Penguin History of the United States of America

by Hugh Brogan

  Hoover saw the peril and acted to avert it. During the rest of his Presidential term, in fact, he was to act incessantly, doing more than any previous President had done in any previous economic crisis. His bad luck was that what he did was never enough, so that he seemed to be doing nothing, and his personality prevented him from doing more. This devoted man in the end trod the same Via Dolorosa as his great hero Woodrow Wilson.

  Meantime he sent for the leaders of the business community and persuaded them to give undertakings not to lower wages or lay off workers. He was convinced that with a little time and patience the bad corner could be turned and renewed prosperity be found beyond it. He believed it and said so, very often, very publicly: for it was part of a President’s duty to restore confidence, since only confidence would persuade frightened capitalists, large and small, to start investing or producing again. He was joined by a reassuring chorus of Cabinet officers, businessmen (‘Just grin,’ said the head of US Steel, ‘keep working’) and patriotic citizens. For a moment in early 1930 it seemed as if the magic was succeeding. Then the second great blow fell on the American economy. Once more the chickens came home to roost, the bad effects of faulty statesmanship made themselves felt, Hoover’s prognostications were falsified and his reputation began to collapse.

  For the rest of the world was feeling the effect of the American disaster. It is important to remember that, throughout the twenties, the United States had been the only one of all the industrial nations to seem solidly prosperous. All the others were walking wounded, victims of the dislocations brought about by the First World War, except Russia and Germany, which were stretcher cases. Above all, the United States had been the only important source of investment capital and the only source of the money needed to pay reparations and war-debts. The flood of dollars had been drying up before the crash, diverted as it was to the home market and the stock exchanges; now it was reduced to less than a trickle, and before very long the economies which it had floated were wrecked.

  This development took more than a year to make itself fully felt, however; meantime Congress pushed the economic thought (if that is the word) of the twenties to its ultimate absurdity: during 1930 a new American tariff, the Smoot-Hawley, was promulgated. It carried protection to heights even beyond those of the Fordney-McCumber tariff. Presumably the rationale was that since American industry had (allegedly) needed protection in the days of its strength, it needed still more now that it was weak. But the schedule of duties was not compiled in any systematic or scientific way. Instead there was the usual brawl of logrollers in Congress as Republicans and Democrats, Senators and Congressmen, farm representatives and spokesmen for industrial states, competed and bargained and engineered to help the special interests they favoured; just as if the times were normal.

  The White House was quite unable to influence the process. A thousand economists signed a petition begging the President to veto the tariff bill; instead he signed it into law – perhaps the most unaccountable action of Hoover’s career, for it was read as a confession that he had entirely lost control of economic policy. It signalled to everyone with money to use or lose that there was no hope of rational and effective leadership from the United States. It was the rejection of the Versailles Treaty all over again.

  The nations turned in despair to each save herself. As the economists had expected, the Smoot-Hawley tariff was the last blow to world trade. America’s trading partners12 instantly raised tariff barriers against her, in revenge and self-protection; now there could be no hope of re-stimulating American production by foreign demand, for their governments would not allow the foreigners to buy American. Nor could there be any question of re-stimulating foreign production by American demand. World commodity prices continued their headlong descent, to the great injury of primary producers such as Australia, Brazil, Argentina – and the growers of wheat and cotton in the United States. More: though it would be untrue to say that the tariff barriers caused the Second World War, the destruction of the world trading community removed an obstacle to the coming of that war. Japan, for instance, despairing of any assistance from the West, turned decisively to the politics of imperialism and autocracy. In 1931 she invaded Manchuria, in quest of raw materials and markets. The old mercantilists would have approved; their successors wrung their hands. The League of Nations could only pass impotent resolutions; Hoover told his Secretary of State, Henry L. Stimson, that he would take any measures to resist Japanese aggression, so long as they did not involve the use of force. The bankruptcy of American foreign policy was thus fully exhibited for the first, but not the last, time.

  Meanwhile no economic recovery occurred. A gigantic new oil field was discovered in eastern Texas, which produced in such abundance that the price of oil collapsed to a few cents a barrel; the industry suffered accordingly. In 1930 there was a drought east of the Rockies which brought particular devastation to the South. In Kentucky, where the coal-mines had already been forced to close, relief workers found families sleeping huddled on the floor together, having sold their beds and stoves cheap to buy a little food. (Next year, there would be violence in the coal-fields.) In the autumn elections the Democrats took control of the House of Representatives and came within one seat of controlling the Senate.

  Next, in the spring of 1931, the strain on Europe became critical, and the European governments were unable to agree on measures to deal with it. The great bank of central Europe, Kredit Anstalt, failed, like so many others in that dismal season; it was followed by the collapse of the German banking system, and then the Bank of England came under the fatal pressure, for it had underwritten both the Kredit Anstalt and the German banks. To save herself, Britain went off the gold standard in September, in effect abandoning her traditional role as the world’s banker. Hoover had launched a moratorium on international debts in the summer, but though this had slightly lightened the pressure on the European economies, it was not enough. It became clear that among all the other frightful consequences of the débâcle would be the inability of the United States to collect either the principal or the interest of the loans it had made, either the public war-loans to the Allies or the myriad of private loans made so merrily during the twenties to Europe and Latin America. When the French Prime Minister proposed, in December 1932, to pay the next instalment of debt to America, his government was immediately voted out of office. Business confidence weakened still further. Perhaps it did not matter very much, economically, whether the debts were paid or not; but the American public was determined to get its money if it could, and the collapse of its chances was one more black mark against Herbert Hoover’s management.

