Hey new to the forum(but not mises) and i have a question about the great depression. I get that Hoover was not a laissez faire but he was not a socialist like FDR was. So why was the depression so much worse under Hoover than FDR?
Saying the economy was so great under FDR compared to Hoover is like saying my ton of cow manure is so great compared to your 1500 lbs of crap. It is true that during FDRs tenure the unemployment rate never got up to that of Hoover but that is like comparing piles of crap. And the worst thing about all of this was that there was recovery under FDR in 1933 despite the efforts of Hoover and FDR. But in 1937 there was a crash in the depression. The Austrian argument is the best that the fake wealth created through the Fed by getting off of the Gold Standard had people feeling wealthier and then 3 years later the whole thing cracked up again.
My opinion is that the economy took until November 1953 to completely recover from the Depression when the Dow finally reached its 1929 high. And all the tinkering of Hoover and FDR plus all of the lost lives and lost opportunities of WW2 made the Depression worse not better.
1) Awesome name and avatar
2) The depression lasted much much longer under FDR than Hoover - we didn't actually get out of it until the massive cutbacks after the war
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Well for a start Hoover actually had a crash on his hands, while FDR would have seen the market begin to adapt in some way or other. Secondly, and much more importantly, FDR implemented policies which, at very least, stimulated some sort of economic activity. Even if you argue that it was all malinvestment in one way or other, the fact is that it was economic activity and a way to get food on the table. The policies which Hoover implemented were almost entirely based upon holding up wage rates and keeping prices inflexible, which is the worst possible thing that you can do during a depression... Like srsly bro, that's economic suicide to anyone who has ANY sort of legitimate macroeconomic background. PRICES NEED TO BE FLEXIBLE IN A PERIOD OF ECONOMIC CRISIS.
Therefore all Hoover did was try and keep them stagnant, and while FDR did the same thing in many cases, he at least introduced policies where people were employed and therefore could get wages and receive some sort of income. If prices are absolutely stagnant and there's no way for the market to properly adjust then Keynesian policies are legitimately your best bet, because they work under the assumption that prices can't adjust. If the alternative to mass unemployment of the productive factors of production, then it makes sense that stimulus economics will work better than any alternative.
In short, and without my ramblings, because he performed the lesser of two evils and performed measures which lead to direct employment and economic stimulation which, at very least, helped things in the short run.
That's not quite true. FDR's employment programs were much larger than Hoover's but that doesn't mean that Hoover didn't embark on them. Hoover started the Reconstruction Finance Corporation pretty late in his term, which lent out tons of money to state governments. For instance, have you ever heard of the Hoover Dam? That was initiated in 1931 but completed in '35.
I'm not sure on what specific employment programs he instituted but at the beginning of his presidency in 1929 there was a federal surplus budget of 700 million. By 1933 it was a 2.6 billion dollar deficit. Clearly he had been spending it somewhere. Outlays increased from 3.3 billion in 1929 to 4.6 billion in 1932.
From Robert Murphy's PIG to Great Depression and New Deal:
In july 1930, COngress authorized an enormous $915 million public works program, which as a percentage of the economy translates to 149 billion in 2007. Rothbard notes that the older Hoover "still points out prouddly that the aggregate public works of the four years of his administration was greater than the public works in the entire previous 30 years.""
On November 23, 1929, he sent a telegram to all of the governors and won their cooperation in expanding state level spending. On the federal level, Hoover asked congress to boost the budget of the Federal Buildings program more than $400 million, and also requested an additional $175 million (for public works projects) for the shipping board. Hoover did all of this before the year's end, prompting Columbia economics professor J M Clark to praise the president's "great experiment in constructive industrial statesmanship of a promising and novel sort."
There ya have it folks. Hoover the great laissez-faireist
Also he raised taxes like crazy in 1932. Just buy and read Robert Murphy's Politically Incorrect Guide to the Great Depression and the New Deal.
BTW, check this out: http://answers.yahoo.com/question/index?qid=20110723231607AAE61Qh
The Anarch is to the Anarchist what the Monarch is to the Monarchist.
thanks for the replies guys. I'm going to be roaming these parts from now on
Why does Bogart consider the DOW metric the measure of recovery? I would say today's DOW has a lot of phoney or artificial value. I'm not sure how bad it was back then.
FDR gets credit for master minding the war effort. Statist have wet dreams about FDR taking over industries. Freedom's Forge by Arthur Herman tells the real story. Our Government was clueless and out of desperation FDR called William Knudsen. Mr.Knudsen was a Danish immigrant that arrived in New York in 1900 at the age of 20, and 20yrs later he was the head of Chevrolet. The only thing our Government contributed was our tax money and Knudsen told FDR to call off his anti-trust lawyers that were tying up industries and manufacturers in court. The books focus is the awsome capabilities of Capitalism. The bad news is that FDR and every President since, has used our productive capabilities to arm and feed every tyrant around the world. Socialism has had no better friend. I think our economy recovered when our Government finally cut back on their spending.