...foreshadow a lot of commentary on our own economy today:
"Thousands of our people in their bitter distress and losses today are saying that "things could not be worse." No person who has any remote understanding of the forces which confronted this country during these last 18 months ever utters that remark. Had it not been for the immediate and unprecedented actions of our Government things would be infinitely worse today."
If not for the bailouts, deficit spending, and Federal Reserve monetary stimulus, it is said, the economy would be much worse.
Instead of a recovery, we are threatened by a double dip recession. Or is it triple? Same as the Hoover years. The economy is stagnating, as it did in the Great Depression.
And people in the media and politics still accuse Hoover of laissez-faire!
What - Or Who - Started the Great Depression?
http://www.econ.ucla.edu/people/papers/Ohanian/Ohanian499.pdf
By September 1931, manufacturing hours worked had declined more than 40 percent, and the average workweek in manufacturing had declined by about 20 percent.
Revisionism by only several sources on subjects as complex as Hoover & the great depression ?! How simplistic ! & You're quoting Hoover to say he was an "interventionist"?! During the depths of the depression, while people were starving, he said there would be a "chicken in every pot & prosperity was just around the corner" !--LMFAO !
Current unemployment is 8.8%. 216,000 jobs created last month, after months of job growth, so appears slow "recovery" is well under way. At height of Great Depression, unemployment stood at 25% Today, people with $ in bank have savings insured by FDIC ( created by FDR ). No such safeguards under Hoover, with massive bank falures & people's savings wiped out. Your analogies to the great depression are exercises in Sophistry to say the least.
Cultist, you need to get your head outta yer "tuchess"------
Lets see, what were his policies in the aftermath of the crash of 1929?
Called business leaders to Washington to pressure them to keep wages high, using threats of labor union legislation.
Expanded public works projects.
Increased agricultural subsidies.
Passed the Smoot-Hawley Tariff Act (Nothing screams laissez-faire like protectionist tariffs.)
Directed the Federal Reserve to divert capital to "essential industries".
Federal home loan banking system.
Began the regulation of the stock market.
Created the Reconstruction Finance Corporation.
Why you persist in arguing this, proving yourself to be as dogmatic a cultist as you accuse me of being, is beyond me.
Most economists say the Smoot-Hawley tarrif was a major reason the Depression became as bad as it did and persisted for so long.
Yes, and that was Hoover, as well. Not exactly laissez-faire, huh?
Smoot-Hawley was a big factor, but I think Ohanian (and before him Rothbard) identified the much larger cause.
And that still doesn't take into account the Federal Reserve's inflating the money supply, especially when it tried to bail out England. All that new money went into the speculative stock bubble.
When he says "cultists" are bending the truth to further crackpot philosophies, Priapus is projecting. There is just too much evidence against him.
Could you possibly consider that ( excluding Smoot-Hawley ), that if Hoover didn't enact the small measures that he did, the Great depression could have been far worse?! Unemployment levels of 33% & up ?!
"Wanna" wants to return to the antediluvian days of 19th century "gilded age", pre-Teddy Roosevelt monopoly busting, unfettered Laissez faire economies, where corrupt business oligarchies ran & ruined the nation.
In 1933, FDR enacted the Glass-Stegal banking reform act. When that act was largely weakened in "go-go" economy of late 90's-early 21st century, it greatly contributed to the economic mess we currently are in.
So much for "Laissez Faire" economic programs.
-- Modified on 4/2/2011 1:17:04 PM
Small measures?
You are evading the real issue. You have accused Hoover of being laissez-faire. He was nearly the exact opposite. All the evidence says so. I have listed a very small amount of it.
Here is more evidence that there was no laissez-faire, another source of information about government intervention that contributed to the Great Depression:
1. The McFadden Act of 1927
This act limited the size a bank could grow by forcing banks to stay within the state which they originated in. Other countries like Canada which did not have this regulation fared much better. Compared to the 9,000 banks lost in America not a single Canadian bank went bankrupt.
2. Loans
The average man was unable to pay off his debts, so they simply borrowed more money causing more stress on the banks.
3. Panic
Panic steamed from the crash and forced people to pull their money out of banks. The panic only grew as more banks fell.
I am not relying on only two economists. There is also Milton Friedman. His analysis is flawed because of his monetarism, but he correctly attributed the speculative bubble and the collapse to "errors" by the federal Reserve. What he unfortunately does not acknowledge is the fact that the Fed can't make anything BUT mistakes.
