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  • 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.

  • As the Depression deepened, industry asked Hoover for permission to cut wages,

  • but Hoover refused. "If we cut wages, there will be hell to pay with unions," he said.

  • By the end of 1931, with the economy in shambles, industry broke their deal by cutting wages

  • and increasing layoffs. But it was too late to stop the free fall. Business failure built

  • on business failure. Unemployment soared from 3.2% in 1929 to 23.6% in 1932.

  • Hoover countered by vastly increasing government spending, offering a nine-point plan that included major

  • public works projects like the Hoover Dam and the Los Angeles Aqueduct. He raised taxes

  • on the top income bracket from 25% to 63%. He did everything he could think of to engineer

  • the economy back to health except the one thing that might have worked --

  • let the free market heal itself.

  • What should have been a couple of hard years turned into a decade long disaster.

  • And what of the commonly-held view that Hoover and Franklin Roosevelt's economic policies

  • were so different? You can now see that view is also inaccurate. Both Hoover and FDR believed

  • in forceful government intervention into the economy.

  • I'm Lee Ohanian, Professor of Economics at UCLA, for Prager University.

Mention the name Herbert Hoover, the 31st President of the United States, and you probably

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フーバーと大恐慌 (Hoover and the Great Depression)

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    James に公開 2021 年 01 月 14 日
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