Herbert
Hoover was worth $4 million in 1914 as a mining engineer and
mine owner. This was before World War I, when the dollar bought 25 times more than it
does today. He was good at what he did in the private sector.
He gained
national fame as a World War I relief administrator: Belgian relief. The
Germans let him do this because it freed up food for the German Army: no need
to feed occupied Belgium. This is now how the history books tell it. This was
the next phase of the legend of "Hoover the Engineer."
Harding
appointed him Secretary of Commerce. Hoover then oversaw the nationalization of
the airwaves. He created the Federal Radio Commission, which became the Federal
Communications Commission. Instead of selling air space to the highest bidder
-- the free market solution -- he let the FCC license and periodically
re-license broadcasters. This became the basis of the second most important
cartel after the banking cartel: the media cartel. This was the origin of the
mainstream media.
Coolidge
kept him on, but he had contempt for him. He called him the "wonder
boy." He once said: "That man has offered me unsolicited advice every
day for six years, all of it bad."
Then he
became President. He became the heir of a boom created by the Federal Reserve
System's fiat money. His actions turned what would have been a sharp recession
into a depression -- a word he coined to replace "panic."
He then
started spending vast quantities of federal money. He also pressured businesses
to hold up wages above the market wage levels, industry by industry. This
created unemployment. His government created the Reconstruction Finance
Corporation to provide government loans to high-risk businesses. Franklin
Roosevelt retained the RFC.
The
percentage increase of government spending under Hoover's four years was
greater than FDR's during the first seven years.
Yet even
Coolidge deserves some of the blame. Professor Randall Holcombe has described what happened under the Republicans, 1921-33.
If one looks only at total federal spending, it appears that the
Republican administrations of Harding and Coolidge are a period of retrenchment
sandwiched between the big-spending Democratic administrations of Woodrow
Wilson and FDR. The Hoover administration does not fit this view even when
examined superficially, because the percentage increase in spending during
those four years exceeded the growth in the first seven years of FDR's New
Deal, before World War II caused spending to skyrocket. Despite the
conventional wisdom that big government began with FDR, a closer examination
reveals that even the Harding and Coolidge administrations were periods of
substantial government growth. It was masked, though, by the reduction in
war-related spending following World War I. The 1920s, then, were actually a
continuation of Progressive Era government expansion, which would last through
the New Deal.
Contemporary
political-party ideological stereotypes do not fit the pre-New Deal era. At the
risk of some oversimplification, they should be reversed. The Republican party,
the party of Lincoln, was the advocate of a strong federal government with
increasing powers, while the Democratic party, which had most of its power in
the South, advocated states' rights and a smaller federal government. Moreover,
Harding and Coolidge were not particularly strong presidents, and the Congress
was dominated by Republicans with substantial Progressive leanings. For Harding
and, after Harding's death in 1923, Coolidge, a return to normalcy meant a
return to the Progressive policies begun before the war. This was even more true
of Hoover, who was an engineer by training and a firm believer in applying
scientific principles of management to government.
This is
why New York Governor Franklin Roosevelt was taken seriously in his Fall 1932
Presidential campaign speech in Pittsburgh when he announced this:
For over two years our Federal Government has experienced
unprecedented deficits, in spite of increased taxes. We must not forget that
there are three separate governmental spending and taxing agencies in the
United States the national Government in Washington, the State Government and
the local government. Perhaps because the apparent national income seemed to
have spiraled upward from about 35 billions a year in 1913, the year before the
outbreak of the World War, to about 90 billions in 1928, four years ago, all
three of our governmental units became reckless; and, consequently, the total
spending in all three classes, national, State and local, rose in the same
period from about three billions to nearly thirteen billions, or from 8 1/2
percent of income to 14 1/2 percent of income.
The
problem was, he insisted, that high taxes cannot boost the economy.
"Come-easy-go-easy" was the rule. It was all very merry
while it lasted. We did not greatly worry. We thought we were getting rich. But
when the Crash came, we were shocked to find that while income melted away like
snow in the spring, governmental expense did not drop at all.
This was
part of Roosevelt's grand deception. It worked. Then
the speech went down the memory hole. So did Hoover's Keynesian spending.
Hoover
gets blamed for the Great Depression, not the Federal Reserve. He should be
blamed for turning a sharp recession into the Great Depression. He did it by
means of policies that were imported and then extended by the New Deal.
This is a
good inoculation against the Keynesian textbook version of the story. https://www.youtube.com/watch?v=KfeHWnaK7rY
If this
gets your attention, here is my lecture on Hoover's economics for my American history course in the Ron Paul Curriculum.