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The Wrong Man At The Wrong Time
For all his previous successes, President Herbert Hoover proved incapable of arresting the economic free fall of the Depression— or soothing the fears of a distressed nation
Summer 2009 | Volume 59, Issue 2
In June the board gave up. The Grain Stabilization Corporation stopped buying surpluses and dumped 257 million bushels on the market, driving the price of wheat catastrophically lower. From its $500 million revolving fund, the board had suffered losses of $345 million with nothing to show for it. Cotton eventually slumped to a sickening 41/2 cents per pound. The government had financed the removal of 3.5 million bales from the market but saw 10 million bales added to the surfeit. After the board’s capitulation, Hoover, who thought the government had already departed too far from sound principles, did nothing at all to sustain rural America. The farming sector faced ruin and, because of its importance to the economy of Main Street, threatened to pull hundreds of banks down with it. Before Hoover’s term was over, one-fourth of American farmers had lost their holdings—their fields, their stock, their barns, and their homes—many of which had been in one family for generations.
After the short session of Congress ended, Hoover turned aside pleas to bring legislators back, even though the Depression was worsening. “I do not propose to call an extra session of Congress,” he announced in May. “I know of nothing that would so disturb the healing process now undoubtedly going on. . . . ; We cannot legislate ourselves out of a world economic depression.” So with Congress away from March 4 to December 7, 1931, he assumed full responsibility for coping with hard times—and for all that went wrong.
Either out of conviction or in self- defense, Hoover’ increasingly offered a new explanation for why recovery was so slow in coming. “The major forces of the depression now lie outside of the United States,” he had announced in December 1930, “and our recuperation has been retarded by the unwarranted degree of fear and apprehension created by these outside forces.” In June 1931 he located the sources of these woes in “the malign inheritances in Europe of the Great War—its huge taxes, its mounting armament, its political and social instability, its disruption of economic life by the new boundaries.” He had become so convinced of the validity of this hypothesis that he stated flatly, “Without the war we should have no . . . depression.”
In October 1931, Hoover returned to Philadelphia for a World Series contest at Shibe Park, where two years earlier he had received a heartwarming welcome, only to be greeted by deafening boos. On the very day of the game, one of the city’s largest banks, the Franklin Trust Company, collapsed—the consequence, said a state official, of “the hysteria and unfavorable psychological reaction which are gripping the public.”
The affliction that brought down Franklin Trust was felling scores of other financial institutions. Within a month of Britain’s being driven off the gold standard, 522 U.S. banks failed. That autumn, in the greatest outflow of bullion in American history, $1 billion was pulled out of bank vaults and squirreled away in coffeepots, mattresses, and other hiding places. No longer was anyone saying “safe as a bank.”
In his State of the Union address in December 1931, Hoover insisted, “Our people are providing against distress from unemployment in true American fashion by magnificent response to public appeal and by action of the local governments.” He opposed “any . . . dole” because, thanks to “the sense of social responsibility in the Nation, our people have been protected from hunger and cold,” and voluntary effort gave “assurance against suffering during the coming winter.” When he delivered these words, more than 200,000 men and women were walking the streets of Detroit seeking work. Throughout the country, tar-paper Hoovervilles were multiplying.
Alarmed that the national treasury was running a historic deficit— nearly a billion dollars—Hoover believed it essential to balance the budget in order to forestall a run on gold reserves and to instill faith in the integrity of the central government. “Nothing will contribute more to the return of prosperity than to maintain the sound fiscal position of the Federal Government,” he declared, consequently advocating substantial tax increases along with cuts in government spending—precisely the wrong medicine for an ailing economy.
Without any effective galvanizer, the slump dramatically worsened— erasing all the gains of the golden era of Hoover’s public career. Factories in 1932 turned out less than they had in 1913. For every four cars that had rolled off the assembly line in 1929, only one emerged in 1932. Steel plants operated at a pitiful 11 percent of capacity. And with few jobs to be had, breadlines grew longer. The business magazine Fortune estimated that 34 million men, women, and children were “without any income what- ever,” and this figure “omitted America’s 11 million farm families, who were suffering in a rural Gethsemane of their own.”
Community chests could deal with a few hundred out of work, perhaps a few thousand, but they could not conceivably meet the needs of a city such as Cleveland, where 50 percent of the workforce was jobless. In Akron and East St. Louis, Illinois, unemployment reached 60 percent; in Toledo it mounted to 80 percent.