I thought it would be interesting to read it prior to reading David Halberstam’s The Fifties. I am so glad I did; this book is fascinating. This is a huge book; over 859 pages; I’ve read the first 2 chapters “The American People on the Eve of the Great Depression”and “Panic”. I know have a much better understanding of the causes of the depression.
I’d always assumed that blame for the Great Depression could be laid at the feet of Herbert Hoover. I’m rethinking that. Kennedy lays more of the responsibility on Calvin Coolidge, Herbert Hoover’s predecessor. It was Coolidge who said “The Business of America is Business”. He was knows as “Silent Cal”and was very inactive president. His philosophy was to ignore problems as long as possible because 9 of 10 of them were resolved before you had to worry about them. Trouble is when that 10th one shows up it is a whopper and you aren’t prepared for it. Hoover was a member of the Progressive Movement and felt that there is a place for the Federal government to combat unemployment with public works. The government should not stand idly by while there is economic difficulty.
After the crash and through 1930 Hoover tried to use four forces to combat the increasing Great Depression
- Get the Federal Reserve to reduce rates. The trouble was it is independent and the governors did not see eye-to-eye with Hoover
- He jawboned industry to maintain wage rates to encourage consumption. That worked for a while.
- He used the Farm Board (created by Congress at his request as a result of a deep agricultural recession in the late 20’s) to help support agriculture prices. Unfortunately the Farm Board had also created crushing tariffs that went against the long term interests of the country. Additionally, the Farm Board wasn’t capitalized with enough money to be useful
- He fought for stimulating public construction projects. Because of the small role of the government there was only about $200 million to spend on construction projects to help boost the economy.
As I’ve been reading these two chapters I’ve been thinking about today’s Conservative and Tea Party movements. They are proponents of small government and want to get back to the America of the past. I’m thinking they are yearning for is this time between the end of World War I and the crash of October 1929. I just don’t see what was so great about that time. Because there were not big construction project like the Tennessee River Valley Authority much of the country was dark after the sun went down. The judiciary were activist on the conservative side supporting industry’s union busting programs of yellow-dog contracts which forced laborers to agree to never join a union. This was a period where there was no social security, no unemployment help, no resources at all for the workers. People worked 12 hours a day, six days a week. There were no, or very weak child labor laws.
The bank failures occurred because most of the banks (thanks to Andrew Jackson) were single institutions. As the panic grew people withdrew their savings; in order to get the money to pay the depositors, the banks had to sell their assets at fire sale prices, so that they didn’t have enough funds.