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HIGH EXPECTATIONS1929-1932 Chapter 26—Part I
What is a “Depression”? “The Great Depression which followed the [stock market] crash of 1929 was the most devastating economic blow ever suffered by the nation. It lasted for more than ten years, dominating every aspect of American life during the 1930s. . . . It left enduring psychological scars—never again would the Americans who lived through it be quite so optimistic about their economic future. . . . The Depression led to a profound shift in American political loyalties.”
The Roots of the Great Depression—The Scorecard Hoover—Republican presidential candidate in 1928 Hoover “did not view business and government as antagonists. Instead, he saw them as partners, working together to achieve efficiency and affluence for all Americans. His optimistic view of the future led him to declare in his speech accepting the Republican presidential nomination in 1928 that ‘we in America today are nearer to the final triumph over poverty than ever before in the history of any land.”
Al Smith—Democratic Presidential Candidate in 1928 “Smith succeeded for the first time in winning a majority of votes for the Democrats in the nation’s twelve largest cities. A new Democratic electorate was emerging, consisting of Catholics and Jews, Irish and Italians, Poles and Greeks. Now the task was to unite the traditional Democrats of the South and West with the urban voters of the Northeast and Midwest. . . .
“[Smith] symbolized the emergence of the city as the center of twentieth-century American life. An older nation founded on rural values had given way to a new urban society in which the production and use of consumer goods led to a very different lifestyle. Just as nineteenth-century American culture had revolved around the farm and the railroad, modern America focused on the automobile and the city. . . . Only after World War II would the American people finally enjoy an abundance and prosperity rooted in the urban transformation that began in the 1920s.”
Lexicon of the 1920s • Speculate—purchase of land or stock by an investor at a low price, hoping that the price would rise giving the opportunity to make a quick profit • On Margin—investor paid only part of purchase price of stock in cash • Broker borrowed the remainder of the money from banks or corporations • Margin Call-broker asks investors buying on margin to put up more money to cover their loans on stocks that were now worth less
Financial Indicators in Farming and Industry Pointing to an Economic Slowdown in the 1920s • Wages of industrial workers failed to keep up with rising costs of goods • Workers could not purchase the goods that they made • Factories had to lay off workers • As workers lost their jobs, demand for goods fell further (a vicious cycle) • For farmers, increased supplies of crops kept crop prices down—a part of an agricultural decline that dated from 1919 • Meanwhile, the expenses of farmers’ increased (vicious cycle again)
Hoover and Smith: Differences in Beliefs and Backgrounds • Professional engineer • Very popular • Experienced Secretary of Commerce • Self-made millionaire • Efficiency expert • Humanitarian • Quaker • Believed in rugged individualism and efficiency • Supported laissez-faire
Al Smith • Four-term governor of New York • Familiar with machine big-city politics • Son of Irish immigrant parents born on lower side of east Manhattan • Roman Catholic • Lacked good education • Poor grammar with heavy New York accent • Wanted government to play an active role • Wanted public ownership of some public utilities/power companies • Wanted government to aid farmers • Eastern provincial outlook
Smith’s Political Career: • Subpoena server • State legislator • Governor of New York State Both Smith and Hoover “were self-made men who embodied the American belief in freedom of opportunity and upward mobility. Neither advocated any significant degree of economic change nor any redistribution of national wealth or power.”
Types of Investment Attracting Investors in the 1920s • Land • Stocks How Public Attitudes, Business, and Government Contributed to Conditions Leading to the Stock Market Crash of 1929
The Stock Market Collapse and the Great Depression 25A • “Black Thursday”—a wave of selling on the New York Stock Exchange. “The great crash in October [29,] 1929 put a sudden and tragic end to the speculative mania.”** • By 1932, stock prices had fallen to 80% below their 1929 highs. Unemployment stood at 12 million workers or 25% of the American work force. Gross National Product (GNP) fell to 67% of its 1929 level.
