as Secretary of Commerce, responsible for business and industrial affairs. Andrew Mellon, Hoover’s Secretary of the Treasury, had been in that post since 1921. Were they to blame?

Hoover’s programme made very little impact on the Depression. He had failed to understand the scale of the problems or to come up with new ideas that were capable of dealing with them. Hoover’s policies were simply not far reaching enough to address the depth of the Depression. He was prepared to do something; but nowhere near enough. Unemployment continued to rise and was particularly severe in some cities such as Chicago, where in 1933 unemployment reached 40%. Matters were made worse because at that time, there was no national system of unemployment benefit.

The electorate appeared to blame Hoover, for although he had won the 1928 election with 58% of the votes; he only received 40% when he lost the 1932 election. Many years later Richard Nixon said that, ‘Hoover had the misfortune to hold office at the wrong time’.

Robert Sherwood, a speechwriter for FDR, writing in 1948.
Hoover failed lamentably. He first coldly assured the people that the Depression was an illusion which it was their patriotic duty to ignore; that, when economic collapse occurred in Europe, he angrily denounced the Depression as something un-American from which we should isolate and insulate ourselves; and finally, truculently scolded the people for blaming the Depression on his own Republican Party which had taken full credit for the preceding boom.

The Human Cost of the Great Depression

In 1932 the popular singer Rudy Vallee was asked by President Hoover to sing something that would take people’s minds off the worries of the Great Depression that had begun with the Wall Street Crash of 1929. Instead, he sang the song that summed up for many the agony of those times: ‘Buddy, can you spare me a dime?’ It was about a man who had helped build the American dream and now found himself reduced to begging in the street. There were many such in 1932, the worst year of the Depression. Between 15 and 17 million men were unemployed, and since most of them represented families, that meant that millions more were plunged into poverty. Fortune magazine estimated that year that 34 million Americans were without any income whatsoever, and that figure excluded 11 million farming families, most of whom were also reduced to a state of poverty.

There was no unemployment benefit and strong opposition to suggestions that there should be. Responsibility for public aid was left to private charities and local authorities, if they could find the money. With some honourable exceptions, the rich showed themselves cruelly indifferent to the problem. All classes were affected: New York department stores were demanding college degrees from those seeking work as elevator operators; on Long Island a registered nurse was found starving on a private estate where she had slept for two weeks wrapped in newspapers and rags. Hundreds slept rough in the city parks; thousands, unable to find even a soup kitchen, rooted for food in garbage pails; in country districts they ate weeds. Men without work developed new skills for keeping alive. A man with a nickel could buy a cup of coffee, and then ask for another cup of hot water free; by mixing the water with the tomato ketchup on the counter he could make a kind of soup.
Newspapers stuffed under the shirt kept out the worst of the cold; and shoes could be lined with cardboard. People sold their most precious possessions to buy food for their children. Many died from exposure, and a large proportion of the population was suffering severe malnutrition. Others committed suicide rather than face the shame of going on public relief.
Two million Americans, mostly men, were living like nomads in 1932, crossing and re-crossing the country, often clinging to the rods under railroad car, in a desperate search for work. Some states posted armed guards on the highways to turn them away: local authorities charged impoverished strangers with vagrancy and threw them out of town or into jail; for many this was welcome since it offered shelter and basic food. An employment agency in Manhattan had 5,000 applications for 300 jobs. An Arkansas man walked 900 miles looking for work. In Washington State men were reported to be starting forest fires so that they would be hired to put it out. In the early 1930s emigration from the United States exceeded immigration; in New York there were 350 applications a day from people wanting to emigrate to the Soviet Union.
Many thousands of dispossessed farmers, facing financial ruin after three years of drought, which compounded the effects of the Depression, joined the breadlines or packed their households in Model T Fords and headed west to find work as fruit pickers in California.
The Depression, bad enough elsewhere in the world, was a calamity for the United States. Apart from the absence of federal welfare provision, which led so many into destitution, the psychological effects were traumatic, many of the jobless suffered feelings of guilt about their inability to provide for themselves or their families. At the fringes of society a minority became convinced that Marxism or fascism could solve the problems that seemed to have brought the country to the brink of disaster. The majority instead voted in 1932 for President Roosevelt and his New Deal policies of welfare and public works. These did not produce immediate results as progress was slow, and in 1937-38 there was another trough of depression, when 5 million people who had obtained jobs in the New Deal again found themselves unemployed. Those who had suffered so badly clung to the belief that, in time, things would get better. Thanks in part to rearmament for the Second World War, they did.

FDR, Alphabet Agencies, Sick Chickens and

Social Security

On 4 March 1933 on a cold grey Saturday with a threat of rain in the air, Franklin D Roosevelt took the oath as President of the United States.
To many people on that damp Saturday morning it seemed that the whole American way of life was crumbling. The nation’s total earnings were now barely half of what they had been in 1929. Hundreds of thousands of Americans were without homes and without sufficient food. Everyday saw more of them unemployed.
At last Roosevelt appeared. Leaning on the arm of his son, he walked stiffly down a red-carpeted ramp to the crowded platform on the steps in front of the Capitol. Here, resting his hand on his own family bible, he repeated the solemn words of the oath of office in a clear and resounding voice.
He returned to the crowd. Now he was their President, their chosen leader. Silently the people waited to hear what he had to offer them. Almost immediately he struck a note of hope. “Let me assert my firm belief that the only thing we have to fear is fear itself.” He then attacked the business leaders whose dishonesty and incompetence had helped to cause the disastrous collapse of the nation’s economic life. He promised that in the future the activities of these ‘money changers’, as he called them, would be closely watched and controlled by Government. He promised, too, that the Government would give help to the millions of unemployed, to the farmers unable to sell their crops, to those who had lost their homes. “This nation asks for action, and actions now” he ended.
It was a declaration of war. War against poverty, against hunger and against despair – and Roosevelt wasted no time in firing the first shots. Driving back through the crowded streets to the White House, he plunged into immediate action.
O’Callaghan, page 67

Roosevelt promised a ‘New Deal for the American people’. He launched upon a far-reaching programme of reform intended to:

  • Halt the Depression

  • Create the conditions for economic growth, and

  • Give a fairer distribution of wealth.

His ‘New Deal’ policy was a daring programme that challenged the role of the federal government and increased the executive power of the presidency. Roosevelt was able to intervene in and regulate businesses and industries that before the economic crisis would have been unacceptable. A new mood of optimism encouraged businessmen to invest and to take on new employees. Nicknamed ‘the Champ’, Roosevelt used his famous ‘fireside chats’ over the radio to win support.

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