Revisiting the historical record sheds truth on the matter and gives us deeper insight into what did actually cause that particular depression to be so great.
Hoover does indeed deserve blame for the depression but not because he did too little. As a self-described progressive he intervened too much and set the table for the hyper interventionalism and meddling of the New Deal. Good one, Herbie!
To that point in history (1929-1932) Hoover set all the records in relation to government intervention in the economy and spending, only to be eclipsed by the dizzying manipulation of society by his successor, FDR.
Here are some examples, from an excellent book on economic history, How Capitalism Saved America, by Thomas J. DiLorenzo.
- As Commerce Secretary under President Coolidge, Hoover disliked open competition in the market and favored government-coordinated competition, calling it "cooperative competition." This laid the groundwork for FDR's National Industrial Recovery Act and the National Recovery Association, a noxious system whereby businesses were forbidden from competing below government-dictated price levels. Policies were set by business cartels supervised by government, and enforcement was provided by the government.
- As president he pushed for and signed the Smoot-Hartley tariff act. This high tariff cut off trade with consumers around the world, set off retaliatory tariffs from other countries, and greatly depressed domestic production of agricultural and manufacturing goods as the tariff killed global demand for American products.
- Hoover was an enthusiastic proponent of public works. As DiLorenzo points out, by 1931 (FDR was not president until 1933) total government expenditures on public works was as high as any other year in the decade! This is astounding when we consider the millions FDR put on the public payroll with his myriad of works programs. Hoover also encouraged state governments to increase spending on public works.
- By 1931 Hoover's spending created a $2 billion deficit.
- He pushed through the largest tax increase in history, to that point in time. Income, corporate, surcharges, estate, and gift taxes all went up.
- Hoover created the Agricultural Marketing Act, creating a government-created cartel of large corporate interests in the form of the Federal Farm Board. This board colluded production interests, reduced production, and drove up prices of agricultural goods. This was the predecessor of FDR's Agricultural Adjustment Act.
- He created the Reconstruction Finance Corporation (RFC). This board used tax payer funds to prop up uncreditworthy entities with credit, leading to the watering down of free market pressures and forces in lending and finance. This effectively steered capital investment away from productive ventures and job-creating businesses, skewing the market and depressing wealth creation and, therefore, job creation.
And all these gross interferences in the market occurred during the onset of a depression, paving the way for the only Great Depression in American history:
- When the market needed more freedom, not less, to create wealth and jobs, Hoover intervened.
- When people needed to save more of their own property in the form of savings, Hoover increased taxes.
- When entrepreneurs and businesses needed more certainty in the market in order to invest and plan for the future, Hoover rocked the boat with interventionalism.
- When the country could least afford deficit spending, Hoover piled it on.
If only there were some written document into which we could place our trust, to which these politicians had to swear to uphold and defend, something that limited the power of the offices of the government they occupy, something that was the first in history to prioritize individual rights over the privileges of the power of the state...
