Hoover and the Limits of Individualism

When the bubble broke, Americans expressed relief that Hoover resided in the White House. Not surprisingly for a man who had been such an active secretary of commerce, Hoover acted quickly to arrest the decline. In November 1929, to keep the stock market collapse from ravaging the entire economy, Hoover called a White House conference of business and labor leaders. He urged them to join in a voluntary plan for recovery: Businesses would maintain production and keep their workers on the job; labor would accept existing wages, hours, and conditions. Within a few months, however, the bargain fell apart. As demand for their products declined, industrialists cut production, sliced wages, and laid off workers. Poorly paid or unemployed workers could not buy much, and their decreased spending led to further cuts in production and further loss of jobs. Thus began the terrible spiral of economic decline.

To deal with the problems of rural America, Hoover got Congress to pass the Agricultural Marketing Act in 1929. The act created the Farm Board, which used its budget of $500 million to buy up agricultural surpluses and thus, it was hoped, raise prices. But prices continued to fall. To help end the decline, Hoover joined conservatives in urging protective tariffs on agricultural goods, and the Hawley-Smoot tariff of 1930 established the highest rates in history. The same year, Congress also authorized $420 million for public works projects to give the unemployed jobs and create more purchasing power. In three years, the Hoover administration nearly doubled federal public works expenditures.

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But with each year of Hoover’s term, the economy weakened. Tariffs did not end the suffering of farmers because foreign nations retaliated with increased tariffs of their own that crippled American farmers’ ability to sell abroad. In 1932, Hoover hoped to help hard-pressed industry with the Reconstruction Finance Corporation (RFC), a federal agency empowered to lend government funds to endangered banks and corporations. The theory was trickle-down economics: Pump money into the economy at the top, and in the long run the people at the bottom would benefit. Or, as one wag put it, “Feed the sparrows by feeding the horses.” In the end, very little of what critics of the RFC called a “millionaires’ dole” trickled down to the poor.

Meanwhile, hundreds of thousands of workers lost their jobs each month. By 1932, an astounding one-quarter of the American workforce—nearly thirteen million people—were unemployed. There was no direct federal assistance, and state services and private charities were swamped. The depression that began in 1929 devastated much of the world, but no other industrialized nation provided such feeble support to the jobless. Cries grew louder for the federal government to give hurting people relief.

Hoover was no do-nothing president, but there were limits to his conception of the government’s proper role in fighting the economic disaster. He compared direct federal aid to the needy to the “dole” in Britain, which he thought destroyed the moral fiber of the chronically unemployed. “Prosperity cannot be restored by raids on the public Treasury,” Hoover declared. Besides, he said, the poor could rely on their neighbors to protect them “from hunger and cold.” In 1931, he allowed the Red Cross to distribute government-owned agricultural surpluses to the hungry. In 1932, he relaxed his principles further to offer small federal loans, not gifts, to the states to help them in their relief efforts. But Hoover’s restricted notions of legitimate government action proved vastly inadequate to address the problems of restarting the economy and ending human suffering.

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