Brad DeLong strikes the perfect balance on Herbert Hoover here. This is a particularly good line:
"But to say that "Hoover was no budget-cutter" misses most of the story. Hoover would have been a budget-cutter in normal times. Hoover was a budget-balancer. Hoover held the line against powerful political forces that sought to increase government spending in the Great Depression for fully 2 1/2 years before endorsing what seem to us to be half-measures."
The revisionism on Herbert Hoover has been tough to read during the Great Recession. Really, there are two revisionist stories, one that is worse than the other.
The first revisionism is one we've come to accept that guys like Paul Krugman usually just pluck from the standard history textbooks: that Hoover was a tight-fisted do-nothing and he - along with a Fed without Benjamin Strong at the helm - caused the Great Depression. That, admittedly, is somewhat unfair. Hoover supported the idea of counter-cyclical fiscal policy since the depression of 1920-1921. He started some of the programs that would continue to be featured under the Roosevelt administration (such as the Reconstruction Finance Corporation). And he did increase government spending and modestly increased the deficit, even.
Another group of revisionists takes that point and goes crazy with it. Rothbard called him a "proto-Keynesian", and many others have followed suit.
The fact is this - talking about Hoover in terms of "liquidationism" (as Brad actually has in the past) isn't particularly helpful, and talking about him in terms of "Keynesianism" is just plain wrong.
Hoover was an "associationalist" and a progressive Republican reformer (the best literature on this is by E.W. Hawley). He wasn't terrified of using the government and he even had a "government should lean against the wind" sort of instinct, but he had no instinct at all that the crisis required the production of higher public deficits to satisfy excess demand for safe and liquid assets. As a happy byproduct, he probably did shift money from lower MPC agents to higher MPC agents, but running an effectively balanced budget (or trying to) kept Hoover from anything like a Keynesian policy. Of course what response there was wasn't anywhere close to what was necessary, as well. This isn't entirely unforgiveable. This was relatively new stuff, at least as far as fiscal authorities were concerned (monetary authorities probably ought to have known better). But it doesn't make him a Keynesian either.
Hoover is one of those cases where you have to accept that just because he wasn't everything you might want - he wasn't laissez faire or a proto-libertarian - that doesn't mean he was a Keynesian or anywhere close to it.
Monday, July 11, 2011
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I personally wish people would stop calling this or that historical figure proto this or that.
ReplyDeleteAnyway, we tend to forget that much of the reason Hoover has a bad rap was due to operatives of FDR making up B.S. stories about Hoover after he left office (not that this is unusual in American politics) - there is still definitely a partisan, team blue tinge to the dislike Hoover gets from liberals these days.
So when liberals talk about Hoover, my eyes glaze over; it is like listening to a liberal talk about Ronald Reagan or a conservative about Jimmy Carter.
The irony about Hoover is that he led an organization that saved the Soviet Union from starvation; the very country that the American left courted and defended so much during the 1920s and 1930s. Few people have been involved in saving more lives in world history (Norman Borlaug would be one example).
Personally I love Hoover because he was a fly fisherman. To the best of my knowledge FDR was a bait fisherman, and that I cannot abide.
ReplyDeleteMegan McArdle over at the Atlantic sez:
ReplyDeleteInstead, he is associated in the public mind with slashing spending. But there doesn't seem to be any question that Herbert Hoover raised both spending and government deficits by rather a lot, and quite bravely considering that his critics--a group led by a fellow named Franklin Delano Roosevelt--"accused the president of 'reckless and extravagant' spending, of thinking 'that we ought to center control of everything in Washington as rapidly as possible,' and of presiding over 'the greatest spending administration in peacetime in all of history.' Roosevelt's running mate, John Nance Garner, charged that Hoover was 'leading the country down the path of socialism.' "
http://www.theatlantic.com/business/archive/2011/07/hoover-was-no-budget-cutter/241665/
Right - DeLong is responding to McArdle here. I should have mnetioned that.
