Not long ago I received an email from the author of a Financial Times editorial chastising me for my advocacy of laissez-faire. He wrote in reply to a comment of mine, sarcastically: "Yes, the free market was tried between 1928 and 1932. It did a wonderful job, too."
Though I disagree with the fundamental outlook of the author, I'm nonetheless very grateful for his reply, particularly the sarcasm. It spurred me to dig further than I had into the history of the period. What I discovered went far beyond just finding evidence to disprove my correspondent's contention. I found that everything being proposed today has been tried and failed, miserably, starting well before Hoover's term, who assumed office in March 1929.
Even so little effort as a casual reading of material on the Herbert Hoover Presidential Library site is enough to show that the 31st president was hardly idle while the country suffered through the Great Depression.
Under the heading of the question: "What did President Hoover do to fight the Depression?" they write, without apology, but apparent pride,
Many people believe that President Hoover did little or nothing in response to the Great Depression. In fact, beginning immediately after the stock market crash in October, 1929, Hoover implemented many ideas to lessen the effect of the Depression and to hasten the recovery.Long before becoming president, Hoover was equally active in pushing the government to intervene in the economy. He supported Teddy Roosevelt and the Progressive Party in 1912. As Secretary of Commerce under Harding and Coolidge, Hoover was just as busy pushing them to intervene and using his power to intervene himself.
He directed all Federal Departments to speed up public works and other projects, in order to create more jobs. He directed the Federal Farm Board to support commodities prices and asked Congress to decrease non-essential government spending and use the money to start new public works.
President Hoover called many conferences with industry and finance leaders to encourage voluntary cooperation among businesses to relieve the Depression. Hoover also created the President's Organization on Unemployment Relief to stimulate and coordinate employment and relief efforts.
After the collapse of the European economy in April of 1931 caused the Depression to become even worse, President Hoover called for a temporary suspension of international debt payments, which saved the international banking system from complete collapse. With foreign trade at a standstill, prices for U.S. manufactured goods and farm products fell, and American industries began laying off even more workers.
President Hoover asked Congress to appropriate more money for farm loans and to create the Reconstruction Finance Corporation, which would be used to help financially endangered building and loan associations, agricultural cooperatives, banks and railways.
He proposed federally funded Home Loan Discount Banks to help protect people from losing their homes. He asked Congress to loan $300,000,000 to the states to aid their relief programs, and to transfer agricultural surpluses from the Farm Board to the Red Cross for distribution to relief agencies.[emphases mine]
The same pattern of involvement in negotiations between labor and management was present during his Secretaryship. He initiated a campaign called "Own Your Own Home" similar to the later ones of Fannie Mae that contributed mightily to the recent meltdown. He convened conferences to establish standards for traffic control. He played a significant role in regulating radio.
[Also, see the current Vulcan's Hammer post.]
One could go on for pages, but you get the point. This is hardly the picture of a man like Calvin Coolidge who declared, in essence, that fixing the economy is not the government's proper function.
Tragically, neither Washington nor the country at large learned the right lessons from these failed efforts. In fact, just as is about to happen now, they were amplified by the even more ambitious-for-control FDR. There's no telling when, or if, enough people will learn those now more than ever needed lessons and thereby stop those in power from meddling.
There's much more evidence, including these 'gems' from Murray Rothbard's book America's Great Depression:
[Quoting Hoover himself] 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.
... 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.
[N]ot so many years ago – the employer considered it was in his interest to use the opportunities of unemployment and immigration to lower wages irrespective of other considerations. The lowest wages and longest hours were then conceived as the means to obtain lowest production costs and largest profits
... But we are a long way on the road to new conceptions. The very essence of great production is high wages and low prices, because it depends upon a widening ... consumption, only to be obtained from the purchasing-power of high real wages and increased standards of living.