My Least Favorite Presidents, Pt. 1: Herbert Hoover

The history of US Presidents is a long tale of incompetence, ignorance, and ineptitude. When once asked who he thought was the best President in American history, economist Murray Rothbard replied, “The best…? You mean the least bad?”  This aptly sums up my attitude towards American Presidents: a parade of bozos from start to finish, with very few exceptions in between. They’ve ranged from blissfully naïve to moderately idiotic and mischievous to downright malevolent in some cases. Starting with this article, I’m going to start firing off some scathing critiques on my least favorite of the many terrible Presidents.

I begin with Herbert Hoover. Herbert Hoover was the 31st President, reigning from 1929 to 1933. His administration is best known for overseeing the start of the Great Depression, which kicked off during his first year in office. Hoover and his administration are often blamed for starting the Great Depression; a popular term for the shanty slums of the era were “Hoovervilles”, named in his dubious honor. The roots of the Great Depression go back much further than Hoover’s Presidency, to the founding of the Federal reserve in 1913; but I agree with the general opinion that Hoover’s policies took bad situations like the stock market crash and made them worse, into a depression.

However, I disagree with the prevalent mainstream opinions on how Hoover’s policies were partly to blame for the Great Depression. If your grade-school education was anything like mine, then you were probably told by a history teacher at some point that the Great Depression was caused by the preceding decade of “capitalism gone wild.”  Herbert Hoover, as we are often told, was a hardcore laissez-faire advocate who engendered run-amok capitalism and refused to extend the benevolent power of the government when it was most needed, just after the stock market crash and into the 1930s. According to mainstream historians and economists, Herbert Hoover’s refusal to act was his downfall and his worst sin.

This is total baloney from start to finish. Herbert Hoover was not a hardcore laissez-faire advocate. He was not an obstinate ultra-capitalist who blindly believed in the Free Market and refused to put the government to work for the good of the economy. Herbert Hoover was indeed partly responsible for the Great Depression, but for entirely different reasons: Hoover did not adhere to laissez-faire doctrine, he was not a staunch Free Market advocate, and he did enthusiastically support government intervention into the economy to try and halt the depression. If Herbert Hoover actually had been a hardcore laissez-faire and small-government ideologue, the Great Depression may have been avoided!

The pervasive myth that Hoover’s reliance on Laissez-Faire doctrine caused the depression is patently false. It’s practically blasphemy to say “Laissez-Faire” and “Hoover” in the same sentence, as the two are so far removed from each other. The crash of the Stock Market and resulting recession was not Hoover’s fault; that was mainly the fault of the newly-created Federal Reserve. The recession of 1929 sucked, but it did not have to become a full-blown depression. Had Hoover done absolutely nothing in response to the crash, the recession would’ve been over within a few years, as all preceding recessions in the past had been over within a few years. However, things were different this time. Hoover didn’t want to sit back and take a laissez-faire attitude towards the recession; he wanted to get in there and get his hands dirty right away, ostensibly in the name of halting depression.

One of the most atrocious acts of the Hoover years, and what may be most responsible for the initial Great Depression, was the passing of the Smoot-Hawley Tariff Act. The Smoot-Hawley act was, up until that time, possibly the most interventionist piece of economic legislation in American history. It raised tariffs (import taxes) on nearly all dutiable goods across the American marketplace, from clocks to wines to agricultural products and beyond. Hoover did this to supposedly protect American farmers and manufacturers; the heavy tax imposed by Smoot-Hawley was supposed to entice (force) Americans into buying more American-made products, which did not have a heavy tax and were therefore comparatively less expensive. This is part of an ideology known as Protectionism, which claims that governments must “protect” home industries by taxing imports and making them less competitive.