Ben Bernanke admits that Friedman was right: “I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again."
http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021108/default.htm
The problem is that Friedman's analysis leaves out the fact that the Fed can't get it right, and they promptly did it again.
http://www.cato.org/pubs/tbb/tbb-0508-25.pdf
The Government and the Great Depression
by Chris Edwards, Director of Tax Policy, Cato Institute
Such often-stated claims are incorrect. Misguided federal policies caused the downturn that began in 1929,
and they prevented the economy from fully recovering for a decade. Policy blunders by the Federal Reserve, Congress, and Presidents Herbert Hoover and Roosevelt battered the economy on many fronts.
What Caused The Great Depression?
by Andrew Beattie
This bleak reality forced Hoover to use legislation, the government's trump card, to try to prop up wages. Following in the unfortunate tradition of the protectionists, Congress tried to restrict the flow of foreign goods by passing the Smoot-Hawley Tariff Act. Because foreign nations weren't willing to buy over-priced American goods any more than Americans were, Hoover decided to choke out cheap imports. The Smoot-Hawley Act started out as a way to protect agriculture, but swelled into a multi-industry tariff. Other nations retaliated with their own tariffs, essentially cutting off international trade. Not surprisingly, the economic conditions worsened worldwide and the U.S. economy sunk from a recession into a depression.
Although Roosevelt promised change when he came into office, he continued Hoover's economic intervention, only on a bigger scale. He created the New Deal with the best intentions, but like Hoover's wage controls, it backfired. With previous recession/depression cycles, the U.S. suffered one to three years of low wages and unemployment before the dropping prices led to a recovery. Responding to this historical trend of a few hard years followed by a recovery, American industrialist and philanthropist J.D. Rockefeller remarked, "These are days when many are discouraged. In the 93 years of my life, depressions have come and gone. Prosperity has always returned and will again." By attempting to immediately recover without swallowing the bitter pill of two hard years, Hoover and Roosevelt may have actually prolonged the pain.
http://www.econlib.org/library/Enc/GreatDepression.html
http://www.leisurelyhistorian.net/herbert-hoover-and-the-corporatist-state
Hoover's campaign slogan of "a chicken in every pot (and two cars in every garage)" was not at the "depths of the Depression." That was during his 1928 campaign, prior to the stock market crash. Furthermore, he was out of office during the "depths of the depression" which came under FDR's administration.
Hoover can be blamed for dooing too little too late, but not for doing nothing as you seem to want to claim. Most of FDR's policies were initially nothing more than an expansion of Hoover's later policies (such as Hoover's Emergency Relief and Reconstruction Act which was the first major relief effort). Hoover, along with most analysts at the time, thought it was just a heavy, but limited RECESSION, which does happen as part of normal business cycles. For example, unemployment was still under 10% in 1930 (estimates differ). But after two years of substantially rising unemployment, he did change his tune. Thus, his statement of "prosperity is around the corner" was in a speech to a group of businessmen designed to give them faith and start hiring and investing again to get the economy rolling.
Note that he also more than doubled the top marginal income tax, and raised corporate taxes as well, reversing many of the policies of Harding and Coolidge. Hoover was decidedly not laissez-faire.
I realize you bow at the altar of FDR, but in a survey of economic historians and generic historians published in the Journal of Economic History (volume 55), it was found that "economists in the sample are almost evenly divided on the question of whether or not when taken "as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression." This is obviously not just the view of one or two "cultists". However, generic historians are reported to overwhelming reject the notion.
BTW, unemployment did not decline to less than double digits under FDR until the US entered WWII (due to the large military mobilization). This was in FDR's THIRD term.
And one thing not mentioned so far is that things had greatly improved by 1937 but then FDR made the big mistake of caving to conservatives and cutting the 1937-38 budget, which caused the economy to tank again. This is one of the lesson learned by Bernanke and others (including Geithner) who have supported postponing budget cuts until the economy is on firmer footing.
The question is, did it actually tank, or were the problems caused by attempted stimulus and deficit spending simply revealed? If people who "worked" at such jobs as chasing tumbleweeds lost these "jobs", was it a reflection of an economic downturn? Or were they then released from glorified welfare to actually rejoin the real labor force? GDP may have declined, but that just measures spending, much of which is government spending, which doesn't really serve economic needs as defined in terms of consumer choice.
