Hoover’s Response

Hoover’s Response

Hoover recognized that the economy risked slowing due to overproduction that had produced glutted markets, especially in agriculture. Hoover believed the solution was higher tariffs for imports and a cooperative effort between businesses and government to expand into foreign markets. The Smoot-Hawley Tariff of 1930Placed taxes on imported goods during the Depression. The tariff was intended to spur domestic production by limiting foreign imports. However, the tariff encouraged foreign countries to place reciprocal tariffs on US exports, leading many historians to argue that the tariff was counterproductive. increased tariffs to record highs in hopes of limiting foreign imports to the United States. Economists predicted that the tariffs would backfire by leading foreign governments to raise tariffs on US products sold abroad. Because the United States was a net exporter of both manufactured goods and agricultural products, the danger of damaging the export trade was greater than the possible benefit of reducing imports. Unfortunately for farmers and industry, the tariff took effect just as a global depression led other nations to place similar tariffs on foreign goods, and international trade fell by two-thirds by 1932. Many in government recognized that raising the tariff was a poor long-term strategy, yet by 1930, most politicians were simply hoping to provide a quick boost to the domestic economy.

The stock market crash led to tighter credit and a suspension of loans from US banks abroad. As a result, only a controversial deal brokered by Hoover granting a one-year suspension of payments on wartime loans prevented an immediate collapse of the international banking system. However, the instability and unlikelihood that European banks could resume payments to the United States when this temporary moratorium ended led private citizens and companies to withdraw their money from European banks. The panic soon spread to the United States where bank runs led to the failure of a few thousand banks between 1931 and 1933. Because US banks had loaned the money that had been deposited to US businesses, real estate developers, and international banks, none of whom could immediately pay back their loans, there was no money to repay all of the depositors who were presenting themselves by the hundreds at the door of US banks.

The years 1932 and 1933 were the worst of the Great DepressionA period of high unemployment and low economic development between the Wall Street Crash of 1929 and US entry into World War II. The Depression was not limited to the United States, as Europe and the rest of the industrialized world experienced severe declines in their material well-being., as bank failures wiped out life savings and discouraged those who still had money from spending or investing it. One-fourth to one-third of Americans who sought jobs were unemployed at any given moment. Private charities that had been somewhat effective at caring for America’s poor in years past found themselves in the unenviable position of trying to determine who was in the greatest danger of starvation. Diseases associated with malnutrition that had not surfaced since the leanest years of the Civil War began to reemerge. Several million families were evicted from their homes and lived in the growing shanties that surrounded most cities. That many Americans called these clusters of makeshift shelters “Hoovervilles” indicated that Americans’ expectations of the federal government had changed since the crises of the 1870s and 1890s. During those years, most Americans turned to state and local governments for assistance. However, the magnitude of the crisis appeared to be beyond the ability of these institutions and private charity to mitigate.

Instead of Coxey’s Army, which had demanded federal jobs during the crisis of the 1890s, more than 15,000 veterans converged on Washington in the summer of 1932. These former World War I soldiers requested early payment of their retirement bonus. Congress and President Hoover debated the matter, but determined that it was more important to maintain a balanced budget. Few of the veterans left the city after their measure was defeated. For many of these men and their families, obtaining an early payment of their bonus was their last best hope. Calling themselves the Bonus Army, these men and their families established their own Hoovervilles throughout the city and resolved to stay until the federal government reconsidered.

On July 28, an enraged President Hoover ordered the military to prevent these men from continuing their protest in front of the White House or US Capitol. Not for the last time in his career, General Douglas MacArthur exceeded a president’s orders. He sought to evict the veterans and their families from the nation’s capitol by force if necessary. Hoover likely did not fully understand the tactics that the military used on these veterans’ families, believing that he had preserved law and order from a trespassing “mob” as he called the men. The media told a different story complete with pictures of tanks under the command of MacArthur and perhaps the last cavalry charge in US military history led by a major named George S. Patton. The troops used poisonous gas that led to the death of an infant, while local police ordered the shacks set on fire. Among the dozens of injured veterans was a former private from Camden, New Jersey, who had been decorated for valor in saving Patton’s life during World War I.

Figure 6.27

The US Capitol appears in the backdrop of burning shacks, the temporary home of veterans who were part of the Bonus Army. These men had traveled to Washington, DC, in hopes of convincing Congress and President Hoover to pay World War I enlistment bonuses early due to the hardships of the Depression. As the photo indicates, that request was denied.

Following the government’s response to the Bonus Army, the public perceived Hoover as remarkably insensitive to the plight of ordinary Americans. It helped little that Hoover believed that keeping up the regal appearances of the White House might help to demonstrate his confidence in recovery. Hoover had never relished the trappings of office in the first place and might have been better served by communicating a bit of his own history instead of being photographed with white-gloved White House waiters. Hoover rose from poverty as an orphan to become a wealthy engineer. Actually, Hoover had succeeded at nearly everything he tried. He had also demonstrated a capacity for helping others in times of dire need as the head of an international agency that provided relief for Belgians during World War I. Hoover had also coordinated America’s remarkably successful humanitarian efforts throughout Europe at the war’s conclusion.

However, Hoover also viewed the creation of a large and powerful central government as the first step toward the tyranny that led to World War I. He and most other leading men of his era had come to believe that economic fluctuations were simply part of the business cycle and should be endured with stoic resolve. Hoover also believed in the importance of balanced budgets and ensuring a strong dollar based on the gold standard. While some of his critics suggested that printing more money would help to alleviate the credit crisis, limit bank failures, and perhaps encourage investment, Hoover followed orthodox economists who believed intentionally causing inflation was heresy. Hoover’s economic advisers also rejected new ideas such as raising money by selling government bonds to fund public works projects that would provide jobs. In fact, Hoover vetoed a law sponsored by his Democratic opponents that would have done this as the 1930 congressional elections approached.