T5 Economic

Question 1

The Car Industry

Answer 1

• The car industry played a very important role in the boom of the 1920s, often leading the way in
  technological change as well as stimulating the growth of other industries.
• It grew dramatically in the 1920s and by the end of the decade there were 4.5 million cars on the
  road, the largest industry in the USA.

Question 2

Henry Ford

Answer 2

• Henry Ford was born in Greenfield Township, Michigan, but he moved to Detroit to learn about
  engineering and became an electrical engineer, building his first car in a rented brick shed.
• In 1903, he founded the Ford Motor Company in Detroit.
• In 1908, he introduced his Model T. Ford which was nicknamed the ‘tin lizzie’.
• Existing car manufacturers built several different car models in a range of colours, but Ford
  showed the benefits (and reduced costs) of manufacturing one standard model that was ‘any
  colour as long as it was black’.

Question 3

The Assembly Line (Mass Production)

Answer 3

• In 1913, Ford introduced a much more efficient method of producing cars, the assembly line or
  ‘magic belt’.
• He had seen how efficiently this was used in meat-packing factories and slaughterhouses.
• An electric conveyor belt carried the partly assembled car at the same speed past workers who
  stood at the same spot and did the one job such as fitting on the wheels or doors.
• This saved time as the tools and equipment were brought to the worker rather than him having
  to waste time walking about for these.
• In 1913, the Ford factory in Detroit was producing one car every three minutes.
• By 1920, the same factory was producing the same car every ten seconds.

Question 4

Workforce

Answer 4

• Ford believed in hard work and would walk round his factory each day encouraging his workers
  to do their job properly.
• However, he had quite a turnover of workers who found the assembly line boring and
  monotonous.
• Therefore, in 1914 Ford announced that he would double the wages to $5 a day, which was far
  more than anyone else paid for the equivalent job. Workers rushed to Detroit to work for him.
• He also reduced the length of the working day to eight hours and introduced a third shift, so the
  factory was operating a three-shift system and working 24 hours each day.

Question 5

The Model T Ford (‘The Tin Lizzie’)

Answer 5

• Owing to his business methods and new technology, Ford brought down the price of cars and
  made them affordable to many Americans.
• In 1914, a Model T cost $850. By 1926, the price had dropped to $295.
• Ford also led the way in introducing hire purchase as a method of credit.
• Benefits of the car industry The car industry revolutionised American industry.
• It used so much steel, wood, petrol, rubber and leather that it provided jobs for more than five
  million people.
• Around 90 per cent of petrol, 80 per cent of rubber and 75 per cent of plate glass produced in the
  USA was consumed by the car industry by the late 1920s.
• The car industry transformed buying habits, making hire purchase a way of life for most Americans
  because it enabled an average family to buy a car.
• It promoted road building and travel, which in turn led to motels and restaurants being built in
  places that had been considered out of the way.
• The production of automobiles rose dramatically from 1.9 million in 1920 to 4.5 million in 1929.
• The three main manufacturers were the giant firms of Ford, Chrysler and General Motors.

Question 6

Road Building

Answer 6

• Breaking with the policy of laissez-faire, the federal government expended a great deal of energy
  on road building in the 1920s.
• The Federal Highway Act of 1921 gave responsibility for road building to central government and
  highways were being constructed at the rate of 10,000 miles per year by 1929.
• But this was not enough. New roads could not keep pace with the growth of traffic.
• Congestion was common, particularly in the approaches to large urban centres.
• In 1936, the Chief Designer in the Bureau of Public Roads reported that between 25 and 50 per
  cent of modern roads built over the previous twenty years were unfit for use because of the
  amount of traffic that was quite simply wearing them out.
• Motor vehicles also created the growth of new service industries such as garages, motels, petrol
  stations and used car salerooms.
• Improved transportation also afforded new opportunities for industry.
• For example, goods could be much more easily moved from factories to their markets.
• The number of truck registrations increased from less than 1 million in 1919 to 3.5 million by 1929,
  when 15 billion gallons of petrol were used and 4.5 million new cars were sold.

