02 Feb The Great Depression And Its Downward Economic Spiral: Part 3 Of A 3 Part Series
"Those who fail to learn from history are doomed to repeat it." -Sir Winston Churchill
In part 1 of this 3 part series, we explored the causes of The Great Depression, in part 2; we examined the effects it had on America. In part 3, we explore the ways that the American people tried to dig themselves out of this hole.
Taking Care of Business
There was a mad scramble to come up with some improvement plan that would change the unfavorable tides. In January of 1932, Hoover's Administration came up with a pivotal anti-depression measure, the creation of the Reconstruction Finance Corporation. The RFC was a government-owned and chartered corporation, capitalized at $ 500,000,000, and was authorized to sell a maximum of $ 1,500,000,000 value five-year notes or bonds to the public or to the Treasury of the United States. The purpose of the RFC was to lend money to businesses in danger of collapse. This caused a political turmoil, especially amongst the Democrats who charged Hoover with denying federal aid to the poor while allowing wealthy businessmen to be earmarked. When the people heard that the RFC was lending money to banks and bailing out failing wealthy businesses, yet nothing was allocated for them, the populace became quite angry and aggressive. The farmers who were the hardest hit, having seen their farms auctioned off, were the most violent of all.
The Glass-Steagall Act was passed by Congress on February 27, 1932. It authorized the sale of $ 750,000,000 worth of the Government's huge gold supply and allowed the Federal Reserve System more margins when discounting commercial paper. The purpose of this measure was to neutralize the hoarding of gold and to ease credit.
There were many measures sponsored by the Democrats and progressive Republicans which Hoover either vetoed or had stopped by some of his supporters in Congress. On July 21 of 1932, President Hoover signed the Emergency Relief and Construction Act which provided for $ 300,000,000 in loans to states that were not able to raise money for relief purposes. On July 22, 1932, the Federal Home Loan Bank Act became law, creating regional banks with a capital of $ 125,000,000. President Hoover's hope was that the act would stimulate residential construction, increase employment and expand home ownership.
A Shameful Bureaucratic Blunder
On July 28, 1932, an army of unemployed veterans went to Washington and encamped on government property. Even though these protestors were well-disciplined and acted in a peaceful way, they were driven out by tanks, cavalry, and infantry and machine gun troops. As a result of this encounter, 1000 men, women and children were gassed and two men shot. This was one of the worst demonstrations of bureaucratic blundering and brutal oppression the country had ever witnessed.
Changing of the Guard
When Election Day came around, the hard hit American people would reconsider their political and financial opinions regarding the Republican Party. They felt it was a momentous time for change. Since it did look like much was done during the Hoover Administration, it was their prerogative as voters, tired of the economic ruin and destruction of confidence in its leadership, to establish a Democratic Congress and Administration in the hopes that the grand old days would be restored once again.
On November 8, 1932, Franklin Delano Roosevelt was elected President of the United States, defeating Herbert Hoover by a margin of over 7,000,000 votes, winning 472 of 531 electoral votes. Congress became intensely Democratic. Franklin Delano Roosevelt was sworn into office on March 4, 1933. In his inaugural address, he stated to his millions of listeners "Let me assert my firm belief that the only thing we have to fear is fear itself nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance. "
These were horrendous times for a newly elected President to step in and take control. A complete reversal of when Hoover entered office. Conditions throughout the nation had deteriorated extensively. A third of the labor force was unemployed and men that were able to find work were earning as little as 10 cents an hour. A serious run on the banks occurred when $ 1,000,000,000 was withdrawn two weeks prior to his March 4th inauguration.
The Slow Economic Uphill Climb to Recovery
During his first 100 days in office, he put into effect 15 crucial pieces of legislation to amend many of the nation's problems. Through his famous "Fireside Chats", he addressed his listeners as "My Friends," trying to raise the nation's morale and restore confidence. Roosevelt criticized the Republican Administration for putting its head in the sand and ignoring people who were destitute, those many who needed food and clothing. He pledged a "New Deal" for the American people and asked them for their help in restoring America to what it once was.
New agencies were formed in 1933 to enable the Executive Branch to manipulate the economy. Agencies like the Agricultural Adjustment Administration, The National Recovery Administration (NRA), the Federal Deposit Insurance Corporation (FDIC) and the Civilian Conservation Corps (CCC). Between March 13-27 banks started to reopen with 75 percent of all banks operating. $ 1,000,000,000 was re-deposited and gold was returned to the US Treasury.
The purpose of the CCC was to provide jobs for men between the ages of 18-25 in various projects that intended to conserve and improve the country's natural resources. On May 12, 1933 The Federal Emergency Relief Administration (FERA) is established. The purpose of this program was to distribute $ 500,000,000 to state and local agencies to relieve the poor and the hungry. On May 27, 1933, Congress passed the Federal Securities Act, which instructed the Federal Trade Commission to supervise all new stock and bond issues. On June 13, 1933, the Home Owners Loan Corporation (HOLC) was set up with a capital of $ 200,000,000. Then on June 16, 1933, The Banking Act of 1933 was passed, setting up the Federal Deposit Insurance Corporation (FDIC) which guaranteed individual accounts in banks up to $ 5,000. Also on June 16 of that same year, the National Industrial Recovery Act (NIRA) was passed with the purpose of improving business activity and providing jobs. Another milestone for the Roosevelt Administration was the establishment of the Civil Works Administration (CWA) which created jobs for 4,000,000 workers, which mostly were geared toward unskilled laborers who were paid the minimum wage. The "Social Security Act" became law on August 14, 1935, which was designed to safeguard Americans against the financial difficulties of old age and unemployment. Other provisions in the act were to assist the blind, the disabled and dependent children.
By 1936 five million people returned to work. On November 3, 1936, President Roosevelt was re-elected.
Trouble in Paradise
In 1937 the nation was in a recession. Stock prices began to drop and all business activity started to decline. By 1938 the recession continued to worsen. The stock market had reached its lowest point in four years and the number of those unemployed had reached 2,000,000.
Dare We Hope?
President Franklin D. Roosevelt was elected to a third term. On December 7, 1941, Japanese war plans to attack Pearl Harbor killing more than 2,300 soldiers, sailors and civilians. The United States declared war on Japan on December 8, 1941. On December 11, 1941, Germany and Italy declared war on the United States. With the United States involvement in World War II, the Great Depression finally came to a close. Men and a few women were mobilized into the armed forces. The entire population also played a role in the production or civil defense. Wartime production created millions of new jobs. Women joined the workforce replacing the men who enlisted or who were drafted into the war. There were 50,000,000 people gainfully employed when the war began.
Given the dismal state of today's American economy, despite all that has been learned from the past to ensure financial stability, we cannot be overly optimistic. Contending with surging gas prices, soaring food costs, rising home foreclosures, mass unemployment, a weak economy and the monthly costs of the US involvement in the Middle East, there is utterly no guarantee that the worst is behind us. History could terrifyingly repeat itself.
American economists, businessmen and numerous politicians have left no stone unturned in their efforts to establish stability in the economy, though not a soul can foresee precisely what will happen or what costs will be incurred to reach successful end results.
The question is, why, with this in mind, am I still feeling uneasy and not more hopeful now? Does it mean that the worst is yet to come? Do you see a pattern in history where we've made the same mistakes and the same responses? What of the over-extended credit and speculation, economic collapse, government bailouts that do little if anything? Perhaps there's a good reason I'm scared. What do you think?