The example that really shows the difference between the Hoover/FDR approach to a recession and a more laissez-faire one is the 1920 depression. Coolidge and Harding didn't do much about that one except cut government spending and taxes. The result was a quick recovery from a depression that barely rates a footnote in the history books. Except as an example of the right way to deal with an economic downturn.
In the case of public works, Bastiat explained that government produces nothing independent from the resources and labor it diverts from private uses. When government borrows money to create jobs, what is readily seen are people employed and the fruits of their labor. However, what is generally not considered are the many things that could have been produced if the capital had not been removed from the private sector to fund the government programs in the first place. Such policies necessarily benefit some (the favored workers) at the expense of others (those who would have had the jobs that were not created) and eventually the taxpayers, who have to repay the debt.
What is Seen
New Deal public-works projects provided plenty of evidence for Bastiat’s theory. They not only failed to help lift the economy out of the Great Depression but also served to make it “great.”
First, many jobs created under FDR benefitted few besides those employed—in things like studying the history of the safety pin, collecting campaign contributions for Democratic Party candidates, chasing tumbleweeds, and cataloging 350 different ways to cook spinach. (See Lawrence Reed’s Great Myths of the Great Depression, www.tinyurl.com/7eecje.)
In addition, much of the “job creation” was directed according to political preferences, rather than where jobs were arguably needed most. For instance, a disproportionate amount of public relief went to western “swing states” expected to help Roosevelt win votes in future elections, rather than to the poorest states, such as those in the South, which were already solidly Democratic during this period. Relief and public-works spending also seemed eerily to increase during election years, and it has been shown that votes for FDR correlated closely with jobs and other special government benefits given. (See Burton Folsom’s New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America.)
"GDP may have declined, but that just measures spending, much of which is government spending, which doesn't really serve economic needs as defined in terms of consumer choice. "
During the 1930s, Gov't spending as a component of GDP averaged only around 20%. It wasn't until involvement in WWII that it zoomed up into the 40%-50% plus range. And that ended when the war did.
Further, if you actually analyze WPA and other assorted programs, very little of it was of the "chasing tumbleweeds" variety. WPA built housing, roads, parks, bridges, hospitals, schools, etc. Yes, there was some spending on artists and musicians, but that was a drop in the bucket overall. WPA also began massive data collection of government statistics, which continues to this date.
Subsequent study has shown the worst abuses of WPA is the manner in which it was distributed to the states. More money went to states whose Senators supported the bill, and to battleground states in the 1940 election. Employment in the WPA was also at its highest in the fall of election years for 1936, 1938, 1940.
As for the short-lived Depression of 1920-21, the most devastating effect was the large deflation which it accompanied. The CPI dropped by 10% and the wholesale price index fell by half. Farmers were hit the hardest, as their harvest could not return enough revenue under the lower prices to pay back their large borrowing (which happens every season). Farms failed and homes were lost. This did not rebound when the Depression ended, although the rest of the 1920s saw a booming economy until 1929.
But why do you discount downturns in GDP as "just measuring spending" when you are bullish on a booming economy which is again determined by the same criteria --- changes in GDP which then just reflects higher spending.
How do you determine that WPA spending was productive? Yes, spending on roads, homes, bridges and all that SOUNDS productive. But you can get things like bridges to nowhere, or homes that people don't live in. What really determines the health of the economy is how well it produces the goods and services people actually want and need, guided by actual consumer choices. People spend their own money to buy the things they need and want. That determines what businesses are productive and profitable. Government spending does not have that guidance, and it more often politically motivated, as you admit when you talk about WPA money went to states that supported it politically.
Of course, when farms are becoming mechanized, more and better agricultural technology is being used, many farmers will suffer. That is the means by which an economy grows. Losing their farms is the economy's way of signaling that more than enough food is being produced, and those farmers are not needed AS FARMERS. They need to sell their farms and go look for other work. This is a reality that no economic system or policy can do anything about, except put off the necessary adjustment and make it even more painful later on.
The economy did not rebound ONLY as measured by changes in GDP. Unemployment dropped, productivity increased, new businesses were opened, new products were invented and produced. The economy became more productive.
Notice that I did not mention GDP when talking about the 1920 depression.
