Herbert Hoover Term Paper

  • Length: 15 pages
  • Subject: Economics
  • Type: Term Paper
  • Paper: #29389765

Excerpt from Term Paper :

Herbert Hoover

When Herbert Hoover became president in 1929, the foundations of economic stability were already beginning to crumble. The demand for mass produced items had peaked, and new areas of spending that would recover the downturn were leveling off. Investors were not hurrying to build new areas of growth since market creation was troublesome. Hoover, or the Great Engineer as he called himself, had many plans for large studies of social trends and corresponding services for child welfare, housing, recreation, education and public health. In fact, he came into office pledging "a chicken in every pot and a car in every garage" and "a final triumph over poverty." In his view, the marriage of private enterprise with science and technology would end poverty and welcome in a new humane social order. However, it did not take long before Hoover found that his attention would be diverted toward much more pressing economic concerns. Unfortunately, he failed time and time again to minimize these problems and the country went from bad to worse. By the time his term ended in 1932, he was being recognized as one of the most ineffectual presidents in the history of the United States.

There is much debate between historians about the role that Hoover played in causing and/or extending the Great Depression. The pendulum on his abilities swings from those who feel he was completely incompetent to run the country, especially in such dire times, to those who believe that he did all that was possible and was the one who actually set the stage for Roosevelt, who ironically received all the credit. It is difficult to find, however, anyone who believed that Hoover did not want the best for the country. Even his most extreme detractors depict him as a man of great vision who tried with his entire mind and heart to do what he thought was right. He is remembered by many as a president who set out to do the correct thing, but who tragically failed to obtain the confidence of the people due to his style of leadership, ignorance of the fundamental economic problems at work, and the limitations posed on his actions by the confines of his personal philosophy of government.

For example, in her book about Herbert Hoover, Susan Clinton explains that Hoover was one of the best men ever to go into the White House. She points out that even Franklin D. Roosevelt wrote about Hoover in 1920, "He is certainly a wonder and I wish we could make him President. There couldn't be a better one," and Harry Truman once said, that the Great Depression was created "for" Herbert Hoover, not "by" him. She also details some of the memorable aspects of Hoover's early presidency, such as the establishment of farm co-ops, that have been blotted out by his involvement with the Great Depression. She concludes that Hoover did try to make some sound moves against what was happening, but was thwarted by circumstances. By the time re-election came in 1932, there was nothing he could have done to turn around the situation.

The First Years

In his campaign speech in 1928, Hoover praised the American form of government and all that it had achieved. He recognized that during WWI, it was necessary to rely on the government for "the preservation of state." However, it was time for these socialistic times to come to an end. As he noted:

When the war closed, the most vital of all issues both in our own country and throughout the world was whether governments should continue their wartime ownership and operation of many instrumentalities of production and distribution. We were challenged with a peacetime choice between the American system of rugged individualism and a European philosophy of diametrically opposed doctrines -- doctrines of paternalism and state socialism. The acceptance of these ideas would have meant the destruction of self-government through centralization of government. It would have meant the undermining of the individual initiative and enterprise through which our people have grown to unparalleled greatness.

In his speech, Hoover decried the thrust of government into business as impairing very life and freedom. As a positive example, he stressed what had happened to the railroad industry since it went from a government to privately run enterprise. During and for some time after the war, the U.S. Department of Transportation found it necessary to operate the railways. However, the federal government handled its responsibilities so poorly, that the railroads were not able to meet transportation demands. Hoover noted that in comparison "eight years later, we find them under private enterprise transporting 15% more goods and meeting every demand for service. Rates have been reduced by 15% and net earnings increased from less than one percent on their valuation to about 5%. Wages of employees have improved by thirteen percent."

As historians Peter Carroll and David Noble note, Hoover feared that the collapse of the large corporations would bring down the entire U.S. capitalist system. After all, one percent of the banks held 50% of banking assets. Three corporations -- Ford, Chrysler and General Motors -- manufactured 85% of the automobiles sold in the U.S. And chain stores dominated retail sales. Any difficulties in these sectors would have national repercussions.

Ironically, the year Hoover was giving his 1928 speech, the economy was already on its downward rollercoaster ride, which was entirely unexpected by most people -- even many a financial specialist. Until 1925, increases in installment buying by a growing number of white-collar workers consumed the scores of products pouring off assembly lines. The use of automobiles went from 9,000,000 to 20,000,000 between 1920 and 1925 -- a tremendous 122%! Likewise, in 1929, cars used 20% of the steel, 75% of the glass and 80% of the rubber produced in the United States. In addition, businesses such as gasoline filling stations, repair garages, auto dealers, highway restaurants, and vacation hotels relied heavily on the automobile.

Yet the sponge can only take so much water. By 1930, the increase in automobile use stood only at 27,000,000 or 35%. Sadly, the country's economy depended significantly on this car buying, and the domino effect began. As the automobile business slumped, so too did other areas of manufacturing and production. The decline in car sales was joined by decreases in the construction of new housing, which caused unemployment in the building trades. Fewer suburban houses meant fewer markets for appliances, wall coverings, and other activities related to home building.

The economy may have been having its difficulties, but these were either being ignored or not acknowledged by those in the know because of the consumptive stock market, which was being fed by wealthy financiers who did not mind speculating. What was forgotten -- or overlooked -- was the fact that the market climb meant nothing if consumer demand and consumption were not increasing as well. Instead, the consumer economy was slowing as incomes skewed to the rich. In 1929, the richest 10% of families received 39% of disposable personal income while the bottom 10% only obtained 2%.

Actions by the Federal Reserve did not help the situation. Several times, it choked off the money supply and raised interest rates. For example, the Fed increased the discount rate, or the amount it charged member banks for loans, four times, from 3.5% to 6%, between January 1928 and August 1929. For the next three years, the Reserve presided over a money supply that actually shrank by 30%. This deflation, which was followed by inflation, pushed the economy from a tremendous boom to a colossal bust. The Great Depression had begun.

Hoover reacted to the Depression as the previous leaders before him. He believed that the government need not help the individual, rather everyone should help themselves. Legislative action or legal decrees cannot end economic depression. Only the producers or consumers can accomplish this feat. Hoover immediately asked that industry avoid layoffs and wage cuts, banks expand credit, and local communities, instead of federal government, provide aid to unemployment.

By spring of 1929, the president clearly recognized that the speculative market was not going to respond to his efforts to persuade warnings from key public and private figures or to his severe requests to the bankers and securities to assume greater responsibility. The prices of stock continued upward at a feverish pace and investment brokers had no problems finding those gullible individuals who were ready to add their money to the growing pool of funds. In September, the bubble burst and Hoover's big test was about to begin.

Hoover summoned industrialists to the White House on November 21 as part of a round robin of conferences with business, labor, and farm leaders, and secured a promise to hold the line on wages. Henry Ford even agreed to increase workers' daily pay from six to seven dollars. From the nation's utilities, Hoover won commitments of $1.8 billion in new construction and repairs for 1930. Railroad executives made a similar pledge. Organized…

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