Question 7

Republican Government Policies

Answer 7

• Republican presidents dominated politics in the 1920s and successive presidents were greatly
  influenced by Treasury Secretary Andrew Mellon, a firm believer in a free economy.
• Andrew Mellon (1855–1937) was appointed Secretary of the Treasury by President Warren G.
  Harding in 1921, and he continued to serve under Presidents Calvin Coolidge and Herbert Hoover.
• Mellon’s philosophy was one of debt reduction, tax reduction and a balanced budget. His tax
  reform scheme, known as the Mellon Plan, reduced taxes for business.

Question 8

Laissez-Faire

Answer 8

• President Coolidge held the view of many Americans, that governments should be involved as
  little as possible in the day-to-day running of the economy.
• If businessmen were left alone to make their own decisions, it was thought that high profits, more
  jobs, and good wages would be the result.
• This was the policy of laissez-faire – the only role for the government was to help business when
  it was asked to.
• Under Harding and Coolidge, the Republican economic policy of laissez-faire contributed to the
  prosperity of the USA.
• Low taxes and few regulations meant that businessmen were able to chase profits without fear
  of interference. Indeed, laws concerning price fixing were often ignored.

Question 9

Rugged individualism

Answer 9

• Successive Republican presidents believed in ‘rugged individualism’.
• This was a term used by Republican presidents such as Hoover who believed that people achieved
  success by their own hard work.
• It originated with the early Americans who moved to the West and made a new life for themselves
  through their own efforts.

Question 10

Protectionism (Tariffs)

Answer 10

• Republican governments put tariffs on imported goods in order to limit the competition from
  foreign imports. Imports became more expensive compared with American-made goods.
• This, in turn, encouraged the purchase of American goods and helped US-based producers.
• The Fordney–McCumber Tariff (1922) raised import duties on goods coming into the USA to the
  highest level ever, thus protecting American industry and encouraging Americans to buy home
  produced goods.
• In addition, a reduction of income tax rates left some people with more cash to spend on
  consumer goods.
• This, in turn, provided the cash to buy the home-produced goods. Mellon handed out tax
  reductions totalling $3.5 billion to large-scale industrialists and corporations.

Question 11

Technological Change

Answer 11

• The USA led the world in changes in technology.
• The development of electricity was fundamental to this advancement.
• Electricity provided a cheaper, more reliable, and flexible form of power for factories and other
  industries.
• Electricity stimulated other associated electrical goods industries such as refrigerators, vacuum
  cleaners, and radios.
• Other key developments included the conveyor belt and mass production techniques adopted by
  the car industry, which speeded up industrial production, improved productivity and led to
  greater profits.
• These were already established in some industries, for example, in the manufacture of firearms,
  sewing machines and railroad engines.
• They were later extended to the production of clocks, typewriters, and bicycles.
• Plastics like Bakelite were developed and used in household products.
• Other innovations included glass tubing, automatic switchboards, and concrete mixers.
• New materials enabled the construction of new types of buildings.
• The skylines of the great cities were transformed by skyscrapers.

Question 12

New Business Methods

Answer 12

• There was a significant growth in huge corporations that made use of more scientific business
  methods. By 1929, the largest 200 corporations possessed twenty p er cent of the nation’s wealth.
• They dominated industry in various ways:
• They operated as cartels to fix prices. The government turned a blind eye to these practices.
• Some corporations such as US Steel were so big that they were able to dictate output and price
  level throughout the industry.
• The large corporations also created holding companies. For example, Samuel Insull built up a vast
  empire based on electrical supply. He eventually controlled as many as 111 companies.

Question 13

Management Consultants

Answer 13

• Management science led to the development of different management roles such as specialisms
  in production, design, marketing, or accounts.
• There was a significant growth of business schools with as many as 89 by 1928 training 67,000
  students.
• There were new ‘scientific’ theories put into practice, particularly the work of Frederick Taylor
  and his followers.
• Frederick Taylor (1856–1915) was a mechanical engineer and one of the first management
  consultants.
• He promoted greater efficiency in business and industry in his book
• The Principles of Scientific Management. He believed in the theory of ‘time and motion’, a system
  in which production techniques are allocated set times for completion and production targets laid
  on this basis.
• His ideas underpinned the use of the assembly line, especially in the car industry.

