(1929–1939)
”If some unprecedented calamity should come upon this nation, I would be sacrificed to the unreasoning disappointment of people who had expected too much.”(Herbert Hoover)
The Great Depression started in America in 1929 and lasted till 1939– the time of the beginning of World War II. It evoked a lot of debates, speculations and misunderstandings among politicians and economists of all levels. It is common to believe that Herbert Hoover was a careless president who allowed already crumbling economy of 1929 to go down into deep pit hole pulling along the entire nation. Majority of middle class population, who are not well rounded in economics and politics, judge Hoover upon the outcome and they do not seem to be unfair. Paul Johnson, in his book ” A history of the American people ”, reasonably said that ”there is no logic or justice in history-only chronology.”
Herbert Hoover came to his presidency in 1929 in a very difficult time in American history. The Wall Street crash was significant evoking a four-week panic. Indexes were down to 224 from 452, GM (General Motors) went down from GM 73 to 8; in deed a very deep plunge in a stock market. However, ”the stock values were right in relations to earnings”. Considering the preceding events that took place in American economy from 1920, with its self-adjusted recessions and artificial inflation, the downturn was inevitable and needed. Federal Reserve Bank System was created to maintain prosperity nationally and internationally by deliberately inflating monetary supply. ”Credit was expanded from 45.3 billion on June 30, 1921 to $73 billion in July 1929, a 61.8 percent expansion in eight years,” (Johnson, Paul). This process was managed by two powerful figures in the formation of the US financial policy domestically and internationally: Montage Norman– governor of the bank of England and Benjamin Strong, governor of the New York Federal Reserve Bank. The prices steadily were going up creating a demand-supply problem and resulting in recessions that successfully self-adjusted.
Another setback was the problem with tariffs. Although America had a very tolerant economy in 1920, meaning that the workers could demand wages and businessmen could work out different corporate polices, the high tariffs did not allow the healthy competition. Among those who benefited were domestic industries and banks. The working population, on the other hand, was denied the competitive prices produced by cheap imports. Overall, the republican leadership did not stand up for the economic freedom and artificial inflation along with low interest rates led to inevitable economic downturn and Wall Street Crash in 1929.
Herbert Hoover was not responsible for this vast economic plunge. ”The Great Depression was caused by monetary mismanagement at the Federal Reserve, as was thoroughly detailed by Milton Friedman and Anna Schwartz in their brilliant “A Monetary History of the United States.”(Wall Street Journal).Contrary, Hoover genuinely wanted to help the suffocating economy of America. Orphaned at the age of nine he was a self-made individual who worked his way through the school and Stanford University to obtain engineering degree. He was liberal and never expressed any anti-Semitic remarks. His good will spread over the poor third world countries that he wanted to aid. Many politicians, including Roosevelt, considered him to be a great presidential candidate. ‘He is certainly a wonder and I wish we could make him a president of the United States. There could not be a better one.” (Franklin Roosevelt)
Herbert Hoover understood all the responsibility of being a president in such a hard time in American history. ”The battle to save our economic machine in motion in this emergency takes new forms and requires new tactics from time to time. We used such emergency powers to win the war; we can use them to fight Depression.” ( H.Hoover, May 1932) Nevertheless, with all his candid intentions did Hoover overestimate his own powers? Paul Johnson, the author of ”A history of the American People” compares Hoover to a social engineer. The concept of social engineering is the ability to determine the shape of the society by manipulating human beings with help of some powerful force, perhaps a president. The people, in such case, are compared to earth and concrete, and the great outcomes to such engineering wonders as the Boulder Canyon Dam. The interesting fact is that Lenin and Stalin were two leaders of socialistic regime who became fascinated by the concept of the organizing power over nature. As a result, the switching of vast rivers from Arctic to other outlets proved to be a disaster along with their imposing totalitarian regime over the entire nation that eventually led to the well-known crash of the Soviet Union in 1990.
Herbert Hoover was a dictator in his own way. His intentions to be the first, the inventor, the pioneer resulted in the San Francisco Bay Bridge, the Los Angeles Aqueduct and the Hoover Dam. ” More major works were started in the Hoover’s 4 years than in preceding 30 years of American history.” (Johnson, Paul). H. Hoover took the approach of the great inventor in saving American economy as well. He wrote: ” No president before has ever believed there was a government responsibility on such cases…there we had to pioneer the field.” And he did what he considered to be a new approach of the interventionist government: ”He resumed credit inflation, adding to the Federal Reserve almost $300 million of credit in the last week of October 1929 alone.” Instead of allowing wages naturally drop he decided to keep them high and even held several conferences taking promises from the corporate world to maintain the wages high and even to pay more whenever possible. This did not have a positive impact on those who did not have any wages at all, considering rising unemployment.
Besides keeping wages high Hoover did not consider interest rates that were too low. He certainly could allow the interest rates to go up, which would be the right economical decision, but he ignored it. In addition H. Hoover did not veto the Smoot-Hawley Act of 1930 about tariffs, which had a negative impact nationally and internationally. ”His policies were far from perfect, especially on trade,” wrote Milton Friedman and Anna Schwartz in their “A Monetary History of the United States.( Wall Street Journal)
With all economical disaster of the Great Depression–education suffered enormously. Almost 1,500 higher education universities went bankrupt. ”University enrollment fell, for the first time in American history, by a quarter-million. ” Looking at the consequences of the Great Depression on education John Steinbeck said, ”When people are broke the first thing they give up is books.”
Herbert Hoover foreshadowed his future by saying: ”If some unprecedented calamity should come upon this nation, I would be sacrificed to the unreasoning disappointment of people who had expected too much.” The calamity was there, before the Hoover took over his presidency, and it turned into disaster during four years of him being a president of the United States. Was Herbert Hoover ”sacrificed” to the ”unreasoning disappointment ” of people with unreasonable expectations? Were the expectations of an American nation so unreasonable? The speculators are still not sure about the exact answer. Paul Johnson rightly said in his book: ”There is no logic and justice in history-only chronology.”
What I say is immensely important than who I am. Let the search be for the meaning and substance in my words rather than the intricacies of my existence.