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November 19, 2007
Horrible Herbert Hoover?
While making the case that George W. Bush is the worst economic manager this country has ever seen, Joseph Stiglitz writes:
Up to now, the conventional wisdom has been that Herbert Hoover, whose policies aggravated the Great Depression, is the odds-on claimant for the mantle “worst president” when it comes to stewardship of the American economy. Once Franklin Roosevelt assumed office and reversed Hoover’s policies, the country began to recover.
Huh. My understanding was that Hoover is largely believed to have gotten a bum rap. His policies weren't enough, but they thrust in the right direction. He called industrialists to the White House and used the threat of regulation to force them to maintain wages, even getting Henry Ford to increase pay; he expanded public work projects and extracted promises of private infrastructure investment in order to accelerate job growth; he sought higher farm prices and increased government spending. In the overall, he did far too little, but his worst sins were of scale, not misjudgement. As for his largest blunder, the Smoot-Hawley Tariff Act wasn't the world's wisest decision, I agree, but I'd been under the impression that its significance had largely been overstated, at least so far as worsening the Depression went.
November 19, 2007 | Permalink
Comments
Hoover's problem was largely ideological. He was a true believer in the economic paradigm of the day which accepted the premise that goverment intervention in the economy was never a good idea, and he believed fervently that eventually the market would sort all of the issues of the Depression out. He was wrong of course, but he wasn't alone and he was certainly willing within the scope of that worldview to try to do what he could. His bad reputation, I would argue,
is more due to his failure to provide actual relief and assistance to people hammered by the Depression more than his failure to try to fix the problem.
The cruel irony is that Hoover appears to have been an able technocrat and diligent President who under different circumstances would have done just fine.
Posted by: Hebisner | Nov 19, 2007 11:45:24 AM
His reputation is well-deserved. He adopted the view that "recessions are good" because they clean the system out, so to speak, of bad decisions, and refused to make any significant positive intervention that was suggested - including those FDR later adopted. Even the interventions you mention are exactly the opposite of what you would want - raising wages during a depression?!? "How to drive companies out of business and increase unemployment in one easy lesson!" Raising farm prices when farmers are (relatively) employed and the manufacturing sector is getting hammered? And without government subsidies? Let's make it tougher for those newly-unemployed workers to buy products other than food! - accelerating the downward spiral.
I agree, however, that the world was not yet Keynesian, so although the results turned out to be terrible, a lot of people thought the methods were appropriate.
Posted by: john | Nov 19, 2007 11:56:47 AM
Worst economic President before Bush? There are several candidates who are far worse than Herbert Hoover. My favorites include:
Andrew Jackson, and the Specie Circular.
The 1981-82 version of Ronald Reagan and his insane tax cuts.
Thomas Jefferson: the 1807 Embargo Act and his generic agrarianism (which admittedly, was muted during the actual term of his presidency).
Posted by: Joe S. | Nov 19, 2007 12:05:48 PM
> His reputation is well-deserved. He adopted
> the view that "recessions are good" because
> they clean the system out, so to speak, of bad
> decisions, and refused to make any significant
> positive intervention that was suggested -
That is currently Wall Street and the Fed's reigning philosophy of course ("job cuts are good; wage growth is bad").
Cranky
Posted by: Cranky Observer | Nov 19, 2007 12:24:22 PM
"a lot of people thought the methods were appropriate."
Actually, not quite the case that a lot did. The economists of the period were split between institutionalists, a few remaining neoclassical economists, budding proto-Keynesians and others. Our current paradigm - neoneoclassicalism (or New Marginalism) - is a revival of that era's neoclassicals. By the 1930s, the neoclassical explanation had largely failed (because it couldn't explain anything, just as our current neoneoclassicalism hasn't), with the dominant paradigms being the institutionalists fighting with various proto-Keynesians.
Hoover was specifically choosing a largely discredited economic theory in opposition to the dominant academic ones. Why did he do so? Because neoclassicalism was the most favorable economic theory for the wealthy, not because it was either the most plausible nor the academic mainstream at the time.