Question 14

Growth of Consumerism

Answer 14

• Increased demand for consumer goods was due to several factors.
• By 1927, two-thirds of US homes had electricity. In 1912, only sixteen per cent of the American
  people lived in electrically-lit homes.
• By 1927, the number had risen to 63 per cent.
• The growth of electric power encouraged a much more widespread use of electrical goods.
• During this period, consumption of other energy sources also grew, for example the amount of
  oil used doubled, and gas quadrupled.
• The growth in female employment also increased the need for labour-saving devices such as
  washing machines and vacuum cleaners and hire purchase schemes made it easier to buy goods
  on credit.
• Furthermore, the popularity of entertainment meant more and more Americans bought radios
  and gramophones.
• For the majority of workers in industry, wages increased. Between 1923 and 1929, the average
  wage rose by eight per cent.
• In other words, workers had more spare money to spend on consumer goods.

Question 15

Growth of Advertising

Answer 15

• Various advertising techniques developed rapidly during the 1920s.
• Before then advertisements had mainly comprised the use of the printed word telling the
  customer about the attributes of the product.
• But now companies needed to expand demand for their products, so they began to hire
  psychologists to design campaigns and target specific groups such as young women.
• Lucky Strike, for example, encouraged women to smoke in public with their cigarettes marketed
  as ‘torches of freedom’.
• Advertising campaigns began to emphasise slogans, brand names, celebrity endorsements and
  consumer aspirations. There was a constant need to create demand.
• The growth in industrial production required a continuous market. It was no longer enough to sell
  a durable unchanging product that might last the purchaser for life, as Ford had done with his
  Model T. Now, to fuel the boom, it was necessary for people to buy new things frequently.
• They had to be convinced that they could not do without the latest model of an electrical
  appliance or the new design in clothing.
• For many consumers advertising techniques worked. Not only did they associate products with a
  slogan, but they also believed they could not manage without the advertised product.
• The Kansas City Journal-Post was hardly exaggerating when it wrote, ‘Advertising and mass
  production are the twin cylinders that keep the motor of modern business in motion’.
• By 1929, companies were spending $3 billion annually on advertising, five times more than in
  1914.
• The new mass media, especially the cinema and the radio, brought about a revolution in
  advertising. By 1928, there were 17,000 cinemas in the USA.
• These provided enormous potential for commercials being shown between the two main films.
• By 1929, there were 618 radio stations throughout the USA with an audience estimated at 50
  million.
• Advertisers again saw the potential and began to sponsor programmes in return for airtime for
  commercials.

Question 16

Availability of Credit

Answer 16

• The growth of credit made it much easier for people to buy goods even though they did not have
  enough cash to pay for them immediately.
• This was due to the development of hire purchase whereby goods were paid for in instalments.
• The goods were owned once the last instalments were paid.
• About half the goods sold in the 1920s were paid for by hire purchase.

Question 17

The stock Market Boom

Answer 17

• In the 1920s, the stock market seemed to be the link to the prosperity of the USA.
• The values of stocks and shares rose steadily throughout the decade until they rose dramatically
  in 1928 and 1929.
• Moreover, the amount of buying and selling of shares grew substantially until it was a common
  occurrence for ordinary working people to become involved – the accepted image of the 1920s is
  that ‘even the shoeshine boy’ was dealing in shares.
• Most companies’ shares seemed to rise, and so people were prepared to risk their money on
  buying shares – after all, their value would rise.
• The USA began to speculate. Even if people did not have enough money to pay the full amount,
  they would make a deposit, borrow to pay the rest and then sell the shares in a couple of weeks
  when their value had risen, and a profit had been made.
• The speculator would then pay off his debt and still have made money on the deal. (This was
  called ‘buying on the margin’.)
• The number of shares traded in 1926 was about 451 million, increasing to 577 million the
  following year.
• By 1928, with share prices rising fast, there was a bull market on the Wall Street Stock Exchange
  and, in 1929, there were more than 1.1 billion shares sold.
• Up to 25 million Americans became involved in the frenzy of share dealing in the last years of the
  decade.

