Herbert Hoover McCain?
By Thomas E. Brewton
web posted April 7, 2008
Senator Hillary Clinton and the Los Angeles Times need to get their facts straight before making ignorant pronouncements.
The Los Angeles Times Blog recently reported:
In the very first words she uttered reacting to John McCain's speech on the housing market crisis Tuesday, Hillary Clinton evinced part of her appeal to older voters: her frame of reference is theirs.
"It sounds remarkably like Herbert Hoover," Clinton said of McCain's assertion that he is not inclined -- and probably never will be -- to embrace aggressive, sweeping government efforts to confront the problem of rising home foreclosures.
Specifically, McCain opined that "it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers."
By mentioning Hoover, whose tepid response to the Great Depression helped keep the White House in Democratic hands for 20 straight years after he was bounced from office in the 1932 election, Clinton invoked what once was a can't-miss applause line among Democrats.
What are the facts, fully detailed and documented by commentators writing at the time?
President Herbert Hoover was a leading exponent of socialist-progressivism in government, despite his characterization by liberal historians as a laissez-faire conservative. So much so that Austrian School economists date the inception of the New Deal to the inauguration of Hoover in 1929. Much of what President Franklin Roosevelt did with disastrous results, from 1933 until late 1940, was merely a continuation and expansion of President Hoover’s policies.
The problem was, not that Hoover was a laissez-faire conservative, but that his liberal-progressive policies failed miserably, just as President Roosevelt's did from 1933 until the outbreak of World War II.
Socialist supporters of President Roosevelt's New Deal had to do something to differentiate his identical policies from those of President Hoover. To do so they resorted to the Soviet Union's standard tactic of rewriting history to discredit former allies of Lenin and Stalin who had been declared enemies of the state and thus had been made non-persons.
Progressives, the American sect of the European socialist religion, had a love affair with experts and the theory that government bureaus could more effectively manage the whole of the nation's economy via collectivized power than could the millions of individual workers and businessmen who made decisions, hour by hour, every day, where the rubber met the road.
Liberal-progressivism thus stands in irreconcilable opposition to the individual political and economic liberties for which the colonists had fought in 1776 and for the protection of which the Constitution was written in 1787.
As Amity Shlaes wrote in the Wall Street Journal:
The premier line in the standard history is that Herbert Hoover was a right-winger whose laissez-faire politics helped convert the 1929 Crash into the Great Depression. But a review of the new president’s actions reveals him to be a control freak, an interventionist in spite of himself. Hoover signed the Smoot-Hawley Tariff Act, which worsened a global downturn, even though he had long lived in London and understood better than almost anyone the interconnectedness of markets. He also bullied companies into maintaining high wages and keeping employees on their payrolls when they could ill afford to do so. Perhaps worst of all, he berated the stock market as a speculative sinner even though he knew better. For example, Hoover opposed shorting as a practice, a policy that frightened markets at an especially vulnerable time.
President Hoover began his interventions in December 1929, shortly after the great Wall Street crash. His opening salvo was jaw-boning businessmen and threatening to retaliate with government regulations if businessmen allowed normal market forces to reduce wages to levels at which they could profitably resume production. President Franklin Roosevelt's active support of socialist and communist labor unions to force abnormally high wages continued Hoover's game in spades.
Artificially-high wage costs in unionized industry were one of the two main factors, along with economic distortions induced by the Federal Reserve's 1920s over-expansion of the money supply, that kept unemployment at double-digit levels throughout the Depression. Unions' prevention of wage adjustments in ratio to sales price declines both held down resumption of full production,and kept the great majority that were non-unionized labor at even lower wages.
Time Magazine reported in its Monday, Dec. 02, 1929 edition:
Prosperity Pledgers
"I WILL APPRECIATE IT IF YOU WOULD MAKE IT CONVENIENT TO ATTEND A SMALL CONFERENCE IN MY OFFICE ON THURSDAY MORNING AT 10 O'CLOCK TO DISCUSS MATTERS CONNECTED WITH MY STATEMENT OF LAST SATURDAY
"HERBERT HOOVER"
Philip H. Gadsden, president of the Philadelphia Chamber of Commerce, received this telegram, hastily "made it convenient" to go to Washington. For "my statement of last Saturday" was, as all the world knows, President Hoover's announcement of a series of conferences to devise means of preventing the Stockmarket decline from affecting U. S. business.
