The Great Depression: Slow Recovery Begins in the United States

The U.S. economy hit bottom in mid-1932. With the approach of elections in November, Hoover vetoed what he saw as wild, emotionally inspired pork barrel legislation that Congress had sent to him. He claimed that he favored carefully planned measures aimed at long-term development rather than "quick fixes."

Hoover lost the presidency to the Governor of New York, Franklin Roosevelt, Hoover winning 15.8 million votes to Roosevelt's 22.8 million. The Democratic Party became the majority party in the House of Representatives and in the Senate by huge margins. Despite the Depression, the Communist Party candidate, William Z. Foster, won only 0.26 percent of the vote -- 102,785 votes -- indicating that the Communist movement in the United States had no successful future. The Socialist Party candidate, Norman Thomas, won nines times that amount -- close to 2 percent of the vote.

Hoover left office saying there was nothing more "we can do." And when Roosevelt took office he was not sure what he would do but he was determined to do something. Roosevelt had little understanding of economics, but he grabbed some slogans that appealed to him -- such as "the greatest good for the greatest number." He began by pursuing a balanced budget, as in his days as governor of New York. He cut federal salaries and veterans' aid. On the other hand, the U.S. Chamber of Commerce was demanding government action in regulating competition, and the Roosevelt administration pondered the benefits of more regulations on business and a greater partnership with business.

In his first one hundred days in office, Roosevelt was responding to crises more than he was laying plans for economic construction. First he ended the run on the banks, bringing a return of confidence in banking. In a "fireside chat" he told citizens that it was safer to put money in the bank than to keep it under one's mattress. He invoked the Trading with the Enemy Act of 1917 in order to suspend the export of gold and silver. By law, banks and individuals were now required to deliver their gold to Federal Reserve banks in return for currency. Then his advisors talked him into attempting to stimulate the economy by increasing the money supply. This included putting three billion more dollars into circulation and taking the dollar off the gold standard.

During these first one hundred days, Roosevelt decided to help the distressed farmers. Hoover had tried to help farmers by buying their surpluses, which had encouraged over-production and resulted in ruinous low prices for farmers. Instead of this and letting bankruptcies run their course, Roosevelt chose to limit the production of certain crops and to give relief to farmers who were in immediate danger of losing their homes.

Eager to fight what they perceived to be economic crisis, Democrats in Congress proposed a "share the work" bill designed to create a thirty-hour work-week and to inspire employers to hire more workers. Manufacturers opposed the bill, and Roosevelt joined in the opposition. Then, consulting with big business, Roosevelt created the National Industrial Recovery Act (the NRA) -- a move intended to get more money into the hands of average working people. Industrialists supported the idea of high wages, believing that high wages encouraged people to stay on the job longer and to improve their job skills. The National Industrial Recovery Act enacted into law fixed minimum wages and maximum hours and it abolished child labor in many industries. The act gave labor unions the right to have representatives of their choice to bargain with employers, and it obliged businesses to open their books to government inspectors.

In May 1933, a government agency called the Tennessee Valley Authority (TVA) was created to oversee development in a depressed 640,000 square-mile area in the Tennessee Valley. There, sharecroppers and tenant farmers were malnourished, and soils were exhausted, eroded and polluted with chemical wastes. Trees had been cut and vegetation destroyed. Many in the area could not afford electrical power. The TVA planned to provide the area with electrical power that was publicly owned. Republicans in Congress took up the fight of two power companies in the area, describing their position as a fight for free enterprise against socialism. The Republicans were out-voted, and the TVA project proceeded as planned. TVA electrical power was to uplift the area, to improve flood control and to reduce soil erosion. And the TVA provided phosphate fertilizers that were to revive soil in the Tennessee Valley.

The appearance that something was being done produced more confidence. By the end of June the value of stock market equities almost doubled. Wages also rose. And higher levels of trade were on the way as big business and the Democrats favored lower tariffs.

In December 1933, the Roosevelt Administration repealed Prohibition. But now came the dust storms across the Dakotas, Oklahoma, Kansas and nearby states, blowing away topsoil. From decades before, the prairie grasses that had kept the soil down had been broken up by plowing. In the place of prairie grasses, wheat had been grown. Then, with the Depression and farmers unable to sell their wheat their fields dried and winds began blowing away the topsoil. Whole houses were buried in dust, and ruined small farmers began migrating to California, lured by growers there who were in search of cheap labor for harvesting their crops.

Growers in California, meanwhile, remained ungoverned by minimum wage laws, and, with an abundant supply of people willing to work for them for a little to eat, they were paying their migrant work force as little as fifty cents a day. And with self-righteousness they were ready to attack with violence anyone who tried to organize their workers.

The U.S. economy was recovering slowly. Roosevelt's strategy of increasing wages had created a disincentive to hire more workers, especially by smaller businesses. People in small businesses were complaining that the National Industrial Recovery Act favored big business. Business leaders in general were concerned whether profits from investments would be secure, and their doubts, according to the economic historian Robert Higgs, would make them less willing to risk long range investment projects.

Meanwhile, some conservatives were complaining that Roosevelt was taking the U.S. down the road to Communism, while American Communists, on a road to political failure, were opposing reform in favor of revolution and charging that Roosevelt was taking the nation toward fascism.

A Slow Recovery begins in the United States