Question 18

Overproduction

Answer 18

• The construction boom of the 1920s came to an end in 1928. This had a knock-on effect, slowing
  down spending and investment. The great boom in car ownership slowed sharply.
• By 1929, most Americans who could afford a car already had one. Industrial production fell in the
  two months before the Wall Street Crash.
• The fall in demand for consumer goods was partly due to the unequal distribution of wealth.
• The new-found wealth of the 1920s was not shared by everyone. Almost 50 per cent of American
  families had an income of less than $2,000 a year, the minimum needed to survive.
• They could not afford to buy the new consumer goods. Some manufacturers did not see that there
  was a limit to what could be bought, and so they continued to produce goods. The result was
  overproduction.
• In addition, the USA could not sell its surplus products to other countries, especially in Europe.
• Some European countries owed the USA huge amounts of money and were struggling with
  repayments.
• The US government had put high tariffs on foreign goods in the 1920s.
• Many foreign governments responded by doing the same to American goods and consequently
  US businessmen found it very difficult to sell their goods abroad.
• Therefore, an ideal outlet for their overproduction was blocked.

Question 19

The Instability of ‘get-rich-quick’ Schemes

Answer 19

• While many people saw easy credit as a strength in the economy, there were also considerable
  drawbacks. ‘Get rich quick’ was the aim of many Americans in the 1920s.
• They invested in hugely speculative ventures and inevitably many lost their money.
• This situation provided golden opportunities for confidence tricksters and crooks.
• In the early 1920s, for example, Charles Ponzi, a former vegetable seller, conned thousands of
  gullible people into investing in his ventures.
• He promised a 50 per cent profit within 90 days.
• When sentencing him to prison, the judge criticised his victims for their greed.
• Ponzi had not forced people to part with their money.
• The period saw other more large-scale speculations, notably during the Florida land boom and on
  the stock exchange in the latter part of the decade.

Question 20

The Florida Land Boom

Answer 20

• While on bail awaiting trial, Ponzi found employment selling land in Florida.
• This was a venture well suited to his talents.
• Until this time, Florida was a relatively undeveloped state with a small population.
• Between 1920 and 1925, the population of the state increased from 968,000 to 1.2 million.
• There were large-scale coastal developments. Parcels of land began to be sold to wealthy
  Northerners on the basis of glossy brochures and salesmen’s patter.
• People began to invest their money in unseen developments, hoping to sell and make a quick
  profit.
• The land boom could be sustained only as long as there were more buyers than sellers, but
  demand tailed off in 1926.
• There were scandals of land advertised as within easy access of the sea that was really many miles
  inland or in the middle of swamps.
• Then nature played its part, with hurricanes in 1926 killing 400 people and leaving 50,000
  homeless.
• With thousands of people bankrupted, the Florida land boom collapsed, leaving a coastline strewn
  with half-finished and storm-battered developments.

Question 21

Problems with agriculture

Answer 21

• The farming industry had benefited from the First World War with prices rising by as much as 25
  per cent.
• However, after the war, falling demand led to falling prices with wheat dropping from $2.5 to $1
  a bushel.
• Farmers were producing more food than America needed.
• Moreover, demand fell further due to the growth of synthetic fibres, which lessened the market
  for natural ones such as cotton.
• Prohibition cut the demand for grain previously used in the manufacture of alcohol.
• Paradoxically, technical advances meant that more crops could be produced on the same or even
  reduced acreage.
• Greater use of tractors meant fewer horses were necessary, which in turn meant less demand for
  animal food.
• The situation was no better abroad. During the war, farmers had been able to sell their surplus
  abroad. After the war, European farmers were able to grow enough to meet their own demands.
• Moreover, there was stiff competition from Canadian, Australian, and Argentinian farmers who
  were supplying a vast amount of grain to the world market.

