CASE STUDY - HOOVER'S WELFARE

By 1932 all major sectors of the United States Economy had collapsed, some sectors such as agriculture had suffered economic decline since the end of World War I. Unemployment was at 25% (13-million), 5,500 banks had collapsed, 2.5 million farm families were forced to migrate, and 300,000 children received no education as their schools were shut down. These were the conditions in the United States in the last year of Herbert Hoover's administration.

President Hoover believed that the role of government in business was to promote economic and social progress by fostering voluntary cooperation among competing interests and groups, an idea known as associationalism. Hoover, like many of his predecessors, feared that government intervention would cause Americans to give up their freedom. He believed the government should help people solve their problems, but not actually solve their problems for them. During most of his term in office, Hoover opposed direct federal budget, relief efforts should be initiated by the private sector and local government, and he was convinced direct relief (the dole) would degrade Americans' work ethic and create a permanent class of Americans dependent upon government handouts.

In early 1932, in an effort to address the worsen depression, Hoover created the Reconstruction Finance Corporation (RFC) to promote economic recovery by providing financing for banks, life insurance companies, railroads, and farm mortgage associations. Hoover hoped that by injecting federal funds at the top levels of these corporations, it would "trickle-down" to workers and unemployed through higher wages and new jobs. Little money actually "trickled-down" to works even though the RFC loaned over $800 million to these business.

By May of 1932, chaos had erupted across the United States in the form of organized protests, marches, riots, and blockades as frustrated Americans demanded that their government take action, take an unprecedented and feared step of direct economic intervention to ensure the welfare of its citizenry.

1. Should government (Hoover) directly intervene in its citizen's lives? Is it government's responsibility to ensure the welfare of all of its constituents?
2. Were there any alternatives to direct governmental intervention beyond Hoover's idea of associationalism or his 'trickle-down" theory?
3. What are the economic, social and ethical implications of government intervention? What future impact does government intervention pose?