  There was still as little sign of recovery at home as abroad. That glory of the twenties, the automobile, on which so much depended, had outlived its popularity, or rather the ability of the masses of Americans to pay for it. Sales of new cars slumped, from just under 4.5 million in 1929 to just over a million in 1932. All other industrial products failed similarly. The pressure on the employers was soon too great to be resisted; and certainly they were not inspired to resist by the gloomy, unreassuring reassurances of poor, reserved, chilly, heavy Herbert Hoover. His proclamations of hope and courage were now received with total scepticism: as early as 1930 a leading Republican Senator was driven to speculate that there must be some concerted effort on foot to use the stock market as a method of discrediting the administration. ‘Every time an Administration official gives out an optimistic statement about business conditions, the market immediately drops.’ So it is not surprising that the industrialists soon forgot their undertakings and began, reluctantly, to cut wages and hours and to give their workers the sack. Soon the only rising curve in the statistics was that of unemployment.

  It was five million at the end of 1930, nine million at the end of 1931, thirteen million at the end of 1932. The raw figures do not begin to convey the horrors that now suddenly entered American lives. The physical consequences of this general worklessness were bad enough. Th
e prosperity of the twenties had never been as universal as its boosters proclaimed, nor its level as high. Still, more Americans than ever before had earned enough money to taste some of the luxuries and comforts of life, as well as to take the necessities for granted. Now, in their millions, they found themselves stripped of everything – jobs, possessions, housing – often unable to find a night’s shelter for their families, or enough to eat. In Youngstown, Ohio, unemployed men went to the municipal incinerator to keep warm and slept at night on the piles of garbage there; in Chicago the garbage was picked over for food by desperate women, competing with flies and maggots. Starvation was a real threat, malnutrition a daily fact of life, in the greatest food-producing country in the world. The food was not even dear: the collapse in world prices had seen to that, and farm incomes (which had benefited little from the boom) had fallen by more than half. But precisely because prices were so low, it would pay nobody to shift harvests to market. In Oregon sheep were slaughtered and left to the buzzards because farmers could afford neither to feed them nor to ship them. Wheat in Montana was left to rot in the fields. In Philadelphia, meanwhile, one family lived off dandelions.

  As bad as the hunger, weariness and cold (gas and electricity companies could not for ever overlook unpayable bills, though they were often surprisingly patient) were the humiliation and despair. The descent came by stages: the loss of one job; the search for another in the same line; the search, growing frantic, for work in any line; the first appearance at the bread-line, where, astonishingly, you met dozens of other honest men who had kept the rules, worked hard and were now as low as the professional bums. It was work you wanted, not charity; but you were forced to plead desperately for charity. Often you did not get it, for there was not enough to go round.

  The bitter truth was that American society was hopelessly ill-organized to cope with such an emergency. The assumption had always been that on the whole the thrifty and diligent would never know real want; private charity was a duty, which would look after the unfortunate; the riffraff could be left to look after themselves. This assumption had been out of date since the Civil War; but it had never been so ruthlessly tested before. Private charity soon began to run out of funds. By 1932 the Red Cross could grant only 75 cents a week to each impoverished family. Public authorities were helpless, for the greatest need was in the cities, and the cities, so long the object of rural suspicion, were prevented by law from tackling the problem of relief by such measures as fresh taxation or public works without the consent of the state governments; and it was long before that consent was forthcoming. For it seemed to all too many businessmen and state legislators that to admit the size and permanence of the relief problem by trying to do something about it would undermine still further that mysterious quality, ‘confidence’, without which there could be no recovery. So the unemployed were left largely to their own devices: whether selling apples on the sidewalks (but there was a glut of apples as well as of sellers), or offering to shine shoes, or, in the case of hundreds of thousands of adolescents, taking to the roads and railroads as tramps.

  Clearly the problem of relief was too big for any agency except the federal government. From every quarter the clamour began to rise for Washington to tackle the problem directly, instead of leaving it to the thousand and one local organs of government. If Hoover, as it seemed, could not give work to the people, let him give them bread.

  He refused to do anything of the kind. There were horrible ironies here. None of those who knew him best doubted his compassion. He was toiling desperately, eighteen hours a day, to mend matters: greying, putting on weight, his hands trembling, his voice hoarse, his eyes red with exhaustion.13

  In 1919 Keynes had described him as having the air of a weary Titan; what would he have said of him in 1932? Yet Hoover, who had first earned his great reputation by organizing the feeding of the starving children of wartime Europe, now set his face against Americans who, if they were not yet starving, in all too many cases soon might be.