Yes, it is true that gov't does not have the same price signals that the market does. So if you ask how do you know it is productive what they do, the question can be turned around to you: how do you know what is being produced is NOT productive?
Furthermore, the price signal approach is deeply flawed. To be an arbiter of productivity, it must be the case that markets are competitive and externalities do not exist. Neither is true. So prices actually send warped signals, not accurate signals of allocative efficiency. You seem to have stopped your knowledge of economics in chapter 3 when supply and demand are first introduced -- read later chapters of any introductory textbook which deal with imperfect information, non-perfectly competitive markets, externalities, and public goods. I.e. actual markets, not idealized markets that do not exist and are used only as a benchmark for comparison to real markets.
You cannot simply assume free markets are more efficient than regulated markets. It is an empirical question. Often the evidence supports the free markets as less inefficient than gov't, but not always. And its downright silly to believe markets are actually efficient. They are not. At best, they are less inefficient than the alternatives. Based on the empirical evidence, I generally favor freer (but not free) markets, but its a case by case basis.
As for the 1920 recession, as already stated what killed the farmers was the large deflation. Not mechanization. Same as the depression of 1896. Mechanization would replace workers, not farmers. Agricultural labor hired to work the farms would be reduced, but this would benefit the farmers themselves (or else why adopt the new technology?). In the 1950s and 1960s there was a lot of innovation which introduced economies of scale making small farms less productive relative to larger corporate farms, but that was not true in 1920-21. There was not a sudden surge in technology which lasted only one year, or a huge boom in supply which evaporated a year later. It was the harmful distributive effects of a sudden drop in prices which farmers cannot adopt to in the same manner as manufacturing because they do not have continued production - it is seasonal with large upfront fixed costs which require loans that can only be paid back if crop prices remain stable. They simply did not forsee the huge deflation (which was NOT limited to agriculture) which occurred after the loans were made in the spring. Deflation harms debtors and benefits creditors, unless loans are indexed to inflation. That is true by definition, and has nothing at all to do with efficiency. This is why governments with large debts favor inflation, so the real value of what they have to pay back is diminished. Again, that is not an efficieny gain either.
So your argument about not needing as many farmers applies to current times (assuming away externalities and the like), when general prices are rising yet agricultural prices are falling. But it does not apply in a period of massive deflation when prices across the board are falling. That was not limited to agricultural markets.
I am always hearing this argument about externalities, as if its something free market economists never heard of. Well,they have. They call it "unintended consequences". Yes, there are unintended consequences to any human action. The problem with the government trying to solve supposed "inefficiencies" is that its actions have unintended consequences. So it is simply ADDING to the "distortions" it is trying to correct. It is simply adding its own unintended consequences to the market's unintended consequences.
All that stuff about imperfect information is the reason WHY we need free markets. It motivates people to FIND the imperfections in our information. Those who do have a profitable advantage, and end up bringing the more complete information to the market.
As for non-perfectly competitive markets, I think you are talking about the "pure and perfect competition" doctrine. That one is another fallacy which puts up an unnecessarily unrealistic standard of competition. In fact, if we were to apply that standard to other things like sports, we would find that we have to abolish competition! Anyone who is a stronger competitor has to be punished because he is being "noncompetitive" by doing his best!
Pure and Perfect Competition: An Unrealistic and Mistaken Ideal
by Edward W. Younkins
Real-world divergences from pure and perfect competition are not necessarily indicative of market failures. Companies should advertise and attempt to differentiate their products. Competition in a free market includes the process of observing and adjustment under conditions of uncertainty involving both cooperation and rivalry. An innovative firm’s lower costs should keep high-cost firms out of the market. When price exceeds cost, information and incentives are provided to entrepreneurs to invest resources in a particular line of business.
Antitrust regulation undermines the discovery process. Regulators, judges, politicians, and economists cannot know the most efficient organization of an industry, including the number of firms it should include, what prices they should charge, and what kinds of contractual agreements they should make with retailers, consumers, and each other. Such knowledge can only emerge through a trial and error discovery process in the marketplace. The essence of a free market is not pure and perfect competition but rather the freedom to compete.
externalites can be stuff you simply don't care about because you don't pay the costs or receive the benefits. You are not taking externalities into account by calling them 'unintended consequences' -- rather you are dismissing them as irrelevant.