How Could this Happen?** • Public ignored warning signs of coming depression • Some people gambled on the stock market • Many banks made risky loans to speculators in the stock market • The government took no steps to regulate stock market prices
Impact of the Depression 25A • Durable Goods—products designed to last several years before being replaced • Business Inventory—quantity of unsold goods on hand How Economic Relations Between Supply and Demand Became Unbalanced in the 1920s • Supply greatly exceeded demand in the late 1920s • Workers didn’t make enough money to purchase the products made by industry
Role of a Weak Banking System in Leading to Economic Collapse • Banks that had loaned large sums to speculators tried to collect • Speculators were unable to repay the banks • Many banks collapsed, went bankrupt
Causes for the Great Depression of the 1930s** Faced with their own economic problems, European banks withdrew money from U. S. banks; a key Vienna bank failed, and the German economy collapsed • Excessive speculation in the stock market • U.S. factories produced more goods that American buyers could consume • Americans could not afford products coming off the assembly lines—a maldistribution of wealth • Agricultural decline over the previous decade • Corporate mismanagement • Instability of the economic conditions of Europe
Impact of Massive Unemployment and Grinding Poverty on American Society 25C • It reduced the standard of living • It sapped people’s sense of personal worth • It made homelessness and hunger major social problems
Ironically, the Great Depression had less impact on the poor than the middle class. Poor folk already knew how to exist in the midst of poverty. But depressed economic condition with no letup in sight was a powerful psychological blow to a middle class with high expectations, to white collar professionals too proud to ask for charity. Even the well-to-do had to forfeit many of their traditional luxuries. During the decade, youths dropped out of college and vagrancy increased.
Searching for a Solution “As the Depression deepened, Hoover reluctantly began to move beyond voluntarism to undertake more sweeping governmental measures.” • Federal Farm Board loaned money to • Aid cooperatives • Buy surplus crops on open market • Reconstruction Finance Committee (RFC) • Congressional creation of early-1932 • Given power to loan money to banks, railroads, and insurance companies (and later granted power to lend money to local communities for public works projects) to save them from bankruptcy • Congress gave the RFC the right to lend money to communities for public works programs
The Bonus Army 25C-2 • Some 22,000 ragged, former American soldiers who marched on Washington, D. C. in hopes of persuading the government to grant them their veterans bonus immediately rather than waiting until 1945 • They took up residence in ramshackle huts in Anacosta Flats along the Potomac River
Bonus Army continued. . . • Hoover authorized General Douglas McArthur to clear out the bonus army** • The brutality of this operation did Hoover irreparable harm in terms of public relations**
Actions President Hoover Thought He Should Take at Beginning of Depression** • Voluntarism—essentially inaction—Hoover believed the government should not get involved in helping the economy • Received wisdom of the day suggested that handouts from the federal government (or elsewhere) would undermine the proud spirit and penchant for hard work that had made America great in the first place. • Rather, private businesses and charities should step in to feed and clothe those in need • Bold forecasts of “better days” ahead, of recovery “just around the corner” • The Republican promise that things would work out in the long run prompted the Democrats’ rejoinder, “People don’t eat in the long run.” • Hoover invited business leaders to the White House for an economic conference • He agreed to federal public works projects that used only cash
Failure of Republican leadership or provision of relief to suffering Americans left the door open for a resurrection of the Democratic Party. Government inaction bred widespread cynicism and mistrust. Under the dynamic, confident, positive leadership of Franklin D. Roosevelt, theDemocrats would get a fresh opportunity to sit in the seats of power and influence.
"As the end of his term approached, President Hoover seemed to grow daily more petulant and pessimistic. . . . His attitude as the election neared alienated many voters and turned defeat into rout."
Herbert Hoover and Public Opinion After the Stock Market Crash of 1929 "The whole world was gripped by depression, but as it deepened, Americans began to blame Hoover for some of the disaster. The president became isolated and bitter. . . . Unable to admit mistakes and to take a new tack, he could not communicate personal empathy for the poor and the unemployed. . . . He believed that the greatest problem besetting Americans was a lack of confidence. He could not communicate with these people or inspire their confidence."