Question 22

Town and Country

Answer 22

• There was a distinct division between the town and the countryside.
• While many towns and cities, especially in the North, experienced economic growth and
  prosperity during the 1920s, this was not the case with rural areas, especially in the South and
  West, due to problems with agriculture.
• This led, for the most part, to much lower living standards and even poverty in these areas of the
  USA.
• The countryside did not really benefit from the improved lifestyle of many urban Americans who
  had electricity and running water, and wages were very low.
• By 1928, half of all US farmers were living in poverty.

Question 23

Problems with Older Industries

Answer 23

• Several staple industries faced long-term difficulties in the 1920s.
• Coal mining and the textile industry were stagnating or in decline.
• Demand for coal fell in the 1920s as gas and electricity were more widely used and there was
  more foreign competition, especially cheap coal from Poland.
• This led to the closure of a great number of mines and many miners were made redundant.
• The textile industry also experienced problems.
• The lowering of the tariffs on wool and cotton in 1913 meant that the US textile industry faced
  stiff competition from abroad.
• It also faced the challenge of a new product – rayon.
• This man-made fibre was far cheaper to produce than wool, cotton or silk.
• Textile mills in the North, for example in Massachusetts, closed down, or moved south where
  there was cheap labour.
• The Wall Street Crash was one of the turning points of the twentieth century both for the USA
  and the world. The Crash was widely regarded as the trigger for the Great Depression, but few
  economic experts agree that it was the main cause.

Question 24

The banking system

Answer 24

• The US banking system was out of date by the 1920s. Twelve regulatory reserve banks were
  headed by the Federal Reserve Board, with seven members appointed by the president.
• The system allowed the banks to regulate themselves without the government having to
  interfere.
• However, there were problems:
• The Reserve Banks acted in the interests of bankers rather than the nation as a whole.
• Local banks were not part of the centralised system. In the 1920s, there were over 30,000 banks
  in the USA. Most were very small and unable to cope with financial problems.
• The Federal Reserve Board wanted to keep the market buoyant so it favoured low interest
  rates. This encouraged the easy credit that was one of the causes of the Crash.
  In 1927, it lowered interest rates from four to three and a half per cent, which many believe
  encouraged the ‘bull market’.

Question 25

Over-speculation on the Stock Market

Answer 25

* During the 1920s, more and more Americans bought shares on the stock exchange and prices kept rising, thus creating a bull market. * The amount of trading grew, particularly after Hoover’s victory in the presidential election of 1928. * In 1928, however, shares did not rise as much as in previous years. * This was because many companies were not selling as many goods, so their profits fell. * Fewer people were willing to buy their shares and there was a drop in confidence in the market. * This was a warning but when share prices began rising again, greed took over and speculation recurred. * The complete lack of stock market regulation by the government or any other agency encouraged more and more speculation. * Successive Republican presidents stuck to their beliefs in laissez-faire. * In 1925, the stock market value of stocks stood at $27 billion but by October 1929, it had reached $87 billion. * By the summer of 1929 there were 20 million shareholders in the USA and prices continued to rise.

Question 26

Availability of Easy Credit

Answer 26

* The growth of credit made it much easier for people to buy goods even though they did not have enough cash to pay for them on the spot. * Firms arranged for customers to pay in instalments on hire purchase. * This included the practice of buying shares on credit, ‘on the margin’. * This practice was further encouraged by the easy credit policies on the part of the Federal Reserve Board. * This worked well as long as prices were rising. However, when the price rise started to slow down or prices fell, problems set in. * Seventy-five per cent of the purchase price of shares was borrowed. This, in turn, created artificially high prices.

Question 27

Loss of Confidence

Answer 27

* The market structure was maintained largely by the confidence that people had in it. * When, in the autumn of 1929, some experts started to sell their shares heavily before their value fell even further, small investors panicked. * They saw the fall in prices and rushed to sell their own shares. * This led to a complete collapse of prices and thousands of investors lost millions of dollars. * Historians point to various reasons for this loss of confidence. * There were rumours that the Federal Reserve Bank was about to tighten credit facilities by making it more difficult to borrow. * Moreover, rumours spread that many of the men who had made fortunes on the stock market, such as Bernard Baruch, were selling their stock.

