The Great Depression is considered the period within which the world experienced its worst economic recession of all times. Numerous economists have had different theories on the exact cause of the recession and the exact time that it started, but general thoughts conclude that it started with the stock market crash of October 1929. The causes remain speculative, consensus being that the stock market crash was a symptom and not a cause. Regardless of the thoughts on its causation, the Great Depression brought about various responses from different groups and individuals in the political, industrial and business sectors. This paper discusses the responses and reactions of Herbert Hoover, Franklin Roosevelt, the labor force and the business leaders of the time, evaluating these reactions and deducing the role that they played in the causation and the recovery from this great depression.
By the onset of the stock market crash, Herbert Hoover had barely been in office for a year. As the president of the United States, his initial response was mediocre; he hoped that the recession was a passing wave and that things would get back to normal within a couple of months. His response was thus largely on the surface. First, he initiated labor harmony where he encouraged employers not to lay off their employees but rather to volunteer and cushion the people through the tough economic times. This only worked for a short time, and eventually, businesses could not sustain their employees and had to lay some off while cutting back on the wages of the retained ones. With the increasing numbers of unemployed people, he started a public initiative to provide employment. He also tried to balance the budget and increase federal spending. Moreover, in a very conservative way, he encouraged the private sector to partner with the government although he was strict against individual bailouts. It is this hard line that may have cost him another term in office seeing as he lost to Franklin Roosevelt who had campaigned on a bailout card promising the people a ‘New Deal.’
Franklin D. Roosevelt
Franklin Roosevelt came into office at a time when the recession had already eaten deep into the American and global economy in general. Right from the time of his campaigns, he had planned to rescue the economy by using a number of practical procedures that included direct funding by the federal government to rescue banks and other businesses. In his ‘New Deal’ as implemented with his first one hundred days, Franklin Roosevelt initiated farm subsidies, upheld the public works program making it much larger and diverse, started the social security arrangement, increased the taxes of the wealthy members of the society, started controlling the banks and other public utilities. All these measures were aimed at cushioning the public as well as the investors while jump-starting the nation’s economic recovery.
It can be stated that these measures were undertaken in a haphazard manner considering that the targeted sectors were not focused on consistently. For this, the President can be excused seeing as the mainstream economic theories on the recession were not available at the time. The President simply targeted the main economic sectors that included agriculture, banking, federal treasury and the labor force. In this way, he managed to channel the available federal resources to improving the country’s economic situation even if this was not done as systematically as it would have had if occurred at a later date.
The Labor Force
As a result of the recession, most employers were forced to let their workers go. The few that were retained were sustained on very low wages in order for the businesses to remain operational during the tough times. These hardships led to the staging of numerous strikes and hunger marches by the unemployed and some worker unions in protest of what was seen as the government’s reluctance to correct the situation. The unemployment rates had gone as high as 25% and life was extremely difficult for the people. With low wages and few jobs, there was not much to do except riot and protest for the government’s consideration.
At the onset of the Great Depression, most businesses suffered great losses as the stock market crashed. As it progressed, things got worse to the point that companies had to close. At this point, business leaders sought the intervention of the government in saving their businesses. While Hoover was still in office, this request was vehemently denied, and it can thus be said that the business leaders played a great role in getting him out of the office. They supported Franklin Roosevelt, encouraged by the fact that his ‘New Deal’ allowed the federal government to bail not only the banks but also the businesses. Later on, however, they criticized this New Deal claiming that it was a shortsighted move and it did not provide a way out of the Great Depression as they had anticipated. These business leaders also further worsened the recession by laying off their employees, closing down most of their establishments and generally destabilizing the prices of consumer goods in the markets in order to transfer the steep costs to the consumers while cushioning themselves.
Their Responsibilities in Causing and Ending the Great Depression
The labor force as a group consisting of the workers and their unions may not necessarily be held accountable for the beginning or the end of the Great Depression. They were mainly spectators or rather victims in this experience. The riots and hunger marches however did not do any good for the populations as they further spread despair and misery.
