678 Chapter 25 From “Normalcy” to Economic Collapse: 1921–1933
compulsion. He urged manufacturers to maintain wages
and keep their factories in operation, but the manufac-
turers, under the harsh pressure of economic realities,
soon slashed wages and curtailed output sharply. He
permitted the Federal Farm Board (created under the
Agricultural Marketing Act of 1929) to establish semi-
public stabilization corporations with authority to buy
up surplus wheat and cotton, but he refused to consider
crop or acreage controls. The stabilization corporations
poured out hundreds of millions of dollars without
checking falling agricultural prices because farmers
increased production faster than the corporations could
buy up the excess for disposal abroad.
Hoover resisted proposals to shift responsibility
from state and local agencies to the federal govern-
ment, despite the fact—soon obvious—that they
lacked the resources to cope with the emergency. By
1932 the federal government, with Hoover’s approval,
was spending $500 million a year on public works pro-
jects, but because of the decline in state and municipal
construction, the total public outlay fell nearly $1 bil-
lion below what it had been in 1930. More serious was
his refusal, on constitutional grounds, to allow federal
funds to be used for the relief of individuals. State and
municipal agencies and private charities must take care
of the needy.
Unfortunately the Depression was drying up the
sources of private charities just as the demands on these
organizations were expanding. State and municipal
agencies were swamped just when their capacities to tax
and borrow were shrinking. By 1932 more than
40,600 Boston families were on relief (compared with
7,400 families in 1929); in Chicago 700,000 persons—
40 percent of the workforce—were unemployed. Only
the national government possessed the power and the
credit to deal adequately with the crisis.
Yet Hoover would not act. He set up a commit-
tee to coordinate local relief activities but insisted on
preserving what he called “the principles of individual
and local responsibility.” For the federal government
to take over relief would “lead to the super-state
where every man becomes the servant of the state and
real liberty is lost.”
Federal loans to commercial enterprises were con-
stitutional, he believed, because the money could be put
to productive use and eventually repaid. When drought
destroyed the crops of farmers in the South and
Southwest in 1930, the government lent them money
to buy seed and even food for their livestock, but
Hoover would permit no direct relief for the farmers
themselves. In 1932 he approved the creation of the
Reconstruction Finance Corporation (RFC) to lend
money to banks, railroads, and insurance companies.
The RFC represented an important extension of
national authority, yet it was thoroughly in line with
Hoover’s philosophy. Its loans, secured by solid
collateral, were commercial transactions, not gifts; the
agency did almost nothing for individuals in need of
relief. The same could be said of the Glass-Steagall
Banking Act of 1932, which eased the tight credit situa-
tion by permitting Federal Reserve banks to accept cor-
porate stocks and bonds as security for loans. The public
grew increasingly resentful of the president’s doctrinaire
adherence to principle while breadlines lengthened and
millions of willing workers searched fruitlessly for jobs.
As time passed and the Depression worsened,
Hoover put more stress on the importance of balanc-
ing the federal budget, reasoning that since citizens
had to live within their limited means in hard times,
the government should set a good example. This pol-
icy was counterproductive; by reducing its expendi-
tures the government made the Depression worse,
which reduced federal revenue further. By June 1931
the budget was nearly $500 million in the red.
Hoover understood the value of pumping money
into a stagnant economy. He might have made a
virtue of necessity. The difficulty lay in the fact that
nearly all“informed”opinion believed that a balanced
budget was essential to recovery. The most prestigious
economists insisted on it, and so did business leaders,
labor leaders, and even most socialists. When Hoover
said,“prosperity cannot be restored by raids on the
public Treasury,”he was mistaken, but it is equally
wrong to criticize him for failing to understand what
almost no one understood in the 1930s.
Much of the contemporary criticism of Hoover
and a good deal of that heaped on him by later histo-
rians was unfair. Yet his record as president shows
that he was too rigidly wedded to a particular theory
of government to cope effectively with the problems
of the day. Since these problems were in a sense
insoluble—no one possessed enough knowledge to
understand entirely what was wrong or enough
authority to enforce corrective measures—flexibility
and a willingness to experiment were essential to any
program aimed at restoring prosperity. Hoover
lacked these qualities. He was his own worst enemy,
being too uncompromising to get on well with the
politicians and too aloof to win the confidence and
affection of ordinary people. He had too much faith
in himself and his plans. When he failed to achieve
the results he anticipated, he attracted, despite his
devotion to duty and his concern for the welfare of
the country, not sympathy but scorn.
Prosperity of the 1920s and the Great
Depressionatwww.myhistorylab.comThe Economy Hits Bottom
During the spring of 1932, as the economy sounded
the depths, thousands of Americans faced starvation.
In Philadelphia during an eleven-day period when noWatchtheVideo