Posted by: burritoboy | Nov 19, 2007 1:33:35 PM
The Reagan administration was much worse than Bush in terms of driving the US into debt (the deficits were much bigger as a share of GDP) and shifting the tax burden away from the wealthy. The recession in 1982 was far worse - unemployment reached 10.8% - though in large part it was due to the Fed (and arguably the consequence of bad policies in the 1970s).
Bush may be a worse president than Reagan overall, but in economic policy, Reagan had a more significant impact. Bush's virtue is that, unlike Reagan, he's so transparently bad that he ends up discrediting his party and ideology.
Posted by: Bill C | Nov 19, 2007 1:42:36 PM
Ezra, you are correct.
Saying Hoover was a do-nothing president is completely and demonstrably false. Hoover tried to a lot...as you point...and then some. Coolidge had contempt for the man,uncharitably calling him "The wonder boy" because he had so many ideas to control and influence the economy that Coolidge did not like.
However, where you go with it is another story. To say that Hoover failed because he was "FDR lite" implies that Hoover needed more of what he was doing.
Absent here is the question of whether specific policies adopted by Hoover and FDR were wise in retrospect and many were not.
Trying to maintain wages above a market rate was bad as were other policies that seemed show some belief that they could achieve results by maintaining prices. NONE of this worked. Neither did anything to increase the money supply as it shrunk and caused deflation even though we had the gold reserves to justify it.
Basically concentrating on maintaining and/or raising prices/wages is bad economics and it didn't work. And the Hawley-Smoot tariff was an enormous blunder and one of the worse things ever done during that period.
These factors combined to turn a bad recession into a depression.
Posted by: John V | Nov 19, 2007 2:25:35 PM
Hoover was intent on fighting the Depression by balancing the federal budget--exactly the wrong thing to do. Of course FDR ran on a platform of balancing the budget, but fortunately, didn't.
Posted by: Jose Padilla | Nov 19, 2007 2:32:00 PM
A lot of people here seem to believe that Economics trump things like democracy, freedom, and stability. John V, I would suggest that treating something like the great depression as a mere economic problem is a fairly big mistake. Economic theory wouldn't have done much to prevent civil war or national rebellion. I'd imagine that we can all realize that if someone hadn't do something, things were going get really nasty, very quickly. Economic theory must give way to reality. The failure to realize this is what made Hoover a shitty president.
Posted by: Soullite | Nov 19, 2007 4:02:57 PM
Soullite,
you make the mistake of claiming that what I said and the ideas you put out are somewhat mutually exclusive.
They are not. What I said is about real policies with real consequences. It actually has a lot of significance in understanding the depression.
I'd imagine that we can all realize that if someone hadn't do something, things were going get really nasty
this by itself sounds like it means a great deal b8ut it really does not. "Doing something" is not necessarily the same thing as "doing something that will give a positive result".
What you said after this is just an empty assertion of the idea that my post directly rebutted. Saying it doesn't make it so.
Posted by: John V | Nov 19, 2007 4:37:02 PM
FWIW, I would have to agree that Herbert Hoover has gotten a “bad rap” from history – and the economic disaster that was the Great Depression was the source of most it. Of course, like most events in American History, we’ve gotten, today, only a quite simplified version (”Hoover sat around doing nothing while the American economy imploded, except for making boosterish speeches”) of reality. However, the inadequate governmental response to the Depression wasn’t quite entirely the President’s fault:
1) Herbert Hoover genuinely did not believe that government intervention in the economy was NOT a good thing, and went against a century of American tradition.
2) He didn’t come to change his mind about Point 1) until it was, fundamentally, too late.
3) Hoover did propose a few (inadequate) countermeasures to jumpstart the US economy, but had them either stonewalled in Congress (Republican-controlled), or by the Republicans’ financial backers, who (then as now) were dead-set against any “socialistic” measures they couldn’t immediately exploit for their own advantage.
4) The unprecedented length and severity of the Great Depression (not entirely “fixed” even by Roosevelt’s Administrations) had pretty much doomed Hoover and the Republicans anyway: the hideously bad PR attendant on the rout of the Bonus Army in 1932 merely nailed the coffin-lid down.
Too bad, really: Herbert Hoover could have been remembered as one of this country’s better Presidents (his retirement career as Red-baiting crank didn’t help his rep much, though); the Muse of History is a fickle, nasty bitch sometimes.
