Competing Visions for America

Hoover vs. Roosevelt

After reading the speech, what predictions might you make about how Hoover would

respond to an economic crisis?Important to remember Hoover’s values, which were very reflective of traditional, conservative American values of the day:Like many, Hoover looked to the past as a model American civilization > moral fiber of citizens = strong morals + self-reliance + initiative. An activist government would destroy this American character. Americans assumed responsibility, not escaped from them. History had demonstrated that Americans relished their free will, personal autonomy, and consent, while rejecting all forms of domination - private or official. (It was not the American way!) Emphasized his faith in “Rugged Individualism”: individual initiative, self-help, private charities, and active state & local governments.

*Hoover’s personality & demeanor doesn’t endear him to the American people.

According to Hoover, what is the role of the federal government in economic affairs?

In Hoover’s “American System”, progress was based on:• self-government established on decentralized local responsibility• ordered liberty • freedom for the individual• equal opportunity

While acknowledging that WWI controls of the economy were necessary, they nonetheless constituted despotism, autocracy, and socialism, which would destroy the American system in peacetime. European models of paternalism & socialism would destroy self-govt thru centralized govt.Hoover’s Role of Government: protect the rights and responsibilities of the individual & property free enterprise free from government interference stimulate business to act as an “umpire”, not a “player” Business, not government, was to solve economic problems protect the public interest engage in certain public works projects that benefitted all: flood control, navigation, irrigation, research, national defense• government to provide economic, political, and social justice*The record of American economic progress was proof that minimal government interference works.

What was Hoover’s response to the depression?Hoover’s Political Economy:*Government to help business – “Trickle Down” to the American people

lower taxes lower interest rates supported state & local governments relief projects reduce the size and cost of government raise tariffs

Hoover on Relief: In keeping with his unshakable faith in voluntarism, cooperation, and limited government, Hoover supported the role of private charities like the Red Cross, Salvation Army, and YMCA in providing direct aid to the people. Any federal aid would go to state & local government for public works projects.Hoover’s Efforts: Smoot-Hawley Tariff (1930), which raised agricultural/industrial tariffs to historic levels and further weakened the already crippled international trade with an unnecessary trade war. Ended loans to Germany and later called for an 18-month debt moratorium. Reconstruction Finance Corporation (RFC): designed to stabilize the nation’s financial structures by providing credit to banks, RRs, insurance companies with goal of keeping people working & improving international trade. (Hoped that it would “trickle down” to smaller businesses.) Rejected the demands of the “Bonus Army”

The Bonus Army Debacle

The Bonus Army Debacle

Why was this economic crisis different?By 1929, the US > consumer economy

to maintain prosperity, people have to keep spending problems leading to economic depression

Reduced consumer spendingGrowing unemploymentHigh tariffs, which stifled international trade

By 1929, most Americans > URBAN can’t retreat to a family farm (like the often did in the past) to sustain this urban, consumer culture – urban employment was essential urban destitution was quickly too much for private charities to addressInternational trade was critical to global economic prosperity

What’s new about the economy?• US is a consumer economy• personal debt was higher than ever before• the economy was connected to international trade more than ever before

What changes in political thinking were required to face this new economic crisis?The role of the federal govt in managing the economy had to change.

• A consumer economy required people to spend money. To have money, people had to have jobs. The Government’s role (1) aid to sustain employment, (2) provide employment if necessary.• Government must grow to adequately deal with the challenges of a modern economy, urban challenges, and international diplomacy.• The government must establish a minimum standard of living to prevent destitituion.*The Depression changed public perception of the economic role of the federal govt.

How did FDR’s Commonwealth Speech reflect new political thinking?

• Stressed the need for an active government that had not been necessary in the past.• No safety valve + urban challenges + industrialization = required active government•W/O the safety valve of the past (land, jobs, opportunity) people were more likely to suffer from economic discrepancies of capitalism.• Why was it OK for the government to support business, but when needed, the government could not intervene for the good of the economy and common man?• Business had too much power economically & politically in the US.• Espoused many “socialistic” sounding ideals:

administer resourcesAddress underconsumptionAdjust consumptionDistribute wealth and products more equitably adapt existing economic organization to serve the people

What was so appealing about FDR in 1932?

How did FDR restore American’s faith in banks?

Bank Failures > panic > massive withdrawals of money from circulation

Emergency Banking Act:• declared a 4-day national banking holiday• government auditors to inspect all banks to establish their solvency• only “solvent, healthy” banks would be allowed to reopen*Within a month, over $1 billion was redeposited in banks across the country.

Glass-Steagall Act (Banking Reform):• separated commercial from investment banking•Increased FED authority over speculative pracitces• created the FDIC to insure deposits up to $5,000

FDR’s Plan:Relief, Recovery, Reform