hoover econ policies

• Within months of becoming president, Herbert Hoover was faced with a major economic crisis in the form of the Wall Street Crash of 1929.
• He later claimed, in his State of the Union Address in 1931, that: 'Our self-contained national economy with its matchless strength and resources would have enabled us to recover long since, but for the continued dislocation, shocks and setbacks from abroad.' Hoover is emphasising how these outside influences have prolonged the economic struggles despite the nation's inherent strength and resources.
• The traditional view of Herbert Hoover and his policies for dealing with the Great Depression was that he did too little to help and, in some cases, made the situation worse.

  To be fair to Hoover, there were limits to what a president could do under the Constitution at the time.
• All new laws had to pass through both Houses of Congress, and a president could do little to influence either House. The Senate was particularly conservative in economic matters.

  Hoover personally felt that it was not the job of the president to intervene extensively in the economy, as this might cause more harm than good. He also felt that much of the blame for the US crisis lay with other countries, which he had no control over.
• The worst of the crisis did not come until 1932 and early 1933, and before this time Congress and the public had tended to be reluctant for the government to intervene in economic matters.
• The Founding Fathers had not anticipated how the

  US economy would develop, so economic matters had traditionally been firmly in the hands of either Congress or individual states.
• It was widely believed that the president should focus primarily on defence and foreign policy.

  However, the Great Depression presented a new challenge.

  Neither Congress nor the states had the ability to respond to a national crisis of this size. Therefore in the 1930s people increasingly looked to the president for action and solutions.
• Hoover did not feel that it was his role to actively manage the economy, and didn't feel that serious intervention by a president would actually help matters. However, he was determined to do what he could within those restrictions.
• pump priming

  A process of providing a stimulus to the economy. It includes lowering taxes, increasing government spending, reducing interest rates or printing more money. Any of these can put money into people's pockets and can increase spending and thus economic activity. However, they can also cause inflation, making them controversial steps.
• Some historians argue that Hoover was right to be concerned that presidential influence would not help, as it appeared some of his actions made the situation worse.
• He did not persuade the Federal Reserve Bank to increase the, supply of money in the economy. This might have reversed deflation and increased demand for manufactured goods. Increasing the money supply might also have helped employment and those who wished to borrow to invest in production.
• Despite protests by many economists, Hoover signed the Smoot-Hawley Tariff Act in 1930. This introduced high tariffs on many imports.
• He had promised a tariff on agricultural imports to help farmers in his election campaign of 1928. However, when the bill for this went through Congress senators added tariffs on manufactured goods. This led to retaliation by other countries, such as Canada, Mexico, Australia and New Zealand.
• These countries (that were now reluctant to purchase) normally bought goods from the United States and they put high tariffs on their imports of US goods. Of course, this reduced the sale of US goods abroad.
• This was catastrophic for the United States and its manufacturers and producers. These tariffs, and their retaliations, played a key part in the collapse of world trade. They are a good example of an action taken during the Depression which made it much worse.
• Many politicians did not understand the implications of these tariffs on either the US economy or the international trade which had been so beneficial to the USA. US exports were worth $5.2 billion in 1929 but had dropped to $1.1 billion by 1932.
• In 1931, many European banks started to collapse and Britain came off the gold standard. Hoover and his treasury secretary insisted on 'defending, the dollar and staying on the gold standard. This limited investment and borrowing cut the supply of money in the USA, and led to further deflation.
• At the same time, there was concern about the federal budget being unbalanced, with more money going out on public spending than was coming in as taxes. Therefore, a recommendation was made to increase taxes to balance the budget. Congress agreed, and this cut the money supply even further.
• The previous year, Hoover had opposed an attempt by the Senate to bring in unemployment insurance.

  He feared the creation of a welfare-dependent class of people who would not work.
• He also blocked a large public works programme which would have boosted jobs and businesses in construction. He believed that it would increase the federal budget deficit. Although this meant money would be borrowed by national and local government, it would be spent on increasing employment.
• Those who had jobs would then have more money to spend on food and manufactured goods which would further help US producers. It was known as pump priming.

  Hoover did make several positive attempts to deal with the Great Depression, mostly with limited success.
• In 1929, the Agricultural Marketing Act created the Federal Farm Board, which tried to stabilise demand for agricultural produce by setting up local cooperatives to deal with local issues. This achieved little as the problems in agriculture were too large for local management to affect.
• Federal Land Banks were given $125 million to help small banks in rural areas which were failing. However, this was dealing with the effects of the crisis, not the cause.

  In addition, the sums allocated were too small to make a real difference. The Federal Home Loan Bank Act of 1932 was designed to prevent further foreclosures that were making millions homeless, but Congress reduced the act's provisions and it had limited effect.
• Also in 1932, Hoover created the Reconstruction Finance Corporation. This did not provide what many wanted, which was direct relief to the unemployed. However, it did provide loans to banks, insurance companies and businesses such as railways which might have otherwise collapsed. Again, the sums involved were just too small to provide significant relief.
• The RFC programme, like many of the others, was designed by conservative bankers and helped them most. The biggest loan the RFC made, of $90 million, went to support the Chicago Bank owned by the family of former Republican vice president, Charles G. Dawes. It did nothing to help the 750,000 jobless in the Chicago area or to pay the wages of teachers there who were collapsing from hunger in front of their classes as they could not afford food because they had not been paid.
• Hoover also persuaded Congress to pass the Relief and Reconstruction Act in 1932. This allowed for $1.5 billion of federal spending on public works, such as roads, to create jobs. It also allocated $300 million to the states to help with welfare - basically feeding the hungry.
• He also had the Bank Credit Act passed through Congress in 1932, which provided some help to banks and stock markets.

  But it was all too little to have much impact on mass unemployment, wages or prices. Again, the focus was too heavily on the effects of the crisis and not on its causes.
• which historian aligned with hoovers view on limited presidential intervention

  William Appleman Williams. In his book "The Tragedy of American Diplomacy"