Presidential responses to the Great Depression: Hoover versus FDR

Great Depression and the Presidents' Reaction

The Great Depression did not have its origins in the United States, even though its effects were deeply felt there. The major causes of the Great Depression were numerous and yet related. This paper will discuss these causes and show what Hoover and FDR did to respond to the Depression.

Major Causes

The major causes of the Great Depression stemmed from the outcome of WW1: war reparations were forced upon Germany, who could not repay them. Europe as a whole was in financial straits and could not afford to import the American products that Americans were used to exporting. Also, the same credit structure problems that afflicted America were an international affliction. Essentially, the banks were in control of the global money supply (thanks to the Federal Reserve Act of 1913 -- and the Great War that soon followed, which allowed American banks to "bailout" foreign governments with loans that they could never truly repay, turning states like Germany into debt colonies). The economic relationship and interdependency of the Western powers was wrecked as a result, and this wreckage was realized in the effects of the Great Depression, the beginning of which was seen in the market crash of Black Tuesday, October 29, 1929: those who had invested on "margin" now learned what a "margin call" was -- how badly it could hurt and how quickly they could lose everything to the big banks and their method of predatory lending. So while the Great Depression did not have its origins in the United States (the war and the Treaty of Versailles planted the seeds of economic woe along with the international banking houses), the advent of the Depression in America was "helped along" so to speak by the banking policies that had emerged in the U.S. And the stock market "bubble" that occurred between 1928 and 1929 when stocks rose by 40% thanks in large part to margin spending and Federal Reserve monetary policies like keeping interest rates low (same then as now), which fueled speculation in the stock market.

FDR and the New Deal: Changing the Course of American History

The election of FDR put an end to Prohibition and his New Deal economic policies provided a socialist response to the ravaging principles of usurious capitalism. FDR unleashed a barrage of "Alphabet Programs" designed to put Americans back to work. These were: the Agricultural Adjustment Act (AAA), which paid farmers to not grow crops (a twist on the Hoover legacy -- do nothing and pay others to do it too); the National Industrial Recovery Act (NIRA), which established minimum wages and maximum hours; the Public Works Administration (PWA), which supported the industrial sector and provided assistance to the unemployed; the Civil Works Administration (CWA), which provided temp seasonal jobs; the Civilian Conservation Corps, which formed camps for young men looking for outdoors work, such as reforestation and firefighting; the Works Progress Administration (WPA), which spent $11 billion on public works (roads, buildings, bridges); and the Federal Emergency Relief Administration, which was an extension of Hoover's Emergency Relief Administration before it morphed into the WPA. Essentially, FDR's solution to the crisis was for the Federal Government to spend its way out of it, by instituting the welfare state. This changed the course of American history by getting Americans used to the idea that they were now beholden to the federal powers for their bread and butter.

Conclusion

None of the sitting presidents addressed the underlying issues of why the Depression occurred -- namely, the issue of fiat currency, usury, reckless lending, international disorder, and unfair reparations. Germany continued to be obliterated (as WW2 showed), and a new nation arose in the Middle East as a result -- a nation that would go on to show undue influence in the higher echelons of the American government, which would as a result reshape the destinies of the Arab world.