Hoover: from Hero to "Hoovervilles"
When Republican Herbert Hoover took over the office of president in 1929, he brought with him a great deal of public confidence. The twenties had been a decade of prosperity and optimism. The economy was expanding, and employment levels were high. Political and business leaders claimed that poverty in the United States would soon be eliminated — permanently.
Not only that, there was a widespread belief that almost anybody from coal miner to farmer to attorney could get rich by simply working hard enough and being thrifty. People were encouraged to invest their money in the stocks of the newly emerging industrial corporations. In 1922, Hoover wrote American Individualism, a book praising the American capitalist system, in which he claimed that the system offered an equality of opportunity that allowed for the "free rise of ability, character, and intelligence."
Hoover seemed like an ideal choice to lead the confident nation forward. A mining and railroad engineer who had made millions in his business career, he personified the success and prosperity of the twenties. He was also known as a humanitarian; as director of war relief under President Woodrow Wilson, he had supervised the distribution of food and medical supplies in war-devastated Europe. Hoover believed in efficiency and had great faith in technology. He instructed his advisors to take a scientific approach to developing economic and social programs.
Yet four years later, Hoover left office in disgrace, his name synonymous with hard times. People used the sarcastic term "Hoover blanket" for the newspapers they used to cover themselves when spending the night on a park bench. A "Hoover wagon" was a broken-down car being pulled by a horse or mule. "Hoovervilles" was the name for the shanties erected by people who had been evicted from their homes. What had happened?
Too Little, Too Late
At first, the stock market crash in 1929 hurt only a small number of Americans, those who had invested heavily in stocks and bonds. But the panic on Wall Street quickly led to a widespread economic collapse. Within just a few months of the crash, banks across the country began failing. Farm prices dropped to alarming new lows. Hundreds of thousands of wage earners found themselves unemployed as businesses failed or cut back on their workforces. Very few city governments could cope with the surge of poor and newly out-of-work people who arrived at their doors seeking help.
Refusing to believe the warning signs, Hoover did not respond quickly or decisively enough. He insisted on holding firm to his philosophy that government intervention in business would hurt not only America’s economy but the nation’s political system as well. So, to reverse the downturn, he took only tentative steps, agreeing that the federal government should intervene but only within certain limits. He truly believed that businesses, local officials, and consumers could, by working cooperatively, solve their own problems. Direct federal relief to the unemployed was not necessary, he insisted.
Hoover initiated a five-part economic recovery program. First, he brought business and labor leaders to the White House and tried to persuade them to keep production levels up, hold wages steady, and even consider expanding their plants. Second, he appropriated $260 million a year (an increase from $105 million) for building new roads, public buildings, and bridges.
Third, the president tried to protect American manufacturers and farmers by signing the Hawley-Smoot Act of 1930. This act raised U.S. tariff rates to their highest levels ever, which kept most foreign-made goods out of American markets. Fourth, he tried to stimulate the purchase of American products abroad by declaring a moratorium on Europe’s World War I debts to the United States, thus freeing European money.
Finally, by 1932, he consented to giving financial aid to big business by creating the Reconstruction Finance Corporation (RFC). In that year, the RFC loaned $1.78 billion in a bid to rescue some seventy-four hundred ailing railroads, banks, and insurance companies from bankruptcy.
None of these initiatives worked out as Hoover and his advisors had hoped. Most businesses, for example, could not keep wages up because the demand for their products was decreasing. The Hawley-Smoot tariff backfired when Europeans retaliated and declared their own high tariffs, which slowed to a trickle the sale of American goods overseas. And the war-debt moratorium simply did not lead to increased sales of U.S. goods in Europe.