If you are getting most of your info from Austrian economists than you definitely need to expand your reading horizons. There is a good reason they remain on the fringes of economic thought.
As just one example, when information is costly, it is not in my incentive to allocate my scarce time and resources to acquire the information. Individually there is only a small benefit. But in the aggregate, massive benefits may be lost to society. Society will remain inefficient. Government can act as a mechanism to reduce transaction costs and break the prisoners'-dilemma equilibrium. Note I said 'can', not 'will'. Again, its an empirical question as to when intervention benefits or harms society. Your black-and-white world of government always causing harm does not exist.
Austrian analysis is nice when one wants to oversimplify and avoid the difficult task of in-depth analysis. It never embraced modern, rigorous economic modeling and preferred instead to talk around the issues. There have been no true advances in Austrian economic thought since Hayek, and people tend to pick out specific instances from Hayek while ignoring other parts, the same way they do for Adam Smith, pretending he was all for free markets. He wasn't.
If you ever want to imply that free markets will be efficient, as opposed to merely being less inefficient than some other alternative, then you just don't understand the concept of efficiency. Its not a question of whether markets have deadweight losses. They do. Its only a question as to how large those deadweight losses are.
Government can reduce transaction costs? As I see it, government imposes HUGE costs.
If it is am empirical question of whether or not government intervention benefits or harms society, how will you know before government intervenes? If you are talking about a case by case basis, what happens to the rule of law?
Its ironic that you say Austrian economics oversimplifies, as some economists have called it overly complicated.
If you think there have been no advances in Austrian economics since hayek, you have not been paying attention. Read up on George Reisman.
Efficiency is always relative. And "efficient" engine may lose 40% of its energy. But it is efficient compared to an engine that loses 80%. This analogy holds true for Austrian economics. You are arguing a strawman.
Where the analogy breaks down is that you cannot measure the loss. Your question about the size of the deadweight loss is unanswerable. By definition, externalities cannot be measured, because they are not exchanged on a market. Unless some property of known value if damaged, or damage done has a specific cost for repair, externalities cannot be compensated, because the amount of compensation cannot be known.
There is empirical evidence that the "externalities" analysis is wrong:
The standard analysis, however, contended that neither party had an incentive to take account of the benefit to the other. Thus, there would be "too few" orchards and beekeepers. Economist Steven Cheung has studied these markets, however, and has found that the parties involved had accounted for the externalities quite well, contracting with each other to raise production to optimal levels.
From the same source:
Block points out that this sort of analysis is flawed in that almost any good could be said to provide some benefits or costs to third parties. What about socks? Doesn't the fact that other people wear socks, and I don't have to smell sweaty feet all day, provide me with a benefit for which I'm not paying? Must socks, therefore, be considered a public good?
The free market is not a panacea. It does not eliminate old age, and it won't guarantee you a date for Saturday night. Private enterprise is fully capable of awful screwups. Both theory and practice indicate that its screwups are less pervasive and more easily corrected than those of government enterprises.
I take it that Hoover & his policies were totally blameless for that statistic ? NO FDIC under Hoover to prevent bank failures & people's savings being wiped out ?! Perhaps not "draconian
Laissez faire" to you, Zisk, but, then again, you didn't live during the great depression & have all your savings vanish, despite never investing a penny in the stock market.
Nearly 10 years later, on the eve of Pearl Harbor, unemployment fell to 10%, which is a helluva lot better than 25%. Did FDR & his policies have an impact on getting unemployment stats cut more than half ? I'll let the board "historians & economists" decide that.
I will agree with you that after U.S entered WW2,
unemployment plummeted; I believe the '42 stats were either 2 or 3 %.
-- Modified on 4/2/2011 8:52:25 PM
unemployment was nowhere 10% at that time. Although it was declining relative to the Recession of 1937-38 (did you forget that occurred under FDR's watch?)
I have no idea what you mean by "draconian laissez-faire". Unless thats like saying FDR's policies were not "draconian socialism". Hoover was no more a laissez-fairist than FDR was a socialist. Adding 'draconian' as an identifier makes no sense at all. If no FDIC is your definition of laissez-faire, then every president in history prior to FDR must have been laissez-faire. Rubbish.
So I didn't live during the GD. That doesn't make Hoover anymore laissez-faire than if I had lived during that time. Would you not be able to defend FDR on the charges of being a socialist because you did not live during that time? The policies aren't different just because you nor I were alive at the time.
