Hoover and the Great Depression

One of the oddities of U.S. history is that Herbert Hoover is regarded as a free-market president. He grew federal spending by 52% in just four years. Engaged in massive deficit spending. Created the Federal Home Loan Bank. And the Reconstruction Finance Corporation. Signed the Smoot-Hawley tariffs into law. And the Agricultural Marketing Act. And so on. Free-market, he was not.

The Hoover myth is showing some cracks, fortunately. Where most civics textbooks would blame Hoover’s laissez-faire policies for the Great Depression, a new paper by UCLA’s Lee Ohanian fingers Hoover’s labor market interventions.

I’m personally convinced the Depression was more of a monetary phenomenon than a fiscal one. But Ohanian is surely right that Hoover’s dictating to companies what wages shall pay their workers was a net negative for the economy.

It’s certainly possible to blame Hoover’s policies for the Great Depression. Just not on the grounds that those policies were free-market. People shouldn’t have to read obscure academic journals to find that out.

Tagged as: christina romer, Economics, great depression, Hoover, monetarist, monetary, ohanian