Causes

One of the primary proximate causes of the Great Depression was the stock market crash of 1929, but even the market crash was the culmination of years of speculative banking and investments leading to the economic downturn. For example, also during this time, American banks—as well as some foreign ones—actually capitulated, causing many people to lose their savings and many businesses to lose their access to financing as well. Responding to initial fears of a financial crisis, several policy initiatives exacerbated the situation. For example, when banks reduced or curtained entirely the number and value of loans offered to Americans, there was less of an opportunity to re-invest in business or housing infrastructure.

Europe

Another policy problem was protectionist tariffs on foreign goods, which stifled foreign trade, which also contributed to the Great Depression. For instance in 1930, the American government passed the Smoot-Hawley Tariff, which was intended to protect American businesses from competition from foreign firms but this ended up backfiring due to the stifled flow of trade.

The Hoover Administration

Hoover attempted to ameliorate the financial crisis by balancing the budget and encouraging investment into public works projects to stimulate the labor market and the economy. Hoover did not want to indulge the banks, or corporations for that matter, in bailouts or on excessive federal regulations. The Hoover response veered towards the laissez-faire.

The 1932 Election

The Great Depression occurred under Hoover’s watch, but only a few months into his first term as President. Therefore, Hoover did not cause the Depression, and yet many Americans associated his presidency with it. Hoover’s seeming nonchalance towards the economic crisis was designed to reduce alarmism and promote public confidence, but instead it resulted in disillusionment, desperation, and anger. While almost anyone with the right credentials could have promised the nation relief from the Depression, Roosevelt actually did offer a sound, sensible, and pragmatic approach to dealing with the Great Depression.