I looked up the post-entry unemployment rates at the BLS website. In 1942 it was still up at 4.7%, which was half of the previous year rate. It didn't drop to 2% (1.9% actually) until 1943.
BTW, I never stated FDR didn't succeed in bringing down unemployment. But as half of the economic historians surveyed believe (and it might even be higher rates today with the influence of more recent studies), New Deal policies overall protracted and worsened the impact of the GD.
Finally, if you are going to "let the board "historians & economists" decide" the validity of FDR's policies, then I get a vote. My guess is you do not.
in the link below you can find unemployemnt rates for the depression years. Steady decline after Hoover left, but then spikes up during 37-38 ( inicky mentions FDR cut the budget which accounts for this ) After those years unemployment goes down again.
Zisk, correct me if I'm wrong, but have a hunch you find Reagan a superior POTUS to FDR. Personally speaking, from historical standpoint, I find that ludicrous,but WTF----each to his own,
according to their political & economic philosophies.
Funny, but you didn't get a steady decline or any spikes in the 1920 depression. You just got a quick decline and then the Roaring 20's.
As noted, mobilization began in Oct 1940. That is what started the large declines in unemployment. The draft increased in 1941 and got larger still in 1942.
Do I personally believe RR was a better president than FDR? Yes, but that is not to state RR was without a lot of problems I've chronicled elsewhere. They also operated under vastly different conditions. I also think Harding was the worst president of the 20th C (primarily but not exclusively to the large scale corruption he allowed to exist within his administration), with Carter the second worst. So what?
Coolidge and Hoover are vastly under-rated. Mainly because Coolidge is ignored despite the difficulty of restoring confidence in the system after Harding (which he was able to do) and Hoover is blamed way too much for the effects of the Depression and treated as a do-nothing, like you do. Subsequent scholorship has been much more favorable to Hoover, and much more damming to FDR. FDR did some things well, but he also blatantly took actions which were unconstitutional, and probably should have been impeached. But I've covered a comparison of Reagan to FDR before.
according to one's political & economic philosophies. As I stated previously, FDR & RR rank very high on POTUS polls, but conservatives despise FDR & liberals despise RR.
We're both biased-----I feel RR was 20th century's most overrated POTUS & you feel FDR shoulda been impeached ( I assume over "stacking" of Supreme Court. ) Both of our views are hardly shared among the mass public.
I feel Coolidge & Hoover's policies led to Great Depression; you say differently. There are schools of historical thought that can back up both of our positions, so, I suppose pointless to argue about this. These same kind of cul-de-sac debates also go on about abortion.
Lastly, these are my choices for worst recent POTUS's : Hoover, LBJ, Nixon, Carter & GWB.
by definition. If it were objective, it would be a fact not an opinion.
I only discussed my personal opinions on FDR vs RR (and a few others) because you directly asked me my view on them head to head.
If you weren't interested, why bring it up?
But why my ranking makes me "biased" you haven't explained. I listed reasons for my conclusion - detailed for more fully in the other link. I disagree with your list (except for Carter) but that doesn't automatically make you biased. Nor does disagreement with the "mass public" which is pretty uneducated about the details of any presidency.
BTW, GWB does not count in a list of worst 20th C presidents (I realize you said 'recent' but then its hard to consider Hoover 'recent'.) And to put Hoover as the absolute worst president? That's shocking, even coming from you.
If I have to go back in history, James Buchanan was worst POTUS, closely followed by Andrew Johnson.
Zisk, I'm ALWAYS interested on informed opinions on U.S. Presidents such as yours. But ( & I don't think I'm jumping to conclusions here )
your viewpoint seems to be conservative & mine liberal ,so we'll have to civilly "agree to disagree".
Although as stated, I don't consider the 1930s to be recent, but hey thats subjective too
But I'm shocked to see Hoover make the bottom of any list, unless its specifically worst president from 1928-1932.
As to whether or not I'm conservative, it depends who you ask. In this thread alone, I probably appear conservative debating with you, but making similar arguments against WBBFE I may come across to him as liberal 'market critic' as he put it. I've been called both conservative and liberal here in the past. And a helluva lot worse!
a fact illlustrated by the " bonus army battle of Anacostila flats" in '32. Without going into long detail, Hoover took brutal measures against protesting WW 1 vets, which made him very unpopular at the time & forever stained his historical legacy.