Posted by: Jay C | Nov 19, 2007 6:44:00 PM
"Huh. My understanding was that Hoover is largely believed to have gotten a bum rap. His policies weren't enough, but they thrust in the right direction. He called industrialists to the White House and used the threat of regulation to force them to maintain wages, even getting Henry Ford to increase pay; he expanded public work projects and extracted promises of private infrastructure investment in order to accelerate job growth; he sought higher farm prices and increased government spending. In the overall, he did far too little, but his worst sins were of scale, not misjudgement. As for his largest blunder, the Smoot-Hawley Tariff Act wasn't the world's wisest decision, I agree, but I'd been under the impression that its significance had largely been overstated, at least so far as worsening the Depression went."
I think your comments themselves prove the point. He asked corporations to increase pay and payroll- they didn't, and instead cut both pay and payroll.
He absolutely refused to invest in public works - instead, he offered LOANS for states and localities to do so, and even then only after being bludgeoned by Progressives of both Congresses for vetoing public works bills. The end result was a $500 million fund that was slow to release any money because states simply couldn't afford to borrow the money.
The promises he extracted were unfortunately specious and didn't happen; private investment in infrastructure almost vanished outright. And as for farm prices, he suggested but did not actually carry those policies out, believing them to be un-constitutional/ un-American.
What you also didn't mention is that Hoover absolutely refused to countenance federal spending on relief, at a time when 25% of the country was unemployed and poverty rates were probably at twice that.
Contrast that to the campaign of FDR, who promised and delivered on massive public works, federal relief money, and farm price supports.
The reputation is totally deserved.
Posted by: StevenAttewell | Nov 19, 2007 7:46:05 PM
Your "Huh" is warranted.
""We didn't admit it at the time, but practically the whole New Deal was extrapolated from programs that Hoover started." - Rexford Guy Tugwell, member of Roosevelt's 'brain trust'.
the familiar characterization of hoover as champion of laissez-faire, echoed here by several of your commenters, is an ideologically motivated fabrication.
Posted by: pimp hand strikes! | Nov 20, 2007 7:13:07 AM
For one detailed review at the various sources from which New Deal planning stemmed, check out Patrick D. Reagan's Designing A New America: The Origins of New Deal Planning, 1890 - 1943.
Posted by: El_Cid | Nov 20, 2007 10:16:21 AM
John, they were. As much as you'd like to pretend we could conduct perfect classroom economics in real life, trying it has never lead to political stability. Trying it at a time when people were half-starved and clearly trending towards riots and revolution would have been national suicide.
I know people like you think that Economics is a science, but it's really a whole hell of a lot closer to an ideology. And yes, 'doing something' was more important that doing what you believe to be the right thing. The honest truth, however, is that hoover had been trying to do what the economists of the day were telling him was 'the right thing' and it wasn't working. While people like you look at economics in terms of large scale numbers, individuals only care about having some prospect for a future and the ability to feed their families. Political stability demanded that whatever be done had to have an immediate effect. FDR's actions may not have ended the depression, but it put money in the average American's pocket when they needed it. That was far more important the safety of our country than implementind whatever friedmannomics was called in those days.
Posted by: Soullite | Nov 20, 2007 12:33:12 PM
Soulitte,
I think you are trying to debate this matter within a paradigm that is of your choosing and that is not very applicable in speaking to my point.
If you return to the original point, this about Ezra's "huh" in response to the notion that Hoover did nothing in response to the depression while FDR did...a notion that is demonstrably false. Hovver did in fact intervene and mostly with poor policies. Again, this is a very true statement that is very at odds with the fiction that Hoover was a "do nothing" or "laissez-faire" president. Hoover did in fact employ many of the same policies that FDR later ran on...only FDR greatly intensified them and added others. All very true.
Now, I then went further and said that history shows us that neither man had the right policies. It was not a matter of degree but rather of bad policy itself.
Now how does this correspond with the argument that you are attributing to me? Not very well. You are trying very hard to make this about people like me (whatever that means) and a very deliberate scoff at economics in general... as if it's some uniform opinion. IOW, you are trying to have a clearly different discussion because you don't like my point.
Posted by: John V | Nov 20, 2007 1:13:08 PM
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