The Myth of Laissez-Faire Herbert Hoover
Rather than sit and do nothing during the early years of the Depression, as President Hoover is often accused of doing, he exercised government power in ways that extended and exacerbated the crisis.
If you were to poll a random selection of Americans and ask them who caused the Great Depression, most of them would pin the blame on one man: Herbert Hoover.
In reality, the Depression was a complex situation with many market forces, government programs, and bad monetary policy all at play. However, I would like to specifically examine the legacy of the man so many blame. While it would be ahistorical to say that Herbert Hoover “caused” the Great Depression, his role in prolonging economic hardship cannot be ignored.
To get a better understanding of Hoover’s legacy, you must first understand who Hoover was. Orphaned at a young age, he was sent to live with his uncle in Oregon in 1885. While he did not necessarily excel academically, he attended Stanford University, as a member of one of the first graduating classes.
He then launched a career as a mining engineer, spending most of his twenties traveling the world. After shifting his focus to the business end of the industry, he soon became one of the wealthiest men in the country. As his fortune grew, so did his ambition.
His real rise to fame came during World War I when he took on the monumental task of coordinating relief efforts for war-torn Europe. He did this first as a private actor, securing food for occupied Belgium. When the United States formally declared war on Germany in 1917, Hoover was appointed as the head of the U.S. Food Administration, where he played a crucial role in ensuring food supplies for both the military and civilian population. His philanthropy not only saved countless lives but also helped restore stability, earning him the nickname, “The Great Humanitarian.”
Buoyed by his remarkable achievements, Hoover transitioned into the world of politics. In 1921, after a failed bid for the White House, he was appointed as the Secretary of Commerce under President Warren G. Harding and continued to serve in that position under Calvin Coolidge. In 1928, Hoover successfully secured the Republican nomination and went on to win the general election. Unfortunately, just eight months after entering office, the stock market crashed.
Although the Great Depression is often associated with Hoover's presidency, many people do not understand the factors that contributed to the economic downturn. Hoover did not cause the Great Depression because he failed to intervene in the economy. Rather, he extended the Great Depression because he intervened too much in the economy. The government cannot solve a problem that the government created, and Herbert Hoover learned this the hard way.
While Black Tuesday did have an immediate effect on the country, what would be considered the Great Depression did not come right away. In the months following the stock market crash, the unemployment rate appeared to be essentially unaffected. It was not until June 1930 that unemployment started to rise precipitously, which happened to be the same month that one of the most protectionist pieces of legislation in U.S. history was passed: The Smoot-Hawley Tariff Act.
The Smoot-Hawley Tariff Act raised tariffs on more than 20,000 goods, which had the unintended consequence of other countries introducing retaliatory tariffs. As a result, imports and exports in the United States were reduced by more than 67%. If there were one action that extended the length of the Great Depression more than any other, this would certainly be it.
However, Hoover made many other poor decisions in his single term in the Oval Office. In one of his first acts as President, Hoover cut immigration to the United States by almost 90%. This was not in a law passed by Congress, nor did Hoover formally issue an executive order. He simply announced it in a press release. This was one of the most far-reaching unilateral actions ever taken by a U.S. President, and by no coincidence, it was also one of the most damaging. By 1931, for the first time in American history, there was negative net migration.
In the same year, Congress passed the Agricultural Marketing Act of 1929, which established the Federal Farm Board (later renamed the Farm Credit Administration) to expand federal control of farming. The FFB bought surplus grain and cotton in an attempt to artificially stabilize prices, but these subsidies resulted in farmers increasing their output because profit was guaranteed.
While there is general agreement that the aforementioned policies helped prolong the Great Depression, a few other major pieces of legislation that Hoover signed remain controversial today. The first of these was the Davis-Bacon Act, which required that workers on all federal construction projects be paid a prevailing wage above the market-clearing wage. Moreover, Hoover signed the Norris-La Guardia Act, which restricted the ability of federal courts to interfere in labor disputes.
Furthermore, in his final year as President, Hoover helped establish the Reconstruction Finance Corporation, which provided government loans to private companies and banks on the brink of failure. Additionally, Congress passed the Revenue Act of 1932, which raised tax rates across the board, doubling the tax rate for the highest income bracket and increasing corporate taxes by about 15%. While the merits and drawbacks of these actions are still debated today, they nevertheless help disprove the myth of the laissez-faire Herbert Hoover.
So why did Hoover’s attempts to revive the economy fail? Think about it this way: if you run a marathon, you should probably go home and get some sleep. If you instead decide to drink a cup of coffee and keep going, you may get another three hours of productivity, but you will crash twice as hard. The Roaring Twenties was a marathon for the economy, so it should have been allowed to rest. However, Hoover gave it a shot of espresso, and we got the Great Depression. The lessons learned from the presidency of Herbert Hoover highlight the importance of restraint during economic crises, and the muddled legacy of the progressive president highlights some of the myths that have arose due to the left-wing domination of academia.
Benjamin Rothove is an undergraduate at University of Wisconsin-Madison, where he studies Economics. He is the Chairman of UW-Madison Students for DeSantis and Wisconsin Students for DeSantis. He is the Vice Chair of Young Leaders for Keep Nine. @BenjaminRothove
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