"Both of our views are hardly shared among the mass public."
Who the F cares? The subject is whether or not Hoover was a laissez-faire president, and therefore can you blame the great Depression on laissez-faire. Even without Hoover, we had all sorts of interventions like the Fed. Laissez-faire had an alibi. IT WAS NOT THERE!
I do blame Hoover. I think so does Zisk. The qiestion was, do we blame his laissez-faire, or do we blame his interventionist policies. Which did, in fact exist? He intervened. And the banking system was NOT laissez-faire. Yes, under laissez-faire, there would be banking failures. That is NECESSARY, and allowed in a free market. But it would be rare in a free market banking system. But instead, we had a central bank, fiat money, at time a PSEUDO gold standard, and fractional reserve. With the central bank and the treasury pumping vast amounts of new money into the system, banks lending up to their reserve limits, people making bad investments with their borrowed money, lots of sudden bank failures at the same time is what you should expect. And you can't blame laissez-faire.
FDIC is just a bandaid used to cover the problems caused by the government's own mistakes.
And take the 1920 depression. All that intervention by both Hoover and FDR, and it took well over 10 years to get unemployment down to 10%. In 1920, President Wilson did very little, and Harding did have very laissez-faire policies, and the economy recovered almost immediately, compared to the Great Depression.
-- Modified on 4/3/2011 5:04:28 AM
Said by what authority? You? It's at least as valid to say without the stimulus we'd be back to Hoover-era unemployment. Then we'd have the worst of both worlds; catastrphic unemployment and even huger deficits to try and turn things around.
It is said by all sorts of Keynesians, most especially Paul Krugman.
Thats what they SAY, but is it true? How do they know? Just mathematical models which can be made to give results that confirm whatever theory they are based on.
but it just makes sense to me.
What makes sense to me is that expecting bailouts makes businesses wait and see what will happen before making any decisions like hiring, merging, buying one another out, or closing their doors. actions that may be painful, but necessary for an economic recovery. Collapses like the crash of '29, the tech bubble and the housing bubble are caused by an inflated money supply.
...and I hear she sucks like a Hoover.
I've read this very same tirade from Cultists more times than I can count. Their position seems to be that Hoover wasn't laissez-faire enough to their liking. Gee, who didn't see that coming?
It's also quite amusing that our Cultist friend would cite the most discredited Fed Chair in all of history, Ben Bernanke for agreeing with Milton Friedman on the causes of the Depression. Our Cultist friend might as well consult Art Laffer for methods to reduce the deficit.
To order to know the causes of the Depression, you have to go back years before Hoover of ever elected.
1) 1917-1923 labor union membership declines, and the AFL is in retreat mode. Organized labor had great difficulty organizing new industries in auto and electronics. (sound familiar?)
2) Because of declining union membership rates, wages remain flat while productivity from new industries skyrocket thanks to the assembly line. (sound familiar?)
3) With no one making enough money to buy all the shit that was being produced, Wall Street came up with a grand solution. The creation of the consumer credit. This sparks massive borrowing of money by consumers to finance their standard of living. (sound familiar?)
4) And with this new credit, Wall Street allows stocks to be traded with no money down. Before long, the NYSE is being funded with bets upon bets upon bets of fake non-existant money. (sound familiar?)
5) And to tie this all together, from '21-'25, tax rates for the wealthy declined by 48%. (sound familiar?)
No, willy, by far that title would go to Alan Greenspan by unanimous consent (with you being the only exception.) Greenspan was a key player in opening the credit taps to liar lenders and their facilitators and he has copped to that, finally. Bernanke isn't lilly-white, but reasonable people can disagree about his level of culpability and, since he's still running the Fed, the jury is out on his ultimate grade.
Not only that, but I accused him of doing it again, when he promised not to. I was not citing him as an authority. Just an example of people who agree that the Fed caused the 1929 collapse. He was saying he agreed with the Friedmans that the Fed made mistakes that led to the collapse, and promised not to do it again.
How anyone could conclude from that I have any respect for Bernanke is beyond me.
My point in bringing him and that statement up is that even if the Fed chairman can recognize past mistakes by the Fed, he cannot avoid making new ones in the future, even repeat the same ones. An economy is too complex to regulate through interest rates and expanding the money supply.
