You are on page 1of 2

Crystal Eshraghi

APUSH ~ Period 5

Unit Eight ~ FRQ

Compare and contrast Herbert Hoovers economic policies with those of Franklin

The Great Depression was the great test of the American governmental system
the final frontier to be passed in the long journey of political development and economic
growth. The two Depression-era presidents Herbert Hoover and Franklin Delano
Roosevelt employed radically distinct economic policies during their time in office in
order to battle the onslaught of unemployment, trade restrictions, farm surpluses, and
other ghastly social and economic evils of the day. While Hoover believed in a system of
trickle-down relief, in which financial aid was given to banks and big business in the
hopes that success higher up in the economic ladder would shower the common man with
prosperity as well while direct, individual doles were virtually forbidden, FDR employed a
vast system of experimental reform, recovery, and relief measures intended to aid the
individual American and boost the failing American economy by priming the pump
that is, by providing the initial monetary stimulus to the people themselves so that business
could be conducted and investments made, and so that the norm of the American economy
could resume its legendarily successful conduct.

At the time of the stock market crash, nobody could foresee how long the downward
slide would last. President Hoover was wrong, but hardly alone, in thinking that prosperity
would soon return. This falsely optimistic perception influenced him to urge businesses not
to wages, unions not to strike, and private charities to increase their efforts for the needy
and jobless. Often considered an economic disaster, Hoovers policies were perceived to
primary press the depression harder upon the American people. In June of 1930, Hoover
signed into law a schedule of tariff rates that would stand as the highest in history. The
Hawley-Smoot Tariff set tax increases up to 49% on foreign imports, and enraged both
foreign traders and domestic consumers. Its purpose was to satisfy American business
leaders who desired a higher tariff that would protect their domestic markets from foreign
competition. However, this insanely high tariff caused a chain-reaction of tariff-wall-
building worldwide, thereby leading to a halt to international trade that further deepened
the devastating depression. In terms of economic relief, Hoovers trickle-down philosophy
was epitomized in the creation of the Reconstruction Finance Corporation during his term
in office. This government-owned entity was created as a sort of federal bank that would
lend emergency capital to faltering railroads, banks, life insurance companies, and other
financial institutions nationwide in order to stabilize such businesses. Hoover believed that
these benefits would then trickle down to smaller businesses and ultimately bring recovery
to all people, although the Democrats criticized this measure, claiming that it would only
aid the rich.

Franklin Delano Roosevelts presidency ushered in the era of the New Deal, a
government-sponsored mission to restore economic health to the nation by providing
economic stimulus primarily to the individual. Centered around the three Rs of relief,
recovery, and reform, New Deal policies were aimed towards action and experimentation
with political solutions to economic problems. In the first eight hours of his presidency,
Crystal Eshraghi
APUSH ~ Period 5

FDR ordered a national bank holiday in order to restore confidence in those banks that
were still able to be saved our of the thousands that had failed during the depression. The
Emergency Banking Relief Act authorized government personnel to examine the finances
of banks closed during the bank holiday and reopen those judged to be sound. This
measure was extremely successfully in winning bank the American peoples confidence in
their banking system, paving the way for healthier economic transactions to occur
nationwide. In order to further confidence in the new banking system, FDRs Federal
Deposit Insurance Corporation swallowed up millions of dollars in potential insurance
payments, as it guaranteed and insured individual bank deposits up to $5,000. Farmers
were hit especially hard during the Great Depression. Caught in a nasty cycle of surplus
production, the farmers struggled to make any profit off the very little product they
actually sold for extremely low prices. Determined to stimulate inflation in order to aid the
farmers cause, FDR sponsored the creation of the Agricultural Adjustment Act, which
subsidized farmers who planted on less acres and who plowed their crops under or
slaughtered their livestock in a nasty attempt to halt production rates. The Farm Credit
Administration was also created by New Deal Policies under FDR for a similar purpose
it provided low-interest farm loans and mortgages in order to prevent foreclosures on the
properties of indebted, and often poverty-stricken, farmers.

The Great Depression demanded great economic reform from the nations leaders if
it was to be overcome. While the Republican Hoover employed a more conservative
strategy of appeasing big-business with a trickle-down relief solution that proved to be
ineffective in the long-run, the Democratic FDR chose a more liberal, even socialistic
strategy of aiding the American individual directly through economic reforms designed to
prime the pump of political, social, and economic health for the nation as a single entity.