Hoover’s Policy Distinguished by the Four D’s • Destruction • Delay • Deceit • Despair Many Americans were demoralized, and rejected "a discredited leader, a man who had been exposed now as cold, uncaring, doctrinaire, and incapable of acting against the causes of popular distress.“ 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." "When Hoover refused to take measures strong enough to relieve people's hardships, voters turned him out of office in the election of 1932."
FDR, The Man 26A-1&2 • From a wealthy New York family, well traveled, schooled, and a socialite. He had a charming and optimistic personality • Pampered Upbringing** • His mother came from an upper class family and her father had owned copper lands, coal mines, acreage on New York Harbor, and a fleet of clipper ships • His father dabbled in Democratic politics, owned a stable of trotting-horses, and lived in leisure on a Hyde Park estate; he was unusually indulgent with Franklin • Educated at exclusive private Groton School and Harvard University • “He became a prodigious doer and joiner, with memberships in more than a half-dozen campus clubs. . . . [He wrote] exhortations about 'school spirit' and football morale.“ At Harvard, he moved "'from one extracurricular triumph to another.'"
FDR, The Man continued • As a child, owned his own pony, a 21 foot sailboat, and went to Europe eight times before entering adolescence • Studied briefly at Columbia Law School • Local volunteer at Hyde Park fire department • Director of First National Bank of Poughkeepsie • Delegate to 1910 New York Democratic convention • Democratic Mayor of Poughkeepsie, 1910—this earned him a party nomination for state senator • Elected Democratic state Senator, 1910 • Assistant Secretary of Navy during World War I
FDR’s Ambition** "Ambition as much as desire to render public service motivated his career in politics; even after an attack of polio in 1921 left him badly crippled in both legs, he refused to abandon his hopes for high office." FDR’s polio attack came at his summer home on Campobello Island. Hofstadter observes, "To be sick and helpless is a humiliating experience. Prolonged illness also carries the hazard of narcissistic self-absorption. It would have been easy for Roosevelt to give up his political aspirations and retire to the comfortable privacy of Hyde Park. That he refused to relinquish his normal life was testimony to his courage and determination, and also to the strength of his ambition. From his bed he resumed as many of his affairs as possible. . . . Inthe long run this siege of infantile paralysis added much to Roosevelt's political appeal. As a member of the overprivileged class with a classic Groton-Harvard career he had been too much the child of fortune. Now a heroic struggle against the cruelest kind of adversity made a more poignant success story than the usual rags-to-riches theme; it was also far better adapted to democratic leadership in a period when people were tired of self-made men and their management of affairs.
There has been much speculation about the effect of Roosevelt's illness upon his sympathies." Frances Perkins, who knew him both before and after notes that FDR, "a pleasant but somewhat supercilious young man. . . underwent a 'spiritual transformation,' in which he was purged of 'the slightly arrogant attitude' he had occasionally shown before. She now found him warm-hearted,' and felt that 'he understood the problems of people in trouble." The notion that FDR "read widely and studied deeply during his illness and developed a firm social outlook that aligned him forever with the underprivileged. . . is not sustained by Roosevelt's history during the prosperity of the 1920s. His human capacity, enlarged though it probably was, was not crystallized in either a new philosophy or a heightened interest in reforms."
Many considered FDR "rather a lightweight intellectually. . . . Roosevelt soaked up information and ideas from a thousand sources. . . . To those seeking specific answers to the questions of the day, he was seldom satisfying. On such vital matters as farm policy, the tariff, and government spending, he equivocated, contradicted himself, or remained silent." FDR the Politician** After his loss on the Cox-Roosevelt Democratic ticket in 1920 (right), he returned to private life until becoming a two-term governor of New York State
"His mind. . . . was generous and sensible, but also superficial and complacent." "Roosevelt proved to be an adept politician. He was not well read, especially on economic matters, but he had the ability to learn from his advisers and yet not be dominated by them. He took ideas, plans, and suggestions from conflicting sources and combined them." When running for the Senate in 1910, Roosevelt "conducted a vigorous, unconventional campaign by automobile, ran well ahead of his ticket, and [in spite of the fact that the district had elected only 1 Democrat since 1856] was elected on the crest of a Democratic wave. In the legislature Roosevelt promptly became a leader among Democratic insurgent. . . . He appeared a typical progressive in his voting record, stood for the civil service, conservation, direct primaries, popular election of Senators, women's suffrage, and social legislation."
