Custom term paper on Herbert Hoover: Bad President or Bad Timing

Age of Prosperity
The short-term period of economic recovery in the United States after the First World War was called the Age of “Prosperity”. In the literature under “the Age of Prosperity” people usually understand unhealthy, dubious prosperity. Postwar America became a leader in economic growth.
Thanks to that the country consolidated its leading position in the world. By the end of 20-ies America has produced almost as many industrial products, as the rest of the world. They were, in fact, years of growth.
The average worker has increased his salary for 25%. The unemployment rate did not exceed 5%, and in some periods – 3%. Consumer credit became popular among people. In the 20’s, during the period of prosperity, the price level was absolutely stable. The pace of economic development of the U.S. was the highest in the world.
According to the pace of scientific and technological progress and product industry USA has far exceeded all other countries. Automotive industry, annually producing millions of machines in the country has created a huge market of metal, oil, rubber, glass and other materials, as well as a powerful infrastructure in the form of gas stations, auto service companies, provoked an unprecedented highway construction. Domestic effective demand couldn’t keep in pace with productivity growth, and the result was quite natural overproduction. The higher was the rise, the lower was the decline. In 1932, as compared with 1929, industrial production fell to by nearly half, and was dropped for 20 years back. The number of unemployed reached 17 million people – almost 14% of the population.
The U.S. economy in the 20’s was filled with exceptions to the simple market relations. In industrial production large corporations dominated, antitrust laws had already been adopted, federal commissions and committees to regulate certain industries had been created, the Federal Reserve System established, in short, the state actively intervened to the economic life. These and other forms of intervention seriously changed the traditional faith in individualism and free markets. But still, in most cases it was thought that the intervention could be necessary only from time to time, and the principle of laissez faire remained dominant. custom term paper
The United States of America in the 20-ies flourished, but the market economy develops in cycles. Climbs are changed by crises. However, the apparent cyclicity of economic development, repeated every 8-10 years phase of prosperity, recession, crisis and recovery were still considered a normal phenomenon with the ability to self-correction. Such a “complacent” attitude to the cyclical dynamics led to the catastrophe in 1929.
On meetings with the presidents of railway companies and the financial, industrial, commercial and trade union leaders, president Hoover predicted a prolonged crisis and the emergence of 2-3 million unemployed, and he warned the leaders that it was their primary responsibility to prevent disaster. Hoover tried to persuade employers not to reduce the level of production and wages, and explained union leaders why they shouldn’t insist on raising the wages.
In the spring of 1930 Congress appropriated, according the Hoover’s plan, $ 750 million for public works. For several months entrepreneurs were faithful to the promise to maintain production and reduce wages. However, starting in May-June 1930, with the loss of markets, they still were forced to reduce production. The level of remuneration generally maintained until the summer of 1931, but increased unemployment dramatically reduced the total payroll. In the spring of 1931 a slight increase of industrial production happened, the failure of banks stopped, the curve of employment started to increase. But the developments abroad did not help to improve the situation. By providing support in Congress, Hoover proposed a moratorium on the payment of all types of debt on foreign loans and reparations, believing that the economic crisis had mostly foreign roots (Leuchtenburg W.E., Schlesinger A.M., Wilentz S.).
Later “the Great Depression” that started in October 1929 changed the situation.
U.S. industrial production in 1932 fell to the level of 1913, and foreign trade fell even to the level of 1905. At the height of the crisis in the winter of 1932-33 nearly one of four workers was jobless. The crisis of farmers dramatically escalated. Hoover became a prisoner of events; he didn’t understand the extent of economic devastation and social needs for a long time. His policy in overcoming the crisis relied primarily on self-healing forces of the capitalist economy. He dismissed the government control of the economy and policy costs for the financing federal social programs.
