June 14, 2012

Financial Health Of A Nation

Financial Resuscitation Of A Country
By Melvin J. Howard

The Great Depression was basically the same in the United States as other capitalist countries. High unemployment, lower gross domestic product, and some kind of a government response to the depression were evident in all the capitalist countries. However, the United took a different approach from the rest of the world powers in their recovery methods during the depression. Lets take a look at the two Presidents at the time and see what happened? Herbert Hoover was the president from 1928-1932 and had the first opportunity to publicly combat the depression.  His philosophy was simple when speaking of the American system. “It differs fundamentally from all others in the world.  It is the American system. It is just as definite and positive a political and social system as has ever been developed on earth.  It is founded upon the conception that self-government can be preserved only by decentralization of Government in the State and by fixing local responsibility; but further from this, it is founded upon the social conception that only through ordered liberty, freedom and equal opportunity to the individual will the initiative and enterprise drive the march of progress. This is not what the American people wanted to hear at this time a self sufficient individualism” speech.

Hoover holds some of the responsibility for the depression.  When the effects of the depression began, Hoover made some fundamental mistakes.  For one, he created the Federal Farm Board to try and improve farm prices. This agency would sometimes pay farmers to not grow crops to try and raise demand. As soon as the prices started to show some rebound, farmers would plant crops again against the federal government’s wishes.  The prices would never correct without production and open foreign markets. He closed foreign markets for agricultural products.  In the 1920’s, markets in Europe for grain were tremendous, but because of the tariffs on American goods, many countries could not afford them and turned to other suppliers.

Hoover had flipped from “self sufficient individualism” to a government interventionist in four years as president of the United States. He turned the recession into a full-blown depression.  This cost him and the Republican Party the election of 1932.  Much worse, the depression’s was just getting started. Now it was FDR’s turn he was president from 1932 until his death in 1945.  He was the next American president that had an opportunity to deal with the depression. “Restoration calls, however, not for changes in ethics alone. This nation asks for action, and action now….It can be helped by national planning for and supervision of all forms of transportation and of communications and other utilities which have a definitely public character. FDR and his advisers believed that Hoover had the right idea, but they wanted to do more than just follow Hoover’s lead. FDR’s first New Deal had two very controversial pieces that tried to stimulate the American economy. 

How does one evaluate the effectiveness of two leaders whose political points of view are so very different when it came to economic recovery during the depression?  Both leaders realized that something needed to be done to help the American people.  That has been proven.  Hoover attempted to stimulate the economy with tariffs and FDR attempted to with price and wage controls through the first New Deal.  While evaluating the recovery programs of the two leaders, it is important to keep the American people’s needs at the top of the list.  With that being said, neither leader kept the basic necessities of the American people in mind when trying to fix the depression.  Food, water, shelter, and heat are things that people need to survive. Fields of crops were being plowed under while people were starving to try and fix low prices. Both leaders served while this was occurring.  Why not direct all the money for economic programs to things that people need to survive? History shows that a capitalist economy needs time to crawl out of a depression. The political divisions like the one we are witnessing now prolonged the depression in the United States until WWII when twelve million men were sent overseas to go to war.