In the course of a New Republic article analogizing George W. Bush to Herbert Hoover, historian Alan Brinkley perpetuates the long-discredited myth that Hoover failed to stop the Great Depression because he pursued laissez-faire policies:
Herbert Hoover . . . exemplifies the dangers of sticking to one's principles. One of the ablest and most widely admired men in America when he was elected president in 1928, Hoover left office four years later discredited and reviled--a victim of a Depression that he had not created, to be sure, but also a victim of his choice of conviction over pragmatism. Unwilling to challenge the pillars of free-market capitalism, strongly committed to balanced budgets and fiscal prudence, convinced that the natural laws of economics would bring the Depression to a close, he responded to the Depression with such restraint and timidity that had his administration not ended when it did, the entire financial system of the United States might have collapsed.
Far from being "unwilling to challenge the pillars of free-market capitalism," Hoover reacted to the Depression by promoting extensive government intervention. For example, he established the Reconstruction Finance Corporation, a new federal agency that gave massive loans and grants to banks, failing businesses and state and local governments - a policy similar to today's bailouts. He also supported (albeit reluctantly) the enactment of the Smoot-Hawley tariff, a protectionist measure intended to strengthen American businesses by shielding them from foreign competition. Furthermore, he sponsored a massive increase in federal spending on a variety of relief programs. Similar to today's Democratic Congress, Hoover sought to stimulate the economy by increasing federal funding for public works through the Emergency Relief and Construction Act.
Speaking before the 1932 Republican Convention, Hoover boasted that he had rejected the "disastrous" option of doing "nothing" and instead had "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." In that same 1932 campaign, FDR even denounced Hoover for overspending and promised to enact a balanced budget.
Nor were Hoover's interventionist policies a sudden change of heart caused by the Great Depression. He had advocated extensive increases in government spending and regulation for years, especially during his time as Secretary of Commerce in the 1920s. Even before the Depression began, the Hoover Administration promoted federal intervention in labor relations and massive farm subsidies.
None of this is news to economic historians. By the 1960s and 70s, research by a variety of scholars had shown that Hoover was anything but a laissez faire advocate. Liberal historian Joan Hoff Wilson's 1975 book Herbert Hoover: Forgotten Progressive is a good summary of the evidence. It is surprising that an outstanding historian like Brinkley would ignore this body of research.
Brinkley is right, however, to suggest that Hoover's policies were similar to Bush's. Like Hoover, the Bush administration responded to an economic crisis with a policy of bailouts. Also like Hoover, Bush sought to push the GOP towards big government policies long before any economic crisis had occurred. Under Bush, the GOP massively increased domestic spending and federal regulation. Bush also, in his own words,"use[d] the mighty muscle of the federal government" to incentivize financial institutions to issue mortgages to borrowers with dubious credit qualifications - an interventionist policy that helped cause the current crisis.
After Hoover left office, New Dealers used the myth of his supposed adherence to laissez-faire as a justification for discrediting free market policies. Today, we are seeing the creation of a similar myth about Bush. The truth, however, is almost the exact opposite of the myth.
The fact that Hoover and Bush pursued interventionist policies doesn't in and of itself prove that free markets are the way to go. Perhaps Hoover and Bush simply chose the wrong kinds of interventions. Nonetheless, the myth of Hoover as laissez-faire advocate was an important rhetorical prop for supporters of big government policies in the 1930s. Hopefully, it is not too late to forestall the creation of a similar convenient myth about Bush today.
UPDATE: It's worth noting that FDR strongly denounced Hoover for being overly interventionist during the 1932 campaign. He attacked what he called the GOP's "reckless and extravagant spending" and warned against Hoover's tendency to conclude that "we ought to center control of everything in Washington as rapidly as possible." The later liberal Democratic view of Hoover as a laissez-faire advocate is a post-New Deal invention. When Hoover was actually in office, most Democrats realized that he was an interventionist, and many criticized him for it.
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- Anna Schwartz on the Economic Crisis:
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