Hoover’s Response to the Great Depression Failed H-SS 11.5.1- Discuss the policies of Presidents Warren Harding, Calvin Coolidge, and Herbert Hoover. H-SS 11.6.2- Understand the explanations of the principal causes of the Great Depression and the steps taken by the Federal Reserve, Congress, and Presidents Herbert Hoover and Franklin Delano Roosevelt to combat the economic crisis.

Economic System Spectrum Background Economic Philosophy Free Market Capitalism Republican Thinking Economic System Spectrum

Three Key Economic Questions What goods and services should be produced? How should goods and services be produced? Who consumes the goods and services?

Capitalism- Adam Smith wrote book “Wealth of Nations (1776).” In it he described the operation of a“Laissez-faire” or free market economy. In this type of economy there is no Government Regulation. Laws of Supply and Demand allocate goods and services and distribute wealth

Characteristics of Capitalism Private ownership of means of production-capital, land, resources, businesses Competition—Survival of the Fittest—motivates people to work harder & smarter Freedom to Fail--no social safety net

Laws of Supply and Demand determine price of goods and services Supply = P Q & P Q Equilibrium Price Price Supply Curve $5 Demand Curve $1 Quantity Demand = P Q & P Q

No Government Regulation= Exploitation of working class No unemployment insurance No worker’s compensation No minimum wage No worker safety laws Children working 10 hour days The list goes on

Exploitations of Capitalism caused people to demand a change New ideas emerge on how society should be structured so that there would be a better distribution of wealth for the workers Socialism & Communism seem like the answer to some

Hoover’s Response Fails During the Depression Americans blamed Hoover for their plight (suffering). Homeless people lived in “Hoovervilles” (shantytowns) and slept in “Hoover blankets” (newspapers), and wore their empty pockets inside out and called them “Hoover flags”

Hoover Turns to Volunteerism Hoover followed a “hands-off” policy, like most economists of the day, they viewed the upswings and downswings of the economy as normal. Business Cycle-periodic growth and contraction of the economy (add drawing and notes pg. 256)

As crisis continued, Hoover tried to promote recovery As crisis continued, Hoover tried to promote recovery. He held a series of conferences that brought together the heads of banks, railroads, big business, labor, and government, and had them pledge to keep factories open and to stop cutting jobs and wages. Hoover also requested that wealthier Americans give more to charity to help those who were suffering.

Volunteerism Fails to Bring Relief His plan was sound but it relied too much on voluntary cooperation. Hoover wanted to encourage economic recovery not legislate it. People and businesses looked out for their own best interests and volunteerism failed.

After volunteerism failed Hoover increased Public Works -government financed building projects, and asked the nation’s governors and mayors to do the same, however, the federal government did not give more money to pay for new projects. The Hoover Dam was one of the major public works projects.

By 1932 Hoover felt the government had to provide funding for borrowers. He asked Congress to set up the Reconstruction Finance Corporation (RFC) to make loans to banks, railroads, and agricultural institutions- the economy continued to decline because the RFC was too cautious in its loan amounts.

Hoover opposed the federal government’s participation in relief- money that went directly to poor families (welfare). Americans were to rely on “Rugged Individualism” and care for themselves. He felt relief was responsibility of state and local governments, and charities such as churches and Salvation Army.

Discontent over the economy led to violence, looting, rallies, and hunger marches. In 1924 Congress had enacted a $1,000 bonus for WWI vets to be paid in 1945. In 1931, Congress introduced legislation to allow vets to get their bonuses early.

In 1932, the “Bonus Army” marched on Washington D. C In 1932, the “Bonus Army” marched on Washington D.C. to lobby Congress to pass the legislation. Hoover refused to meet with the Bonus Army and the Senate vetoed the bill. Some marchers left, some stayed and moved into vacant buildings. Hoover ordered the buildings cleared and riots broke out between the Bonus Army and police and military units (feared revolution).