"Not laissez-faire enough"??? The only "laissez-faire enough" is totally laissez-faire. As long as we have a central bank, it is not laissez-faire enough to avoid the business cycle. How interventionist would Hoover have to be in order to be not laissez-faire at all? He personally denounced laissez-faire. He violated private properties in his regulation of the airwaves when he was Commerce Secretary. He raised taxes. He imposed tariffs. He used the threat of labor legislation to coerce businesses to keep wages high when Austrian theory says they should fall because the supply of money and price levels have fallen. He began massive public works projects.
but they were new to the United States in that more innocent age. Like all such programs, it was heavy on government planning, which was envisaged as “voluntary” cooperative action under “central
direction.”3 The government was supposed to correct “our marginal faults”—including undeveloped health and education, industrial “waste,” the failure to conserve resources, the nasty habit of resisting unionization, and seasonal unemployment. Featured in Hoover’s plan were increased inheritance taxes, public dams, and, significantly, government regulation of the stock market to eliminate “vicious speculation.” Here was an early display of Hoover’s hostility toward the stock market, a hostility that was to form one of the leitmotifs of his administration.4 Hoover, who to his credithas never pretended to be the stalwart of laissez-faire that most people now consider him, notes that some denounced his program
as “radical”—as well they might have. So “forward-looking” was Hoover and his program that Louis
Brandeis, Herbert Croly of the New Republic, Colonel Edward M. House, Franklin D. Roosevelt, and other prominent Democrats for a while boomed Hoover for the presidency.5 Hoover continued to expound interventionism in many areas during 1920. Most relevant to our concerns was the conference on
labor–management relations that Hoover directed from 1919 to 1920, on appointment by President Wilson and in association with Secretary of Labor William B. Wilson, a former official of the United Mine Workers of America. The conference—which included “forward-looking” industrialists like Julius Rosenwald, Oscar Straus, and Owen D. Young, labor leaders, and economists like Frank W. Taussig—recommended wider collective bargaining, criticized “company unions,” urged the abolition of child labor, and called for national old-age insurance, fewer working hours, “better housing,” health insurance, and government arbitration boards for labor disputes. These recommendations reflected Hoover’s views.6
Hoover was appointed Secretary of Commerce by President Harding in March, 1921, under pressure from the left wing of the Republican Party, led by William Allen White and Judge Nathan Miller of New York. (Hoover was one of the first of the modern breed of politician, who can find a home in either party.) We
have seen that the government pursued a largely laissez-faire policy in the depression of 1920–1921, but this was not the doing of Herbert Hoover. On the contrary, he “set out to reconstructAmerica.”7 He only accepted the appointment on the condition that he would be consulted on all economic policies of the federal government. He was determined to transform the Department of Commerce into “the economic interpreter to the American people (and they badly need one).”8 Hardly had Hoover assumed office
when he began to organize an economic conference and a committee on unemployment. The committee established a branch in every state having substantial unemployment, along with subbranches in local communities and Mayors’ Emergency Committees in 31 cities.9 The committee contributed relief to the unemployed, and also organized collaboration between the local and federal governments.
As Hoover recalls:
We developed cooperation between the federal, state,
and municipal governments to increase public works.
We persuaded employers to “divide” time among their
employees so that as many as possible would have some
incomes. We organized the industries to undertake renovation,
repair, and, where possible, expand construction.
WHAT MORE DO YOU WANT????
It was Hoover that pioneered the idea that its the Fed's job to fight the business cycle and promote employment!
Figures you would blame a drop in union membership, and include a distorted version of the Keynesian overproduction doctrine (not that ANY version of overproduction is valid).
Increased productivity means reduced consumer prices, allowing the same level of MONEY wages to buy a greater supply of goods. This increases real wages even if money wages remain the same. The problem was government sponsored inflation which kept commodity prices the same.
I bet you are focusing only on money wages. If the supply of money remains the same, the total amount of money spent on wages cannot rise above a certain amount, and neither should you expect it to. If you want to improve the living standards of workers, you need to increase real wages, which means increase productivity.
You do include one true element in your analysis, the artificial expansion of credit.
-- Modified on 4/4/2011 2:56:53 PM
Watching a bunch of mongers on a fuck board debate economic theory is hilarious! And, yes, I know I've been doing it, too. It's still fucking hilarious!