  Hoover had not grown inhumane. But he had always been an ideologist, who believed in what he called American individualism: in the social arrangements which had made it possible for a poor Iowa farm boy to become, first, a millionaire by his own efforts, and then President of the United States. The system which had made such an achievement possible must not be tampered with in any circumstances; it must be vigorously defended, whether against monopoly capitalists (Hoover retained many of the attitudes of a pre-war Progressive) or the Kaiser’s armies, or the Bolsheviks, or, now, the economically and politically ignorant who wanted the state to take on responsibilities which, in the American system, belonged exclusively to the individual. He was being asked to abandon the convictions of a lifetime, and he could not do it. In that he showed his unfitness for his position (as had George III). ‘Time makes ancient good uncouth.’ What America needed was a leader who could accept this truth. Hoover could not. He clung to what, until then, most men had deemed to be the essence of America. Even the agonies of the Depression could not shake him: if the will was there, organized private charity could deal with them, as he himself had dealt with the agonies of Belgium. If the state made itself responsible for seeing that men had work, food, shelter – made the direct pursuit of happiness its business – then everything that made the United States unique and glorious would be betrayed. The mission of the federal government was to get the productive machine operating again without destroying the moral fibre of the citizens.

  All this seemed beside the point to the unemployed. And Hoover was inconsistent. He allowed, indeed encouraged, the states and the cities to organize relief; he set up a Reconstruction Finance Corporation to assist businesses in trouble by making them loans; he came to the rescue of farm animals whose owners could no longer pay for their feed. Why then would he do nothing for the mass of his fellow-countrymen? Hoover had an answer, but by the election of 1932 the people were no longer listening to him. He had become a joke in bad taste. The shanty towns that sprang up round the great cities, where impoverished families sought shelter, were known as ‘Hoovervilles’. The newspapers they slept beneath were ‘Hoover blankets’. He was seen as stony, unimaginative, hard-hearted, inert. These impressions were reinforced by the affair of the Bonus Marchers. These were unemployed First World War veterans, who had been promised ‘bonus’ payments in 1945, cash presents to see them through their old age; now they demanded payment in advance, since old age could hardly be worse than what was already happening to them; and they marched on Washington to demand their due. Hoover hid in his office and refused their petition, seeing it as no more than an unusually spectacular raid on the Treasury. Eventually he ordered the army to disperse them from the little Hooverville they had established not far from the White House. The army Chief of Staff, General Douglas MacArthur, a flamboyant egoist on a white horse, made a bad affair worse by driving off the veterans with tanks, guns and tear-gas, giving them no chance to leave quietly. The public was revolted by the business, and if Hoover had not already lost the coming election, he did so then.

  Meanwhile the economy continued to spin down the deflationary spiral. Even crime and vice felt the cold wind: in 1933 the New York police estimated that the number of speakeasies in the city had fallen from a high of 32,000 to only 9,000. The scandals of the palmy days began to be uncovered. The ‘match-king’, Ivar Kreuger, committed suicide in March 1932, just before the full extent of his swindling was revealed; Insull’s electricity empire crashed at much the same time. Senate investigators began to publish the full extent of the frauds and malpractices that Wall Street had tolerated while the going was good.

  In their despair and disgust the Americans did not abandon their ancient political system; rather they gave it one more chance. They turned from the Republicans not to the Socialists but to the Democrats. Franklin Roosevelt, the Governor of New York, secured his party’s Presidential nomination after a sharp struggle. He showed a dramatic flair for smashing obsolete traditions by flyin
g to Chicago14 to accept the nomination in person. ‘I pledge you, I pledge myself, to a new deal for the American people,’ he told the delegates. Thereafter he ran a dazzling campaign, defeating Hoover by 22,815,539 votes to 15,759,930; Hoover carried only six states. But it would be four months before the new President could take office, and meanwhile the attrition of the business system went on. Confidence was still a corpse, and under the impact of previous disasters a still worse one began to draw near. Bank failures, we have seen, had been endemic during the twenties. They were vastly more numerous during the Depression: as many as 2,298 banks broke in 1931, for instance; but the really worrying thing was that every year brought down bigger banks than the year before. No recovery measures could be effectively taken by Hoover now; he had been repudiated; and Roosevelt refused to lend the outgoing President his authority – he could not afford to tie himself to that sinking ship. So when the third acute crisis of the Depression struck, there was no one to resist it. Suddenly the bank depositors (private and commercial) discovered that they had lost all faith, not so much in the national banking system as a whole (though they would have had good reason) as in the particular banks where they had put their money. For money was performing an unnerving vanishing trick: there were two-thirds less of it than there had been in 1929. Withdrawals soared; still more banks broke; the governors of the various states began to declare ‘bank holidays’ – in other words, they shut the banks and froze the deposits. This new panic erupted in mid-February 1933. During the next two weeks bank holidays became nearly universal. On 4 March, Inauguration Day, the last hold-outs gave way, and the banks in Chicago and New York refused to open for business. In that ghastly moment it seemed as if the entire economic structure which so many generations had laboured to rear and improve had collapsed for ever. It was with dread in their hearts, and not very much hope, that people waited to hear what the new President would say, and to see what he would do.