Most economists from across the political spectrum, left and right, agree that Protectionism is a bad idea and attractive only to politicians for political purposes (because it sounds patriotic: “Buy American!”). This is because imports and exports and intrinsically related. After Smoot-Hawley, it became harder for foreign nations to sell goods in America. This meant that foreigners brought back fewer dollars to their home nations to turn around and spend on American exports. This damaged American manufacturers, who suddenly lost a great deal of overseas business. Because Hoover choked off imports, he simultaneously and predictably choked off exports. Furthermore, the heavy taxes on imports made it difficult for American businesses that relied on imports to survive. In one instance, an American wool-clothing manufacturer had to shut down operations and fire all 60,000 employees because the new import taxes ruined their ability to purchase cheap-enough foreign wool for a profit margin; American wool was too expensive to use. Because Hoover used the government to try forcing consumers into buying American goods, he drove the economy further into recession and ultimately depression.

Smoot-Hawley should be evidence enough that Hoover was no “Free-Market fundamentalist”, but there’s even more still to prove the opposite. After the major stock market crash and resulting recession, many businesses needed to lower real wages in response to a much lower cash intake. However, Hoover continually badgered business leaders into not lowering wage rates. This might seem like it makes sense: keeping wages high would allow workers to spend more, thereby jumpstarting the economy, right? Wrong. Hoover got his wish, and most business leaders did not lower wage rates; but costs had to be cut. Real business incomes had fallen. Therefore, instead of lowering wages but still employing numerous workers, many businesses retained only a fraction of their workforce at the same wage rate and laid off everyone else. In 1929, the unemployment rate was near 2%; by 1930, it had leapt to 8.5% as the recession began to be fully felt. By 1932, unemployment had skyrocketed to an appalling 25%. This is directly attributable to Hoover’s insistence that business-leaders not lower wage rates. Had real wages been allowed to fall, unemployment would have been far milder, and the Depression would have been far shorter and less painful as businesses rebuilt their broken finances. Had Hoover actually been a “laissez-faire enthusiast” like mainstream economists and historians claim, then he would have sat idly by while businesses lowered wage rates; he would not have interfered. Unfortunately, he did interfere. He did not adhere to a laissez-fare attitude.

There are a few more key points that reveal Hoover as an interventionist and anti-laissez faire policymaker. One very important and oft-ignored fact is that the Hoover administration presided over what was the largest peacetime increase in taxation and government spending in history. Hoover’s record would not be surpassed until the WWII years. As the Depression began, Hoover did not sit idly by: he created a number of agencies and commissions designed to combat the effects of the Depression. From 1930 to 1931, the government’s portion of the Gross National Product (GNP) leapt from 16.4% to 21.5% under a huge expansion of welfare, relief, and subsidy programs kicked off by Hoover. The Department of Agriculture was given the green light to start handing out millions of dollars in subsidies to failing farmers (who were being screwed over by the tariff act; “the left hand knoweth not what the right hand doeth.”) The Reconstruction Finance Corporation was doling out millions of dollars to subsidize failing businesses. This laid the foundation for what would become Roosevelt’s infamous “New Deal” suite of welfare programs. The New Deal is always considered to be Franklin Roosevelt’s brainchild, but that’s not true: the New Deal was only an enlargement and acceleration of what Hoover began. Decades after the Hoover administration, one of Franklin Roosevelt’s chief architects of the New Deal, Rexford Tugewell, confessed: “We didn’t admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started.” As we can see, Hoover was in no way a small-government laissez-fare enthusiast, and was actually the intellectual father of the New Deal.

Herbert Hoover is wildly misunderstood. He was indeed responsible for the Depression in many ways, but not because he was an obstinate free-market and small-government fundamentalist. In fact, we can only WISH that Hoover had been a laissez-faire enthusiast, because then the Depression would have been much shorter and less painful. Instead, Hoover leapt into action right away, and promptly plunged the nation ever deeper into economic turmoil as more and more capital was sucked out of the free market and into the inefficient and wasteful hands of the government. Anyone who claims that Hoover was a laissez-faire enthusiast either does not understand what laissez-faire means, or they are a history ignoramus.  

Hoover’s Presidency was a resounding failure, but at least he is recognized for this. In my next article in this series, I will discuss the administration of a President who was immeasurably worse, yet is consistently lauded as one of the best: the sinister Franklin Delano Roosevelt. 

 

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