The Great Depression (1920–1940): The Onset of the Depression: 1928–1932

The Smoot-Hawley Tariff

Hoover made another serious miscalculation by signing into law the 1930Smoot-Hawley Tariff, which drove the average tariff rate on imported goods up to almost 60 percent. Although the move was meant to protect American businesses, it was so punitive that it prompted retaliation from foreign nations, which in turn stopped buying American goods. This retaliation devastated American producers, who needed any sales—foreign or domestic—desperately. As a result, U.S. trade with Europe and other foreign nations tailed off dramatically, hurting the economy even more.

The Reconstruction Finance Corporation

When it became clear that the economy was not righting itself, Hoover held to his laissez-faire ideals and took only an indirect approach to jump-starting the economy. He created several committees in the early 1930s to look into helping American farmers and industrial corporations get back on their feet. In 1932, he approved the Reconstruction Finance Corporation(RFC) to provide loans to banks, insurance companies, railroads, and state governments. He hoped that federal dollars dropped into the top of the economic system would help all Americans as the money “trickled down” to the bottom. Individuals, however, could not apply for RFC loans. Hoover refused to lower steep tariffs or support any “socialistic” relief proposals such as the Muscle Shoals Bill, which Congress drafted to harness energy from the Tennessee River.

“Hoovervilles”

The economic panic caused by the 1929 crash rapidly developed into a depression the likes of which Americans had never experienced. Millions lost their jobs and homes, and many went hungry as factories fired workers in the cities to cut production and expenses. Shantytowns derisively dubbed “Hoovervilles” sprang up seemingly overnight in cities throughout America, filled with populations of the homeless and unemployed.

In 1932, Congress took the first small step in attempting to help American workers by passing the Norris–La Guardia Anti-Injunction Act, which protected labor unions’ right to strike. However, the bill had little effect, given that companies were already laying off employees by the hundreds or thousands because of the worsening economy.

The Dust Bowl

Farmers, especially those in Colorado, Oklahoma, New Mexico, Kansas, and the Texas panhandle, were hit hard by the depression. Years of farming wheat without alternating crops (which was necessary to replenish soil nutrients) had turned many fields into a thick layer of barren dust. In addition, depressed crop prices—a result of overproduction—forced many farmers off their land. Unable to grow anything, thousands of families left the Dust Bowl region in search of work on the west coast. The plight of these Dust Bowl migrants was made famous in John Steinbeck’s 1939 novel The Grapes of Wrath.

The “Bonus Army”

Middle-aged World War I veterans were also among the hardest hit by the depression. In 1924, Congress had agreed to pay veterans a bonus stipend that could be collected in 1945; as the depression worsened, however, more and more veterans demanded their bonus early. When Congress refused to pay, more than 20,000 veterans formed the “Bonus Army” and marched on Washington, D.C., in the summer of 1932. They set up a giant, filthy Hooverville in front of the Capitol, determined not to leave until they had been paid. President Hoover reacted by ordering General Douglas MacArthur (later of World War II fame) to use force to remove the veterans from the Capitol grounds. Federal troops used tear gas and fire to destroy the makeshift camp in what the press dubbed the “Battle of Anacostia Flats.”

Hoover’s Failure

Hoover’s inability to recognize the severity of the Great Depression only magnified the depression’s effects. Many historians and economists believe that Hoover might have been able to dampen the effects of the depression by using the federal government’s authority to establish financial regulations and provide direct relief to the unemployed and homeless. However, Hoover continued to adhere rigidly to his hands-off approach. This inaction, combined with Hoover’s treatment of the “Bonus Army” and his repeated arguments that Americans could get through the depression simply by buckling down and working hard, convinced Americans that he was unfit to revive the economy and destroyed his previous reputation as a great humanitarian.

The Election of 1932

When the election of 1932rolled around, all eyes focused on the optimistic Democratic governor of New York, Franklin Delano Roosevelt. A distant cousin of former president Theodore Roosevelt, FDR promised more direct relief and assistance rather than simply benefits for big business. Republicans renominated Hoover, and the election proved to be no contest. In the end, Roosevelt won a landslide victory and carried all but six states.