Policies of Herbert Hoover and FDR to Combat

The Great Depression.

Maxwell Leasure

History1102

Professor Curtis-Khidr
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6 December 2018

The Great Depression the largest economic recession in American history. After the

decade of the Roaring 20s, the Great Depression started with the stock market crash of 1929 and

continued on for the next decade. All of America was affected by this and many people lost

everything they had. President Hoover was the President at the time of the market crash,

followed by FDR who saw the remaining of the Depression as president. These two presidents

had vastly different views on how to combat this time of catastrophe and the policies they

enacted had varying degrees of success. The legacies of these presidents have been shaped

entirely by their responses to the Great Depression and the effects of these policies can be seen

for decades to come.

What caused the Great Depression?

The roaring 20s was a time of change for the United States. Communication had never

been easier with telephones and radios. Home life was changing due to the new washing

machines and refrigerators. 1 This was a time in which America felt prosperous. The culture of

America was changing. There was a newfound obsession with celebrities, due to the increase in

radios and the popularity of cinemas. African Americans were also experiencing their own

cultural changes, most notably in large cities in which the Harlem Renaissance was prevalent and

the black community was discovering their own forms of art, such as jazz. The use of credit

allowed middle and lower class citizens to purchase amenities they otherwise would not be able

to. “By the last years of the decade, three of every five cars and 80 percent of all radios sold were

purchased with installment credit. Between 1925 and 1929 the amount of installment credit

outstanding in the United States more than doubled, from $1.38 billion to $3 billion.”2

1
Eric Foner, Give Me Liberty! An American History, 783
2
Robert McElvaine, The Great Depression, 41

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Americans were buying things they could not afford, because they did not have to pay for it

before the got to reap the benefits. The problem with this, is that the items that people were

buying were more expensive than they could afford. Because they could purchase items on

installment plans, the general idea was they could afford it over time. This did not work out and

the consumers were constantly getting more bills that they could not afford, leading to the

exponentially increasing amount of debt they were creating for themselves. People had to then

choose which bills they would pay each month, water, electricity, or the debt from their new

radio and refrigerator. This led to the banks raising their interest rates, as an attempt to get their

money back faster and have less risk than before. The banks were not getting their money back

from the installment plans because the consumers simply did not have to money. This was a

major cause of the Great Depression. Another cause was the stock market crash of 1929. The

stock market was extremely popular in the decade prior to the Depression, with people from all

classes pouring their savings into the market. There were extreme amounts of speculation, which

lead to stock prices being much higher than they were actually worth. In the crash of October, it

was nothing more than a self- correction but due to the amount of people having invested and the

amount these people invested, it was devasting and led to a great panic. One final main cause of

the Great Depression was the decrease in farmers’ incomes. WWI was the peak of the need for

crops, in order to sell to war-torn Europe. After the war, the demand for crops decreased. More

farms were being foreclosed and those that did not lose their farms, lost much of the pay that

they were used to. “For the first time in the nation’s history, the number of farms and farmers

declined during the 1920s. For example, half of the farmers in Montana lost their land to

foreclosure between 1921 and 1925.”3 In just these four years, half of Montana’s farmers were

3
Foner, Give Me Liberty, 785

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out of a home, and out of a job. This was completely unprecedented in America, a society

created and based on agriculture. Though America was a fairly industrialized nation by this

point, it still had an extremely large agricultural sector that made up a large part of the economy.

This was changing quickly and the 20s was when it reached its climax. The period of rapid

expansion in the 20s had to be corrected as part of the business cycle. Since it had expanded so

much, it fell hard and fast. The Great Depression was primarily caused by the natural business

cycle correcting the economy partnered with the ever-declining agricultural market.

Hoover’s Response to the Great Depression

Herbert Hoover, the Republican president at the time of the start of the Depression, had a

laissez-faire approach to governing, especially when it came to the economy. Hoover’s approach

can be summed up as, “The federal government must help the people, but the people must bear

the burden and not expect miracles.”4 He believed that the government should help the people,

but that it is not responsible for taking care of the people and the people would, in essence, have

to live with the Depression. His small government approach to politics was in part due to his fear

of government control and government becoming too large.

