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Assess The Impact Of Government Intervention In Ending The Great Depression In The Usa

2507 words - 11 pages

The Great Depression began with the Wall Street Crash of 1929, marking the beginning of a decade filled with high unemployment, poverty and a loss of confidence in the economy. Industries and firms suffered greatly particularly in the agriculture, manufacturing and automobile sectors. The governments of the time led by Republican Herbert Hoover (1929-1932) and Democrat Franklin D Roosevelt (1933-1945) were critiqued heavily by society on how they responded to the depression. Their methods of intervention have attracted a number of views over the years in how effective they were in ending the depression. Hoover was seen as following a somewhat ‘laissez-faire’ attitude when it came to the ...view middle of the document...

This would be done through buying surplus farm products at the commercial rate. However by 1932, the Farm Board had spent its budget of $500 million and grain prices fell again. This initiative had a substantial impact on the agricultural sector, and reflected highly on the government’s attempt at intervention. Hoover had made two mistakes with the Farm Board which led to its failure. He did not give them a big enough budget and he did not introduce laws to cut surpluses by reducing production. His efforts to persuade farmers to reduce production voluntarily also went unheard. Later on, President Roosevelt avoided making the same mistakes in 1933 when he tackled the problem of poverty amongst farmers.

Tariffs were also increased as part of Hoover’s attempt to halt the depression. The Hawley Smoot Act was passed in 1930 which tariffs by 50% on 1000 farm products and manufactures goods that were imported from foreign countries. However this intervention also had a negative impact on halting the depression as countries retaliated by raising tariffs on American goods entering their country. This only decreased the level of trade in the USA and contributed to the downward economic spiral, thus having a disastrous impact for Hoover. Roosevelt later learned from this mistake and signed the Reciprocal Trade Agreements Act in 1934 to gradually reduce tariffs. The next attempt that Hoover made to halt the depression was by promoting voluntarism among the American people. He encouraged firms and industries to adopt his policy of ‘voluntary non-coercive’ cooperation in an attempt to keep wages and production steady. This was not effective however in stopping high unemployment and lower wages.

Hoover’s most ambitious measure came in 1932 when he signed a bill which created the Emergency Reconstruction Finance Corporation (RFC). This would authorise massive loans to insurance companies, railroad companies and banks allowing them to promote investment in the hope that this would fuel industrial recovery. The RFC was granted $500 million with the option of borrowing an additional $1.5 billion. Historian Fiona Venn highlight some of the problems with the RFC and how it had some negative impacts on America. She says that individual businesses were too worried by long-term business prospects that they were not interested in borrowing. She also says that these loans were aimed at restoring confidence in the whole economy rather than meeting the needs of the most vulnerable in it.

Despite all of these attempts to halt the depression, none of them succeeded in getting the job. Hoover’s administration always fell short and their measures had a limited impact. Hoover failed to understand the magnitude of the problems and was not effective in coming up with ideas that would be capable of dealing with them. While Hoover was by no means unresponsive to the depression, he did lack the ability to properly combat the problems. He did not lack compassion or...

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