Grave mistake of Hoover was the approval of the Customs Act of July 1930, which by a record rate of customs duty had a catastrophic effect on world trade. Federal farm management did not cope with the rising surplus because of reducing of the demand at domestic and foreign markets, attempt to persuade farmers to voluntarily reduce the production was no more successful than the request for maintaining the level of industrial production. At the end of 1931 Hoover was forced to increase the share of state aid. In January 1932 on the initiative of the President the Congress decided to establish a Reconstruction Finance Corporation to issue loans for the salvation of railways, banks, building and loan associations and other financial institutions. Only at the end of 1930 Hoover’s Administration began to move to anti-crisis events. Up to $ 2 billion was provided for public subsidies in the economy. In July 1932 the Government allocated to certain states $ 300 million to provide assistance and benefits.
At wide-ranging reforms proposed by Congress, such as the introduction of national unemployment payments, Hoover put his veto in 1932.
However, he confirmed by his signature the Act of Norris La-Guardia in favor of unions. As it turned out, the president’s tough stance on everybody’s needs contributed to the loss of Hover’s credibility among people.
Extremely unpopular was his decision in July 1932 to send military force of several thousand veterans of the war away from Washington, where they staged a demonstration for an advance payment of compensation and encamped near the Capitol. Federal farm management did not cope with the rising surplus caused by reducing of the demand for domestic and foreign markets; attempt to persuade farmers to voluntarily reduce the production was no more successful than the request for maintaining the level of industrial production. At the end of 1931 Hoover was forced to increase the share of state aid. In January 1932 on the initiative of the President of the Congress decided to establish a Reconstruction Finance Corporation to issue loans for the salvation of railways, banks, building and loan associations and other financial institutions.
Then he made Congress approve the appropriation of the federal land banks, and in July – of the banks of the housing loan, but categorically opposed to direct federal assistance to the unemployed. In July, Congress adopted the law about providing direct assistance to individuals and significant expansion of public works, but the president vetoed it, declaring that it was “impractical”, “dangerous” and “defamatory to whole our concept of government.” On the proposal of the President Congress passed a law authorizing the Reconstruction Finance Corporation to issue a loan of $ 300 million to states, whose reserves had been exhausted, and 1 billion 500 million dollars to states and municipalities to conduct self-liquidating public works.
The beginning of the crisis was the sudden unprecedented general fall in stocks; stock market panic arose, which grew further into the long strip of comprehensive economic chaos. Exchange panic attack only superficially reflected the economic crisis, it was a consequence of a violation of the reproduction process, caused the exacerbate problems of implementation and mass relative overproduction of goods. Because of difficulties of marketing and inability to obtain loans a wave of bankruptcies went everywhere across the country. According to official statistics, during the years of crisis more than 110 thousand commercial and industrial firms, 19 major rail companies failed, more than 5760 banks went bankrupt, and along with them, and millions of depositors lost their money.
Starting in the industry and the credit system, the crisis has spread to all other sectors of the economy – construction, transport and trade. Influenced by the sharp decline in demand for agricultural products strong agrarian crisis started. In 1934 the wheat harvest fell by 36%, corn – 45%. Crop area catastrophically reduced. The prices were reduced: wheat and corn – in 2,7 times, cotton – more than 3 times.
The inevitable result was a sharp deterioration in the situation of workers and farmers. During the years of crisis, real wages of workers fell by 60%. The total number of unemployed in 1933 reached 17 million in 1933, unemployment in the U.S. amounted to 24,9%, in 1937 – 14,3% and in 1938 – 19%.
Gross income of farmers decreased to more than half. Due to inability to pay debts more than 1 million farmers, who lost their land ownership, went bankrupt. Tens of thousands of destitute farmers came to the cities in search of livelihood, adding to the ranks of the unemployed. Unemployment situation was desperate. Not receiving any assistance from the state, in the absence of any social insurance, the unemployed were forced to beg and starve. Evicted for nonpayment from their apartments, they settled on the outskirts of cities where there were built of boxes and construction waste towns (Hoover H., 2009).