Hoover believed that if the government intervened too much in the economy, that it

would impede on the ability of America to have a free society. This can be seen in his practices

and reactions to the Great Depression. Though he did enact some measures to combat the

Depression, most historians and people at the time came to the same conclusion, that he did not

do enough. The first reactive policy Hoover enacted was with the Federal Reserve Bank. “The

Federal Reserve Banks eased the credit situation through purchases of commercial paper and

federal bonds and lowered the discount rate.”5 The ultimate goal of this was to stop the interest

4
Harris Warren, Herbert Hoover and the Great Depression, 114
5
Ibid., 114

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rates for loans and installment plans from continuing to rise. This was successful to some degree,

as the overall loans and investments by banks did increase in the coming months. Hoover also

responded to the ever-falling prices of crops that got even worse the days leading up to the

Depression. Both wheat and cotton were down extraordinary amounts, and Hoover took note.

Before the Depression, Hoover created the Federal Farm Board. This board gave loaned money

to farmers in order to help cushion the extreme price drops of their crops. However, this was not

enough, as “Farmers… needed a prop instead of a cushion.” Farmers needed much more than

some help, as their ability to bring in both revenue and profits dropped significantly. Without

Europe needing the US and their crops and the overall drop in prices of their crops, many

farmers lost everything they had and Hoover’s initiative to help them was not enough for most of

them to save face. The largest attempt for Hoover to stimulate the economy was his attempt to

increase construction around the entire country mainly by increasing public works projects.

Having vetoed bills for public relief in the past, Hoover realized his hands-off approach and faith

in business had failed and the federal government would have to intervene. “… He now

approved a measure appropriating nearly $2 billion for [public works projects] and helping fund

local relief effort.”6 Though against these initiatives on principle, Hoover was forced to comply

due to the American public and Congress agreeing that it was necessary. Most experts and the

American public at the time agree that this effort by Herbert Hoover was too little, too late.

Hoover was a principled man. He believed in minimal government interference,

capitalism, and the American public. He, as did many others, underestimated extent to which this

depression would reach, as well as how long it would last. It was an economic collapse that had

never before been seen in America to this level. Hoover put a lot of faith in American businesses

6
Foner, Give Me Liberty, 814

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and by the time he intervened with the Federal Government, the effects of the Depression had

reached levels that would require much more than what he did to reverse.

Franklin Delano Roosevelt and the Great Depression

Hoover and Roosevelt differed greatly in both practice and ideology. Hoover, a man that

questioned “What should government do to end the Great Depression?” was staunchly contrasted

by FDR, who question “What could the government do to end the Great Depression?” FDR

wanted to and would do everything in his power to help the people suffering through the use of

the federal government. FDR vastly increased the power of both the executive branch and the

federal government as a whole through his creation of federal agencies such as the SEC and the

NRA and through his use of executive orders to enact legislation that Congress would not. FDR

was a president who ignored many precedents, such as presidents only running for two terms as

well as his record setting number of executive orders in order to combat this unprecedented level

of economic crisis.

The New Deal is almost completely the legacy of FDR. It is a series of policies and

government expansion as FDR’s plan to combat the Depression. It can often be broken down

into two different parts, the first New Deal and the second New Deal. FDR spent no time

keeping his promise of the New Deal once elected and sworn in as President of the United States.

This is what is commonly known as the first New Deal, generally referring to the first 100 days

of FDR’s long and impactful presidency.

FDR wasted no time once in office to begin his New Deal. Within the first 100 days, “He

persuaded Congress to create a host of agencies, whose initials soon became part of the language

of politics- NRA, AAA, CCC. Never in American history had a president exercised such power

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in peacetime or so rapidly expanded the role of the federal government in people’s lives.”7 The

urgency in which the 32nd president acted once in office to the Depression set the tone that

FDR’s presidency and efforts to combat the Great Depression would be vastly different than his

predecessor’s. At the center of FDR’s plan was the National Industrial Recovery Act. This act

established the NRA, or the National Recovery Administration. This was the first of many

agencies created by FDR during his New Deal. The primary goal this agency was to prevent

what is referred to as cutthroat competition. This was a fairly common practice at the time, in

which large companies would sell a product for less than they made it for in order to put smaller

businesses that could not afford those deficits out of business. In order to accomplish this, the

NRA would meet with industrial and business leaders to set these fair business practices. The