The business leaders however had a role to play in the cause and the worsening of the situation. Before the stock market crashed on Black Thursday, business leaders had largely taken advantage of the terrible lending tendencies of the banks to make risky investments. As a result, it can be stated that they along with the banks were responsible for the recession. These faulty banking policies and the fact that businessmen were not keen to evaluate the risk of their investments made the markets vulnerable thus triggering a complete melt down when the Wall Street came down.
In addition, these business people brought about the high levels of unemployment. Before he was defeated by Franklin Roosevelt, Herbert Hoover dedicated his time trying to get the business leaders to consider volunteerism in retaining their workers just so they could earn a living and sustain themselves through the hard times. These employers however opted to lay the people off and save their businesses. This increasing unemployment only worsened the situation, as there were far too many homeless and hungry people on the streets.
Herbert Hoover also played a significant role in the Great Depression. He did not appreciate the gravity of the situation early enough and thus allowed the people to continue in oblivion of the approaching problem. By the time he sprang into action, the Depression had already destroyed a considerable part of the country’s economy, especially the agricultural and industrial sectors. This reluctance to act may have cost the nation a great deal and him the presidency. Hoover was soon replaced by a feistier Franklin Roosevelt. In addition, he was shortsighted in handling the matter as he simply hoped that it would pass quickly, and all his efforts were directed towards cushioning the citizens with the help of the businesses and industries. Hoover’s rigidity over federal funds also somehow worsened the situation by increasing despair and killing the hope of the people in terms of a recovery. While trying to prevent a complete meltdown, he may have caused one by acting aloof over the plight of the business community during the recession.
Franklin Roosevelt is commended for his ‘New Deal’ that gave Americans the hope of recovery from the severe economic recession. This deal, however, cannot be commended for ending the recession. Things certainly got better for the people with the implementation of the New Deal, but it took much longer for the country to get out of the recession. The deal at some point even received a lot of criticism from the business community as they questioned its ability to restore the economy to what it had been and even make it better. This means that its role in ending the Great Depression is not entirely established on solid ground.
Among the things that Franklin Roosevelt is remembered for is the way in which he took control over the banking sector to restore people’s trust to the system. While this had been refuted by his predecessor as a socialist move, Franklin Roosevelt implemented it and managed to calm the masses with it. Years later, these bailouts may have been considered as a wrong move, but at the time they saved the economy in an exceptional way.
Furthermore, he started the work relief programs for the unemployed who at that time were an astounding 25% of the labor force. This reduced the unemployment levels thus improving income levels and purchasing power parity. These programs enabled a return to normalcy by ensuring that the people could afford the basic consumer goods once again. Another important step was the initiation of public private partnerships and farm subsidies to stabilize the prices of products in the market. All these actions got trade back up, implying that once again the businesses could become operational despite the bad global economy.
The actions undertaken by Franklin Roosevelt neither ended the Depression nor made a future recurrence unlikely. These actions however corrected the situation as it was at the time, restoring hope and rejuvenating trade in the country at a time when most people thought all was lost. This is a remarkable contribution considering that not much had been done in terms of economic theories with regards to the recession. He can be said to have gone a long way to save the American economy without much to go on in terms of academic thoughts and research.
The Great Depression is considered to have put the political front to the test in a very significant way. First, Hoover was considered too rigid for the office, and later on Roosevelt was criticized for being shortsighted. In essence, each of these presidents had a role to play in the severe recession, although neither of them actually ended it. The business leaders on the other hand played a big role in causing the Great Depression; and yet, they sat back complaining and worrying about their businesses to the end. From the Great Depression, it becomes imminent that economic theories play a role in the formulation of sustainable policies that are not as shortsighted and fruitless as the ones implemented first by Herbert Hoover and then by Franklin Roosevelt. Each played a part during their time, but so many years later, these parts became more insignificant in the bigger picture.