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In 1928, when
visiting the Black Hills in South Dakota,
the normally silent Cal Coolidge made on of his few memorable
statements. He told reporters: "I do not choose to run for
President in 1928." No one knows exactly why he made such a
statement; perhaps he wanted to give other candidates a chance, or to
allow a show of unity by the Party by having it draft him as a
candidate. But whatever his intentions. the effect of the
statement was to open the way for Herbert Hoover.
Also in 1928, it was clear that
Hoover was way ahead of his presidential rivals; but it was also true
that Coolidge was increasingly unhappy about his apparent
successor. But whenever his complaints prompted aides to broach
the idea of a Coolidge candidacy, Cal returned to his usual policy of
silence. Three weeks before the convention, Coolidge again
publicly rejected the idea of running again. He said:
I
think I know myself very well. I fitted into the situation that
existed right after the war, but I might not fit into the next one....
From this time
on, there must be something constructive applied to the affairs of
government, and it will not be sufficient to say, `Let business take
care of itself.'"
All this from the man who had once made faith in business and
businessmen into a religious observance, whose administration had been
dedicated to the principle that business should govern itself.
Could the farmer's son from Vermont see the writing on the wall?
Had the speculative orgy of the Twenties shown him that business, after
all was said and done, was just as greedy and amoral as it had always
been? It is hard to tell, but Coolidge's actions and statements
reveal a strong ambivalence about another term in office. Despite
his observations on the need for a change, his actions after the
Convention
show something else. When he received the news that the
Convention
had nominated Hoover, Coolidge refused lunch and threw himself
despairingly
across his White House bed. Change, for Coolidge, was literally
a hard matter to stomach.
But Hoover's nomination seemed to
confirm that business and government were on the right
track in America. No other American in 1928 could have provided
a fairer test of the capacity of the business community to govern
a great and multifarious nation than Herbert Hoover. And Hoover
himself understood his new responsibilities. He had promised
in his campaign that his administration would introduce a "new basis
in government relation with business." Looking back on his
record,
such a relationship would be based on cooperation among business
associations
rather than government action, for Hoover felt strongly that the
Democratic
policies of government intervention in the areas agriculture and the
public utilities would bring disaster for business, and would lead
inevitably to state socialism. The American people, Hoover
declared, had a fundamental conflict to resolve: they must decide
between American individualism, or "rugged individualism," or a
philosophy of
government operation and control. The Republican track record
of prosperity and success made the choice an easy one. The
Republicans
looked back with confidence at their past, and with great optimism
towards
the future. Hoover, true to the spirit of the times, pointed to
the overt signs of prosperity as visible proof of economic
rectitude--here was the visible evidence that Republican economic
policies were indeed the way to salvation; Hoover even began to speak
about the day when "poverty will be banished from the nation."
On November 6, 1928, Americans
vindicated his faith in the economic morals of progressive
individualism by electing Herbert Hoover the 31st President of the
United States.
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Herbert Clark
Hoover (1929-1933)
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"It was beautiful
dream while it lasted....":
1929
During the Twenties, men like President Harding proclaimed with
relative indifference that economic depressions were inevitable, and
that they must simply be endured like a bad cold. And it was true
that the nation had endured serious economic depressions on a fairly
regular basis. But the economic structure of previous eras had
been
regionalized and fragmented; while crisis in one area might affect
another, rarely did a hemorrhage in one area threaten to drain the
economic lifeblood from the rest of the country. But the process
of economic centralization had changed all that. Corporations no
longer controlled a single railroad, for example, just in New England
or in the Carolinas, but
ran rail lines from Los Angeles through Chicago to New York. Beef
packed in Chicago now fed workers in Boise, Idaho, and farmers in
Tallahassee, Florida. Banks no longer relied just on local
creditors, but were part of a financial network stretching all the way
to Wall Street and beyond. New York bankers loaned money to
German chemical cartels, who sold their product to Argentina, who sold
their wheat to England, who sold their wool to America. Like
ancient Rome, the financial roads of the world all led to New York.
In his inaugural address in March
1929, Hoover spoke of a future "bright with hope." America seemed
to be on a permanent plateau of prosperity. There were a few
voices in the wilderness crying about the dangers of having the
nation's economy balancing on a roller-coaster ride through the Stock
Exchange, but few paid any heed.
As President, Hoover tried to
apply the same policies he had developed as Secretary of
Commerce. In August 1929, he upset conservationists with his
proposal that all public lands, as well as all new reclamation projects
and irrigation matters, be withdrawn from national control. The
states, he said, were "more competent to manage these affairs
than...the Federal Government." He aimed to place the local
communities--and presumably the strongest interests in them--in control
of their own natural resources. After this pronouncement, one
newspaperman drily remarked: "Well, conservation was a pretty
dream while it lasted."
Hoover's attitude towards
regulation of public utilities was in much the same vein. He was
certain that state regulation and private responsibility were enough,
and he had no misgivings about appointing James W. Good, the former
counsel for the Alabama Power Company, as head of the Federal Power
Commission--the federal body responsible for regulating public
utilities. When the Commission was reorganized in 1930, staff
members whose zeal had irritated the power companies found themselves
out of a job. One of those discharged told the press that Hoover
himself had personally intervened to prevent the rigorous application
of the Federal Water Power Act to private companies.
None of this was of interest to most Americans--they kept their
eyes on the stock market, and were little concerned about any other
area of the economy. But cracks in the boom were beginning to
appear. In early 1929, the Federal Reserve Board, under pressure
from the New York Federal Reserve Bank, warned member banks not to loan
any more money for speculative purposes. But warn was all they
would do; they would not intervene to stop it, so the loans still went
out. Some conservatives wanted to take more active steps, like
raising the discount rate to 6% to discourage people from taking loans,
but expansionists felt that any such restrictive policy would induce
inflation. Even by acting to warn member banks, they felt, was
creating a "state of mind which breeds depression." And true
enough, raising the interest would have
been inadequate to stop the boom--it would more likely have stopped
real
investment faster than speculation. So the debate went on and
on.
Hoover was preoccupied with other issues and was not sure what he
wanted
to do.
By the end of the summer, more
danger signs were apparent. For one, there was sharp decline in
building contracts. Net investment in residential construction
sank to $216 million, over a billion dollars less than the previous
year. At the same time, there was an alarming growth in business
inventories, i.e., unsold products--more than triple the previous
year. And the rate of consumer spending was off, down
from 7.4% in 1927-28 to 1.5% in 1928-29. These developments were
beginning to have a noticeable affect on production and price
indexes. Industrial production began to fall off, and
unemployment rose.
Wholesale commodity prices fell. Finally, in August, the Federal
Reserve Board agreed to raise the discount rate to 6%.
But the stock market, which had
been rising for years now on speculation rather than production, was
little affected by the interest rate or the indexes. In
September, Stock Exchange price averages reached their highest point
of all time. AT&T was up to 304; GE was up to 396,
having tripled its price in 18 months. By the beginning of
October,
brokers' loans--the index of margin buying--topped $6 billion.
Business leaders meanwhile competed with each other in expressions
of optimism and Washington displayed no concern.
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