Question 28

Economic Effects of The Great Depression

Answer 28

* With unemployment reaching 16 million, few people were left unaffected. * The Depression hit men and women, all races and classes and almost all geographical areas of the USA: towns, cities and the countryside. * There are no fully accurate statistics but official figures show that unemployment increased from 3.2 per cent in 1929 to 25.2 per cent in 1933 with 12,830,000 out of work. * The Labor Research Association insisted that these figures were underestimates and suggested that the figure was nearer 17 million. * Unemployment was unevenly distributed throughout the country. * New York State had 1 million unemployed. In Toledo, there was 80 per cent unemployment. * Unemployment was four to six times greater among African Americans. Employment opportunities in northern cities, which had opened up for them in the 1920s, were now generally closed to them. * There was also much higher unemployment among working-class women. Those in unskilled jobs were likely to be laid off before men. * The growth rate of the US economy went into decline, from 6.7 per cent in 1929 to minus 14.7 per cent in 1932. In the coal industry, production in 1932 was the lowest since 1904 with 300,000 made unemployed. Iron and steel production fell by 59 per cent.

Question 29

Depression in the Cities

Answer 29

* Once the crisis began in October 1929, it was not long before factories began to close down. * People stopped spending and, as this trend continued, production had to slow down or stop. * The industrial cities saw a rapid rise in unemployment and by 1933 almost one-third of the workforce was out of work. * Once a person became unemployed, it was practically impossible to secure another job. * Those Americans who lost their homes as a result of becoming unemployed moved to the edges of towns and cities. * They built homes of tin, wood and cardboard. These became known as ‘Hoovervilles’. * There was even a Hooverville in Central Park, New York. Many of the unemployed in cities wandered the streets. * They slept in doorways or cardboard boxes or lived in the parks where they slept on the benches. Some drifted across the USA as hobos. * They caught rides on freight trains in search of work. * It was estimated that in 1932 there were more than 2 million homeless.

Question 30

Depression in the Countryside

Answer 30

* As the Depression took hold, farmers experienced several problems. * Bankruptcy among farmers grew because they were unable to sell their produce and, in many cases, food was left to rot in the ground. * The drought of 1931 compounded the farmers’ problems as reduced prices and falling output meant there was no hope of breaking even financially. * Crops were damaged not only by the dry weather but also by high temperatures, high winds and sometimes attacks from grasshoppers and other insects. * The states worst affected by the drought were Oklahoma, Colorado, New Mexico and Kansas. * Poor farming methods had exhausted the soil, and in the drought the soil turned to dust. * Therefore, when the winds came, there were dust storms. * The affected area, about 20 million hectares, became known as the ‘dust bowl’. * These issues forced more than 1 million people to leave their homes and seek work in the fruit growing areas of the west coast. * Farmers and their families packed what they could, tied it to their cars, and set off for the West. * Those from Oklahoma were nicknamed ‘Okies’ and those from Arkansas ‘Arkies’.

Question 31

Hoover’s Response to the Great Depression

Answer 31

* Herbert Hoover was president during the Depression. * The traditional view, expressed by historians such as Charles P. Kindleberger and Robert Sobel, is that he did little to help, instead actually making the situation worse. * More recently historians have been more sympathetic to Hoover, believing he was a victim of his own beliefs and of a terrible crisis. * Hoover’s achievements were reassessed in the 1980s, during the presidency of Ronald Reagan, who followed similarly conservative economic policies.

Question 32

Hoover’s Beliefs

Answer 32

* In the 1928 presidential election campaign, Hoover claimed that ‘the USA is nearer to the final triumph over poverty than ever before in the history of any land’. * Within a few years, these words would come back to haunt him. Hoover had certain beliefs that he acquired at an early age and which greatly handicapped his attempts to deal with the worst effects of the Depression. * He believed that people should be responsible for their own welfare and that government should not intervene to try to solve people’s problems. * The role of government was to give people the ability to solve their problems themselves. ‘Economic wounds must be healed by producers and consumers’, said Hoover. * Hoover was also a firm believer in ‘rugged individualism’, which he wrote about in his book American Individualism, published in 1922. * He was a self-made man and felt that everyone could achieve what he had achieved through hard work and initiative.

