(4 of 18)
Economists debate to this day about what caused the Great Depression. A prevailing view, persuasively argued by John Kenneth Galbraith, is that the technological increases in productivity throughout the 1920s (up 43% per factory man-hour) were not matched by increases in wages and thus in the public's capacity to consume (factory pay rose less than 20%). The collapse of the overinflated stock market therefore started a downward spiral in both demand and the ability to pay. Conservative economists like Milton Friedman, on the other hand, blame the Federal Reserve System for failing to expand the money supply sufficiently in the wake of the stock market crash.
Hoover was rather dour by nature—Secretary of State Henry Stimson described a White House meeting as "like sitting in a bath of ink"—and he insisted that reduced spending and a balanced budget would end the slump. "Nobody is actually starving," Hoover said. "The hobos, for example, are better fed than they have ever been." Other U.S. officials were equally astute. Said Treasury Secretary Andrew Mellon in 1930: "I see nothing in the present situation that is either menacing or warrants pessimism." (Joke of the day: Hoover asks Mellon, "Can you lend me a nickel to call a friend?" Mellon answers, "Here's a dime. Call all of them.")
Nostalgia portrays Roosevelt as the smiling and confident man who knew the answers, but in 1932 there was no such omniscience. "If you had to start a campaign trip within ten days, we'd be in an awful fix," Speechwriter Rosenman told the would-be President. Roosevelt assigned Rosenman to recruit the idea men who were to become known as the Brains Trust, notably Columbia Professors Raymond Moley, Rexford Guy Tugwell and Adolf A. Berle. But the Democratic platform of 1932 committed Roosevelt to Hooverian solutions: a balanced budget and a 25% cut in Government spending.
Indeed, while Hoover fulminated against "socalled new deals," it was Roosevelt who accused the President of "reckless and extravagant" spending, and of thinking "that we ought to center control of everything in Washington as rapidly as possible." Roosevelt's running mate, Congressman John Nance Garner of Texas, 63, even claimed that Hoover was "leading the country down the path of socialism." Eleanor Roosevelt best summed up her husband's uncertain command of the future when she wrote at the time of his Inauguration: "One has a tremendous feeling of going it blindly, because we're in a tremendous stream, and none of us knows where we're going to land."
To the 100,000 citizens assembled before the Capitol on that bleak and windswept Inauguration Day of 1933, and to millions more clustered around their radios, Roosevelt offered not a series of remedies but a new spirit of assurance. It was this spirit that inspired him to seize a phrase from Henry David Thoreau ("Nothing is so much to be feared as fear") for his famous declaration that "the only thing we have to fear is fear itself." There had been three years of Government dithering since the Crash, and a new course was to be set. Said Roosevelt: "This nation asks for action, and