3) High protective tariffs like the Hawley-Smoot Act (Tariff Act of 1930) that produced retaliatory tariffs in other countries, which strangled world trade.
High protective tariffs also helped cause the Great Depression. A protective tariff is a tax on imports that is so high that Americans cannot afford to buy foreign goods. After the 1929 stock market crash, Congress attempted to help American business by passing the Tariff Act of 1930, which was popularly called the Hawley-Smoot Tariff. Since the Hawley-Smoot Tariff was a protective tariff that set the highest tariff rates in American history, historians now believe it actually had the opposite effect from what Congress intended. Instead of helping business by encouraging Americans to buy American-made goods, the Hawley-Smoot Tariff encouraged foreign countries to retaliate by passing high tariffs of their own. This meant foreigners could not afford to buy American goods. In short, the creation of tariff barriers by all of the world’s major industrial powers strangled world trade. This decrease in world trade deepened the worldwide depression.
The Great Depression had a four-pronged effect on the United States.
Unemployment skyrocketed and homelessness increased. By 1932 twelve million Americans were out of work, and the unemployment rate stood at twenty-five percent of the American work force.
Bank closings led to a near collapse of the nation’s financial system.
Business bankruptcies, increased unemployment, and bank closings led to political unrest. Labor unions especially became more militant, and some even questioned whether capitalism was the best economic system for the U.S.
The Great Depression worsened banks which foreclosed on thousands of farms. These foreclosures caused thousands of farm families to migrate away from home. They traveled in search of jobs, which often did not exist.
Recovery from the Great Depression
Most Americans blamed President Herbert Hoover, a Republican, for the terrible conditions of the Great Depression. As a result, in the presidential election of 1932 the Democrat candidate Franklin Delano Roosevelt (FDR) overwhelmingly defeated President Hoover’s bid for re-election.
At his inauguration, Roosevelt tried to rally the American people by telling them, “This is pre-eminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great nation will endure as it has endured, will revive and will prosper. So first of all let me assert by firm belief thatthe only thing we have to fear is fear itself.”
President Roosevelt offered the “New Deal” program for the American people to end the Great Depression. This program changed the role of the government to a more active participant in solving the nation’s problems. The power of the federal government increased, and Americans came to expect the federal government to take responsibility for bringing prosperity to the American economy.The New Deal followed a three-pronged strategy, often called the “three R’s.” These three R’s were relief, recovery and reform.
Relief programs tried to ease the suffering of the unemployed. Relief measures, like the Works Progress Administration (WPA), provided direct payments to people for immediate help. Many were public works programs which are construction projects that benefit the whole society, like highways, bridges, schools, post offices, and parks. The federal government hired unemployed Americans who could not find jobs.