NRA also established protection for employees’ right to join and organize labor unions. “… and

labor received Section 7a, modeled on the War Labor Board practices, which guaranteed the

right to collective bargaining and stipulated that codes should set minimum wages and maximum

hours.”8 The right to unionize was important to many laborers in the country at the time, as

working conditions were still below humane. This act also was the beginning of the minimum

wage, which was later passed as law. Leon H. Keyserling, the author of the aforementioned

Section 7a of the NIRA, stated,” I wrote in the provisions on wages and working conditions

which abolished the sweat shop and child labor and were the forerunners of the Fair Labor

Standards act of 1938, the minimum wage law.”9 Keyserling is a fairly unknown name, but was

behind some of the most influential aspects of the New Deal. The NIRA one of the acts from the

7
Foner, Give Me Liberty, 824
8
William Leuchtenburg, Franklin D. Roosevelt and the New Deal, 58
9
Katie Louchheim, The Making of the New Deal, 197

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New Deal passed that still impacts the United States today, especially the right to unionize and

minimum wage.

Though the NIRA and the NRA were very important to the first New Deal, there were

many other parts of FDR’s busy 3 months. In a paralleled belief from Hoover, FDR did not want

to give money directly to those unemployed however his approach was to create temporary jobs

for those out of work to maintain a level of self-dependence in America while still helping those

that lost their jobs in this crisis. The CCC, or Civilian Conservation Corps, was created for this

reason. “By the time this program ended in 1942, more than 3 million persons had passed

through CCCC camps, where the received government wages of $30 per month. The CCC made

a major contribution to the enhancement of the American environment.”10 This agency created

short term jobs for those out of work, especially young men. These jobs were for projects such as

forest preservation, flood control, and other similar areas of work. Similar to the CCC, the CWA,

or Civil Works Administration, directly hired people to do jobs such as construction of highways

and tunnels and by the start of 1934, the CWA had employed more than 4 million people.11

Roosevelt was creating these temporary jobs that required little to no training, so much of the

lower and middle class was able to find at least some relief in this hard times. Within these two

years, the government had millions of more people on its payroll than ever before due to

Roosevelt’s policies. However, these were not the only programs he had set in place. The NIRA

also created the PWA, or the Public Works Administration. This was a vast expansion on

Hoover’s attempt at a public works project. As previously stated, Hoover allocated about $2

billion to this project. FDR expanded this budget to about $3.3 million.12 What made the PWA

10
Foner, Give Me Liberty, 825
11
Ibid., 825
12
Ibid., 825

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different from the CWA and the CCC was the Public Works Administration worked with the

private sector to increase jobs.

From 1933 to 1939, PWA helped construct some 70 per cent of the country’s new school

buildings; 65 per center of its courthouses, city halls, and sewerage plants; 35 per cent of

its hospitals and public health facilities. PWA made possible the electrification of the

Pennsylvania Railroad from New York to Washington and the completion of

Philadelphia’s 30th street station. In New York, it helped build the Triborough Bridge, the

Lincoln Tunnel, and a new psychiatric ward at Bellevue Hospital.13

Never before in America had there been such a massive amount of infrastructure built in such a

short time. These projects followed FDR’s ideologies, as they were not just busy work and the

government was employing people, not just paying them. FDR and Hoover both wanted to keep

the American self-sufficient, but FDR was willing to provide jobs for people when there were

none. Through the PWA, FDR was able to create short term jobs which led to some relief among

Americans as well as the infrastructure of the country vastly improved. A large majority of the

jobs created during the first New Deal were construction, whether through the PWA of CWA.

This also aligns with FDR’s goals, as he believed the young men of the country needed to be

employed and that having young men at work and earning an income for their family was more

important than the rest of the family having jobs. The final large-scale public works project by

FDR was the TVA, or the Tennessee Valley Authority. Yet another infrastructure project, “The

TVA would build multipurpose dams which would serve as reservoirs to control floods and at

the same time generate cheap, abundant hydroelectricity.”14 This program provided electricity

for homes and factories in the South. This electricity was much cheaper than the electricity

13
Leuchtenburg, Franklin D. Roosevelt and the New Deal, 133
14
Leuchetenburg, Franklin D. Roosevelt, 54

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provided by the private sector. As well as being cheaper, it was also available to many of the

isolated homes in the South, of which there were still many at this time. Partnered with the

economic benefits of these dams, they also protected the environment from flooding and

deforestation. FDR drastically improved the infrastructure of the country through his policies and

projects in the first New Deal. He also provided relief to millions of Americans that were out of

work by providing jobs that would allow their family to have an income during these had times.

