Hoover (R) (click here for info) (1 ene 1929 año – 1 ene 1933 año)

Descripción:

Though the depression crippled the United States, it was a global event that crossed borders and oceans quickly. Germany preceded the United States into economic contraction in 1928, and its economy, burdened by heavy World War I reparations payments, was brought to its knees by 1929. The other major European economies, France and Britain, and the largest South American economies, Argentina and Brazil, were hard hit as well. Recovery proved difficult because the international gold standard constrained economic policymaking. The United States and most European nations had fixed the value of their currencies to the price of gold since the late nineteenth century. This system proved vulnerable during economic downturns, because the gold standard rendered nations unable to increase the supply of currency at precisely the moment when more was needed.

Crisis Management Under Hoover
Despite the global reach of the depression, like all nations the United States had to manage the crisis on its own. President Herbert Hoover and a Republican-majority Congress responded to the downturn by drawing on two influential American traditions. The first was the belief that economic circumstance flowed from individual character: success went to those who earned it. The second tradition held that the business community could recover from economic downturns without government assistance or, even worse, government regulation. Following these principles, Hoover asked Americans to tighten their belts and work hard. After the stock market crash, he cut federal taxes in an attempt to boost private spending and corporate investment. “Any lack of confidence in the economic future or the strength of business in the United States is foolish,” Hoover assured the country in late 1929. Treasury secretary Andrew Mellon suggested that the downturn would encourage Americans to “work harder” and “live a more moral life.”

EXAM TIP
Evaluate the impact of Hoover’s economic policies as contributing factors to the Great Depression.

While many factors caused the Great Depression, Hoover’s adherence to the gold standard prolonged the crisis in the United States. Faced with economic catastrophe, both Britain and Germany abandoned the gold standard in 1931; when they did so, their economies recovered modestly. But the Hoover administration feared that such a move would weaken the value of the dollar. In reality, an inflexible money supply discouraged investment and prevented growth. The Roosevelt administration would ultimately remove the United States from the burdens of the gold standard in 1933. By that time, however, billions had been lost in business and bank failures, and the economy had stalled completely.

Adherence to the gold standard was not the only economic orthodoxy that would prove damaging in the downturn. Hoover and many Republicans in Congress thought high tariffs (taxes on imported goods) could stimulate American manufacturing, as they had in previous eras. In 1930, Congress passed the Smoot-Hawley Tariff Act. Despite receiving a letter from more than a thousand economists warning of catastrophe and urging him to veto the bill, Hoover signed it into law. The Smoot-Hawley Tariff triggered retaliatory tariffs in other countries, which further hindered global trade and worsened economic contraction throughout the industrialized world. What had served American interests in earlier eras — protecting domestic industries and agriculture — now undermined them.

Hoover recognized that individual initiative, business self-regulation, and high tariffs were insufficient, so he proposed government action to address the severity of the depression. He called on state and local governments to create jobs by investing in public projects, and in 1931 he secured an unprecedented increase of $700 million in federal spending for public works. Hoover’s most innovative program was the Reconstruction Finance Corporation (RFC), which provided federal loans to railroads, banks, and other businesses. But like most federal initiatives under Hoover, the RFC was not nearly aggressive enough: by the end of 1932, it had loaned out only 20 percent of its $1.5 billion in funds.

Few chief executives could have survived the economic woes of 1929–1932, but Hoover’s stubborn belief in the philosophy of limited government hampered recovery, and his insistence that recovery was just around the corner made him unpopular. By 1932, Americans perceived the president as insensitive to the depth of economic suffering. The nation had come a long way since the depressions of the 1870s and 1890s, when only radical figures, such as Jacob Coxey, called for direct federal aid to the unemployed (see “Depression and Reaction” in Chapter 19). Compared with previous chief executives — and in contrast to his popular image as a “do-nothing” president — Hoover had responded to the national emergency with unprecedented government action. But the country’s needs were similarly unprecedented, and Hoover’s programs failed to address them (Map 22.1).

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