America’s Great Depression

1. Hoover’s presidency will be forever shadowed by the Great Depression.  Is it fair to blame Hoover’s actions or inaction for the Great Depression?

Use the information below to answer the question only one paragraph 7 sentenes needed no references need to be included

· Read America’s Great Depression:   www.amatecon.com/gd/gdcandc.html

· Read Digital History: Sections Why it Happened to President Hoover    http://www.digitalhistory.uh.edu/teachers/lesson_plans/pdfs/unit9.pdf

The Unfinished Nation: A Concise History of the American People, 6/e Alan Brinkley, Columbia University Debating the Past Chapter Twenty-Five: The Great Depression Where Historians Disagree – Causes of the Great Depression

The Unfinished Nation: A Concise History of the American People, 6/e Alan Brinkley, Columbia University Debating the Past Chapter Twenty-Five: The Great Depression Where Historians Disagree – Causes of the Great Depression What were the causes of the Great Depression? Economists and historians have debated this question since the economic collapse began and still have not reached anything close to agreement on it. In the process, however, they have illustrated several very different theories about how a modern economy works. During the Depression itself, different groups offered interpretations of the crisis that fit comfortably with their own self-interests. Some corporate leaders claimed that the Depression was the result of a lack of “business confidence,” that businessmen were reluctant to invest because they feared government regulation and high taxes. The Hoover administrations blamed international economic forces and sought, therefore, to stabilize world currencies and debt structures. New Dealers, determined to find a domestic solution to the crisis, argued that the Depression was a crisis of “underconsumption,” that low wages and high prices had made it too difficult to buy the products of the industrial economy; and that a lack of demand had led to the economic collapse. Scholars in the years since the Great Depression have also created interpretations that fit their view of how the economy works. One of the first important postwar interpretations came from the economists Milton Friedman and Anna Schwartz, in their Monetary History of the United States (1963). In a chapter entitled “The Great Contractions,” they argued for what has become known as the “monetary” interpretation. The Depression, they claimed, was a result of a drastic contraction of the currency (a result of mistaken decisions by the Federal Reserve Board, which raised interest rates when it should have lowered them). These deflationary measures turned an ordinary recession into the Great Depression. The monetary argument fits comfortably with the ideas that Milton Friedman, in particular, has advocated for many years: that sound monetary policy is the best way to solve economic problems–as opposed to fiscal policies, such as taxation and spending. A second, very different argument is known as the “spending” interpretation, an interpretation supported by many liberal, Keynesian economists. It is identified with, among others, the economist Peter Temin, and his book Did Monetary Forces Cause the Great Depression? (1976). Temin’s answer to his own question is “no.” The cause of the crisis was not monetary contraction (although the contraction made it worse), but a drop in investment and consumer spending, which preceded the decline in the money supply and helped to cause it. Here again, there are obvious political implications. If a decline in spending was the cause of the Depression, then the proper response was an effort to stimulate demand–raising government spending, increasing purchasing power, redistributing wealth. The New Deal never ended the Depression because it did not spend enough. World War II did end it because it pumped so much public money into the economy. Another important explanation comes from the historian Michael Bernstein. In The Great Depression (1987) he avoids trying to explain why the economic downturn occurred and asks, instead, why it lasted so long. The reason the recession of 1929 became the Depression of the 1930s, he argues, was the timing of the collapse. The recession began as an ordinary cyclical downturn. Had it begun a few years earlier, the basic strength of the automobile and construction industries in the 1920s would have led to a reasonably speedy recovery. Had it begun a few years later, a group of newer, emerging industries would have helped produce a recovery in a reasonably short time. But the recession began in 1929, too late for the automobile and construction industries to help and too soon for emerging new industries–aviation, petrochemicals and plastics, aluminum, and others–to help, since they were still in their infancies. The political implications of this argument are less obvious than those of some other interpretations. But one possible conclusion is that if economic growth depends on the successful development of new industries to replace declining ones, then the most sensible economic policy for government is to target investment and other policies toward the growth of new economic sectors. One of the reasons World War II was so important to the long-term recovery of the U.S. economy, Bernstein’s argument suggests, was not just that it pumped money into the economy, but that much of that money contributed to developing new industries. This is, in other words, an explanation of the Depression that seems to support some of the economic ideas that became popular in the 1980s and 1990s calling for a more direct government role in stimulating the growth of new industries. In the end, however, no single explanation of the Great Depression has ever seemed adequate to most scholars. The event, the economist Robert Lucas once argued, is simply “inexplicable” by any rational calculation. There is no one, wholly persuasive answer to the question of