Hoover and the Great Depression | 5 Minute Video
A new history of the Great Depression is emerging. One that acknowledges the role that government played in causing and prolonging it, and the constructive role that free enterprise could have played, if it were given the chance. In this video, UCLA economist Lee Ohanian explains how Herbert Hoover, widely misunderstood as a champion of the free market, actually turned what should have just been a recession into a depression due to his mistrust of the market.
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Script:
Mention the name Herbert Hoover, the 31st President of the United States, and you probably think “Great Depression.”
Here’s how the usual narrative goes: The stock market crashes in October of 1929. Hoover, a Republican, refuses to intervene. Instead, he lets the free market deal with the problem and the economic downturn morphs into a catastrophic decline.
Well, the Stock Market did crash in 1929 and the economic downturn that followed did lead into the Great Depression, but it wasn’t because Hoover was a small government man like his predecessor, Calvin Coolidge. It was just the opposite. My research shows that it was Hoover’s incessant meddling — not the mistaken view that he did nothing — that provoked the Great Depression.
Hoover, a good man with magnanimous instincts, was a successful mining engineer before he got into government. He believed that almost anything could be engineered, and he brought that philosophy to the economic crisis of 1929. As a result, he was the wrong man for the job at exactly the wrong time. For starters, Hoover distrusted the free market. He knew that unfettered competition forces companies to reduce prices; but, he believed, lower prices lead to lower wages.
In November of 1929, shortly after the stock market swoon, Hoover called a meeting with the CEOs of major American industry. Henry Ford of Ford Motor, Alfred Sloan of GM, and Pierre Dupont of Dupont Chemicals led the group that met with Hoover.
The President set down a very clear and unprecedented directive: 1) Despite the weakening economy, keep wage rates at current levels. 2) Minimize layoffs. If you must reduce manpower, do it through work sharing — that is, have two workers work half a day each or every other day.
In return for maintaining wage rates and sharing jobs, Hoover promised the CEO’s that he would convince workers to neither strike nor demand additional pay or benefits. He kept his promise. Labor agreed not to strike. Industry agreed not to cut wages. In fact, Henry Ford raised wages as a gesture of solidarity.
The engineer, it seemed, had engineered the perfect solution. Only it didn’t work.
As 1929 moved into 1930 and 1931, prices for industrial goods declined. One reason was the economy-wide deflation brought on by the Federal Reserve’s tight money policy. People simply didn’t have money to buy goods or invest in companies. But another reason, and a big one, was the result of something else Hoover did — his signing of the Smoot-Hawley Tariff Act of 1930. That act, which raised tariffs on imports to the highest levels in 100 years, led America’s trading partners to retaliate by placing tariffs on American goods. With American exports cut in half, the prices of American industrial goods declined sharply.
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Paid for by conservative dollars
Ohh look an example of tarriffs tanking a weakend economy! We'll never make that mistake again
The key phrase is when the narrator says, “I believe…” what follows goes against what every credible economist on both the right and left have determined.
Were Hoover & Roosevelt's Great Depression policies so different? Did one do a better job than the other? Why or why not? Provide specific examples
Very interesting perspective ❤
Trump is going to put Tariffs in 2025? Will this end up hurting us?
Ironic that tariffs is exactly what this incoming administration is proposing right at a time that it will have the exact same affect. According to the LISEP(Ludwig Institute for Shared Economic Prosperity) the real unemployment rate when accounting for underemployment and those looking for work but are no longer being counted as unemployed is close to 23.1%, significantly more than the 4.1% that the current administration is reporting. I fear for our country.
Terriffs are bad, hopefully trump watches this video
Trump wants 20% blanket tariffs.
My opinion is that Hoover's American Relief Administration giving out hundreds of millions to other countries that would later hate the US like the Russian Relief Act instead of keeping the money for the citizens. Like they are doing now.
He ignores a lot of detail. For example, Hershey avoided union problems by cutting hours and not cutting jobs. He also locally sourced many of the raw materials for his products and had their support against unions striking.
In a nutshell, Ohanian is cherry-picking.
The issue with this argument is that the Great Depression (at least the forces that created the Depression) were already underway before the stock market crash and the Smoot-Hawley tariff being an effort to rebalance the economy before the Depression began.
Additionally, suggesting the guy nominated by the opposition party to replace Hoover is also somehow the same as Hoover is applause-worthy mental gymnastics.
Govt need to spend.
They should have called it the Hoover Depression.
He was one of my favorite presidents.
It was the Fed …. Hoover did what the Fed wanted … to destroy the American WILL TO FIGHT enemies on our own SOIL … the fed … EVIL , CORRUPT , FED
Democrats have been destroying everything they get their hands on including The USA
Did we track that Hoover thing all the way back to Black Friday 1929???????
Never knew that Hoover and FDR had the same policy. FDR just had a better hype man.
I think you left out that he raise taxes, and the Democrats were elected to control Congress in 1930 and they raise taxes a lot followed by 1932 when they got a supermajority and really lowered the boom in taxes.
History has repeated itself as always