FDR’s Rapport With the Masses 26A-1&2** "No personality has ever expressed the American popular temper so articulately or with such exclusiveness. . . . In the age of the New Deal, it was monopolized by one man, whose passing left American liberalism demoralized and all but helpless. . . . At the heart of the New Deal there was not a philosophy but a temperament. The essence of this temperament was Roosevelt's confidence that even when he was operating in unfamiliar territory he could do no wrong, commit no serious mistakes. From the standpoint of an economic technician this assurance seemed almost mad at times. . . . And yet there was a kind of intuitive wisdom under the harum-scarum surface of his methods. . . .
“[Although] reared on a social and economic philosophy rather similar to Hoover's, he succeeded at once in communicating the fact that his temperament was antithetical. When Hoover bubbled that it was necessary only to restore confidence, the nation laughed bitterly. When Roosevelt said: 'The only thing we have to fear is fear itself,' essentially the same threadbare half-true idea, the nation thrilled. Hoover had lacked motion; Roosevelt lacked direction. But his capacity for growth, or at least for change, was enormous. Flexibility was both his strength and his weakness.Where Hoover had been remote and abstract, a doctrinaire who thought in fixed principles and moved cautiously in the rarefied atmosphere of the managerial classes, Roosevelt was warm, personal, concrete, and impulsive. . . .
He had little regard for abstract principle but a sharp intuitive knowledge of popular feeling. Because he was content in large measure to follow public opinion, he was able to give it that necessary additional impulse of leadership which can translate desires into policies. Hoover had never been able to convey to the masses a clear picture of what he was trying to do; Roosevelt was often able to suggest a clear and forceful line of policy when none in fact existed. . . . Roosevelt's admirers, their minds fixed on the image of a wise, benevolent, provident father, have portrayed him as an ardent social reformer and sometimes as a master planner. . . . He displayed a broad, easygoing tolerance, a genuine liking for all sorts of people; he loved to exercise his charm in political and social situations."
FDR "was a marvelous campaigner. He traveled back and forth across the country, radiating confidence and good humor. . . . Like every great political leader, he took as much from the people as he gave them, understanding the causes of their confusion and sensing their needs." One member of the Hoover Administration noted that "'the people seem to be lifting eager faces to Franklin Roosevelt, having the impression that he is talking intimately to them. . . . I am glad of his enthusiasm and buoyance but it cannot escape the sense that he really does not understand the full meaning of his own recitations.'"
"One element was rapport with the masses, created through a mixture of antiestablishment appeals to the 'forgotten man' with a charismatic radiation of warmth, confidence, compassion, and even vigor despite his crippled legs."
FDR’s Advantages** • His antiestablishment appeals to the "forgotten man" • He radiated a charismatic warmth, compassion, an optimism, a confidence, and vigor "His sunny, magnetic personality contrasted favorably with that of the glum and colorless Hoover." He knew how to use flattery to win supporters. He easily transmitted his effervescent confidence to others.
FDR’s Advantages continued • He invocated a political demonology • The accommodation/balancing of conflicting prescriptions and pressure groups "Roosevelt displayed a buoyancy and a willingness to experiment that helped restore public confidence in the government and the economy." He was a master at using the media of the period to his advantage.
FDR’s Advantages continued • He proposed greater relief & work expenditures • He used of the prestigious Roosevelt name Theodore Roosevelt was a distant cousin. Like TR, he had a quick and agile mind.
Hoover • Often ill-informed • Generally shy and ill at east
FDR • Master of all facets of various questions • Relaxed, informal, and cordial "Operating in terra incognita did not seem to trouble him [FDR] in the least."