Question 33

Hoover’s Volunteerism

Answer 33

* He placed great emphasis on the role of the individual. * Overall, he believed in self-help and voluntary co-operation to solve problems. * People should help themselves and help each other. ‘A voluntary deed’, he said, ‘is infinitely more precious to our national ideal and spirit than a thousand deeds poured from the Treasury.’ * However, voluntarism and self-help were never going to be enough to deal with the problems created by the Great Depression. * Hoover’s problem was that he could never abandon these fundamental beliefs and accept a greater (if temporary) role for federal government. * He was convinced that the economy would right itself. * To be fair to Hoover, there were few theories at the time about how to solve the Depression.

Question 34

Hoover’s Policies

Answer 34

* One the one hand Hoover has been criticised for doing too little too late to deal with the Depression and that some of his policies, especially increasing tariffs, actually made the situation worse. * Indeed, by 1932, he was being widely ridiculed in the USA. His name became a term of abuse with the new shanty towns set up on the edge of cities by the unemployed nicknamed ‘Hoovervilles’, and newspapers that homeless people used to cover themselves called ‘Hoover blankets’.

Question 35

Hoover & Agriculture

Answer 35

* Hoover assisted farmers with the Agricultural Marketing Act of 1930. * This Act enabled the government to lend money to farmers through special marketing groups which stabilised prices and tried to ensure that produce was sold at a profit. * The Grain Stabilisation Corporation, introduced in the same year, tried to guarantee fair prices by buying wheat so that it could be stored until the price went back up again. * However, prices continued to plunge. * Hoover’s agricultural policies failed because he was paying farmers artificially high prices. * In addition, farming was badly affected by the introduction of tariffs through the Hawley–Smoot Tariff Act of 1930. * This protected US farmers by increasing import duties on foreign goods, but in retaliation, other countries refused to trade with the USA.

Question 36

Hoover & Industry

Answer 36

* Hoover tried to balance the budget by reducing federal spending and opposing relief schemes that were suggested by Congress. * Instead, he relied on voluntary action. He hoped to persuade businessmen and state governments to solve the Depression by voluntary efforts. * He met businessmen and implored them not to cut their workforce or wages. He encouraged state governments to begin new public works programmes. * In 1932, he gave an additional $500 million to help various agencies to provide relief. * The Reconstruction Finance Corporation (RFC) of January 1932 was the most radical measure introduced by Hoover to deal with the Depression and was a forerunner of Roosevelt’s New Deal policies. It lent up to $2 billion to rescue banks, insurance companies, railroads and construction companies. * The Emergency Relief Act in July of the same year gave $300 million to state governments to help the unemployed. * The Home Loan Bank Act of 1932 was to stimulate house building and home ownership. Twelve regional banks were set up with a fund of $12 million.

Question 37

The Bonus Marchers

Answer 37

* Hoover’s treatment of the Bonus Marchers made him even more unpopular. * The Bonus Marchers were veterans of the First World War who had been promised a bonus for serving in the war, payable in 1945. * The veterans felt that they could not wait that long. In May and June 1932, a Bonus Expeditionary Force, made up of over 12,000 unemployed and homeless veterans from all over the USA, marched to Washington DC to voice their support for a bill that would allow early payment of the bonuses. * They brought their wives and children and built a Hooverville outside the capital. * To pay the bonus would have cost $2.3 million, and Hoover felt that it was simply too much. * Five thousand Bonus Marchers refused to leave and Hoover then called in the army to control the situation. The armed forces, led by Douglas MacArthur, Army Chief of Staff, razed the Hooverville to the ground. * More than 100 were injured and a baby died of tear gas poisoning. * This event left a bitter taste in the mouth of many Americans who were more convinced than ever that Hoover did not care. It finally destroyed the credibility of the President.