FDR also realized to issues of the American Farmers. Within the first 100 days, he

created the AAA, or the Agricultural Adjustment Act. The primary goal of FDR with this act was

to raise the price of crops, as they had continued to rapidly decrease, especially through the 20s.

In order to combat this, FDR’s plan was based on reducing the supply of many crops. “The

Agricultural Adjustment Act (AAA) authorized the federal government to set production quotas

for major crops and pay farmers to plant less in an attempt to raise farm prices. Many crops

already in the field were destroyed. In 1933, the government ordered more than 6 million pigs

slaughtered as part of the policy.” 15 This was FDR’s attempt to control the ever-declining prices

of the crops in the US. By lowering the supply, you increase the price. It was successful to some

extent in raising the farmers’ incomes and the prices of crops.16 Farmer’s profited from this act,

as they collected more than $100 million in payments from the US government.17This practice,

however, was met with backlash to FDR’s presidency. Many people believed it to be inhumane,

especially with the slaughtering of all the pigs. As well as the backlash, the vast majority of the

meat from all of these pigs was inedible and had to be trashed and wasted. In the times of

starvation in the country, many people were upset about FDR’s choice to waste all of the crops

15
Foner, Give Me Liberty, 826
16
Ibid., 826
17
Leuchtenburg, Franklin D. Roosevelt and the New Deal, 73

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and meat. However unpopular, the choice was made, and it ended up increasing the profits and

revenue generated by farmers in this time.

The final large-scale policy of FDR’s first New Deal was the FHA, or the Federal

Housing Administration. Home ownership was always a goal of many Americans however the

Depression ruined that for millions. The housing crisis began under Hoover, and he recognized

it. He created a federally sponsored bank to give people home loans. This was primarily only in

theory.

Not until the New Deal, however, did the government systematically enter the housing

market… In 1933 and 1934, his administration moved energetically to protect home

owners from foreclosure and to stimulate new construction. The Home Owners Loan

Corporation and Federal Housing Administration (FHA) insured millions of long-term

mortgages issued by private banks.18

FDR and Hoover both believed that owning a home was essential to life, however FDR actually

practiced this, Hoover just believed it. FDR built low-rent apartments and housing for these

people that were either out of work or working for very low incomes. Housing was again an

option for many Americans, which was a large change and unprecedented in America. Like

many of FDR’s New Deal policies, this was another drastic change in the day to day lives of

Americans.

The Great Depression was a devasting economic collapse and the worst in United States

history. Having many causes, the two presidents during this period had vastly different means of

fixing it. Hoover, the president when the Depression started, believed the private sector and

Americans could work through it and fix it without government intervention. Because of this

18
Foner, Give Me Liberty, 829

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belief, there were very few policies enacted by Hoover in his four-year span as president. FDR

on the contrary, believed that government had to help out the Americans. He created millions of

jobs through both the government and the private sector. He subsidized the farmers in America at

a level unseen in history. He created low income housing for those displaced during the

Depression and was able to give America hope that it would be changing directions from where

it had been heading in the Hoover years. These presidents did have similar views on some

problems but had different ideas as to how to solve them. Finally, both of the presidencies would

be defined by how they reacted to the Depression. Hoover’s presidency is completely smeared

by this event whereas FDR is praised, in general, for his actions and the overall perception that

America’s 32nd president carried the US out of the Great Depression with his New Deal. The

Great Depression was a disastrous event and will never be forgotten.

Bibliography

Foner, Eric. Give Me Liberty! an American History. New York ˜ œ: WW Norton &, 2017.

Leuchtenburg, William E. FRANKLIN D. ROOSEVELT AND THE NEW DEAL, 1932-1940.

BY WILLIAM EDWARD LEUCHTENBURG. NEW YORK: HARPER AND ROW, 1963.

Louchheim, K., and J. Dembo. The Making of the New Deal: With Historical Notes by J.
Dembo. Cambridge, Mass: Harvard University Press, 1983.

McElvaine, Robert S. Great Depression; America, 1929-1941. Times, 1993.

Warren, Harris Gaylord. Herbert Hoover and the Great Depression. New York: Oxford Univ.,
Pr., 1970.

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