ReplyDeleteWell, I refrain from reading DeLong's blog as a general rule; very little worthwhile there.
ReplyDeleteAs I understand it Hoover didn't take drastic measures exactly because he thought that the panic, or depression, was going to be like that of 1921 since businesses continued to report year-end profits; the stock market recovered by several points; and no large banks collapsed. All he basically did was urge congress to spend $150 million for public works, and asked the Federal Reserve to expand the money supply, and for the first time in history discount rates fell under 2 percent.
ReplyDeleteHe did ask manufacturers to maintain wage rates (and he asked unions not to strike and to withdraw demands for wage increases), but all of the responsibility for the health of the nation was left with the corporate boards who felt the economy was "fundamentally sound," and who also homeowners do things like add on an extra sunporch.
Hoover had a Quaker upbringing and believed in the tradition of private giving. He said the US couldn't "legislate its way out of the depression," that the fundamental business of the country was on a sound and prosperous basis, and that lack of confidence in the US was "foolish." He told the Chamber of Commerce that the US had already passed the worst in 1930 and expected an immediate recovery. When a group of bishops visited him to inform him of the accelerating decline, he said: "Gentlemen, you have come 60 days too late. The depression is over." He tried to galvanize community leaders and turned to the Red Cross. State authorities placed the need of people at the range of $120 million, but Hoover restricted aid to $25 million, specifying none of it could go for food. He had a fundamental belief in "local government responsibility" and even when he established the PECE, which he didn't do until 1930, it wasn't allowed to offer any a penny for relief, but was instead established to stave off demands for a dole and churned out press releases suggesting people "spruce up" their homes.
Keep in mind in 1930 cities were suffering massive unemployment. In 1930 factory payrolls plunged 35 percent; Detroit turned out 2 million fewer cars than the year before; more than 25,000 businesses failed (a record); and the Grain Stabilization Corporation stopping buying surpluses and dumped millions of bushels on the market, driving the price of wheat much lower. It suffered losses $345 million and cotton slumped to 4 1/2 cents a bound.
ReplyDeleteIn 1931 he didn't bring legislators back to deal with the depression and he claimed that the forces of the depression "lie outside the United States" and that this created negative psychological factors from these "outside forces." He continued to believe it was essential to balance the budget in order forestall a run on gold reserves. "Nothing will contribute more to the return of prosperity than to maintain the sound fiscal position of the Federal Government" -- and he actually advocated tax increases.
As you can see, he was indeed a budget balancer. He only, finally, capitulated when the pressure from progressives in both parties was too great. He signed the Emergency Relief Construction Act, which provided $300 million in loans to states for "needy and distressed people" and gave $1.5 billion for income-producing public works. In addition, he authorized $300 million for emergencies. However, even here, at Hoover's behest, "federal officials administered the law so stingily that the tens of thousands of jobs the country had promised were never created." Hoover said, that the "loans are to be based upon absolute need and evidence of financial exhaustion." "I do not expect any state to resort to it except as a last extremity." When Pennsylvania wanted to give 13 cents a day to the extremely poor, the government granted a sum that yielded just three cents a day. Only three of the 243 applications received for public works were approved.
Finally, as for Hoover being a nice guy, his reputation for being cold and heartless was on display when he ordered for the U.S. Army to disperse forcibly members of the "Bonus Army," thousands of World War I veterans and their families who gathered in Washington to lobby congress for bonuses for their services. Hooverville's were all across the country, and wherever Roosevelt went to campaign during his run against Hoover you saw signs like "Abolish Bread Lines Vote for Roosevelt."
Hoover was the wrong man at the wrong time,and his later policy of tax increases along with cuts in government spending was precisely the wrong medicine for the economy. (And I've seen some economists comparing our current president to Hoover.)
"I was neither the inventor nor the promoter nor the supporter of the destructive currents of that Period," a bitter Hoover told a reporter after he left the White House. "I was the 'receiver' of it when it went into collapse." --Hoover
(Source: Herbert Hoover: The American Presidents Series.)
--SB