36 major business leaders, ranging from Henry Ford to the heads of General Motors and General Electric, were summoned by the President's "invitation." The results, with the prominent exception of Henry Ford, were pledges not to lower wages, formation of a permanent national economic council to deal with emergencies, cheaper credit and further money-supply expansion by the Federal Reserve, and manifold pledges by business to expand expenditures for plant and equipment construction (surely one of the most bizarre and counter-productive measures imaginable for an economy that had fallen into recession precisely because of misaligned expenditures that resulted in vast over-capacity for production).
The Federal government itself pledged to increase its public building program from $248,000,000 to $423,000,000.
The Reconstruction Finance Corporation later was President Roosevelt's primary financing vehicle for creating and funding "off the books" Federal agencies and for bailing out failing companies. It was created, not by Roosevelt, but by Hoover.
None of this could be described accurately as laissez-faire capitalism.
Two of the most detailed and best accounts of President Hoover's socialist-progressivism are Benjamin Anderson's Economics and the Public Welfare and Murray Rothbard's America's Great Depression.
Mr. Anderson was for many years chief economist for the Chase National Bank and was a participant in most of the major conferences of central bankers and major private bankers before World War I and into the 1940s.
Mr. Rothbard was a leading exponent of the Austrian school of economic analysis. The following is quoted from America's Great Depression. It can be found on the Mises.org economic blog.
Laissez-faire, then, was the policy dictated both by sound theory and by historical precedent. But in 1929, the sound course was rudely brushed aside. Led by President Hoover, the government embarked on what Anderson has accurately called the "Hoover New Deal." For if we define "New Deal" as an antidepression program marked by extensive governmental economic planning and intervention-including bolstering of wage rates and prices, expansion of credit, propping up of weak firms, and increased government spending (e.g., subsidies to unemployment and public works)-Herbert Clark Hoover must be considered the founder of the New Deal in America...
Franklin D. Roosevelt, in large part, merely elaborated the policies laid down by his predecessor. To scoff at Hoover's tragic failure to cure the depression as a typical example of laissez-faire is drastically to misread the historical record. The Hoover rout must be set down as a failure of government planning and not of the free market.
To portray the interventionist efforts of the Hoover administration to cure the depression we may quote Hoover's own summary of his program, during his Presidential campaign in the fall of 1932:
"we might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action. . . . No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times. . . . For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered. . . . They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.
Creating new jobs and giving to the whole system a new breath of life; nothing has ever been devised in our history which has done more for . . . "the common run of men and women." Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom. . . . We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction."...Characteristic of all Hoover's interventions was the velvet glove on the mailed fist: i.e., the businessmen would be exhorted to adopt "voluntary" measures that the government desired, but implicit was the threat that if business did not "volunteer" properly, compulsory controls would soon follow.
...The government was supposed to correct "our marginal faults"-including undeveloped health and education, industrial "waste," the failure to conserve resources, the nasty habit of resisting unionization, and seasonal unemployment. Featured in Hoover's plan were increased inheritance taxes, public dams, and, significantly, government regulation of the stock market to eliminate "vicious speculation."
...So "forward-looking" was Hoover and his program that Louis Brandeis [a prominent socialist and Supreme Court Justice], Herbert Croly of the New Republic [the most prominent liberal-progressive publication from World War I until the 1950s], Colonel Edward M. House, Franklin D. Roosevelt, and other prominent Democrats for a while boomed Hoover for the presidency.
Thomas E. Brewton is a staff writer for the New Media Alliance, Inc. The New Media Alliance is a non-profit (501c3) national coalition of writers, journalists and grass-roots media outlets. His weblog is The View From 1776. Email comments to viewfrom1776@thomasbrewton.com.