Tuesday, September 1, 2009

Economist: Great Depression Caused by Interventionism

A UCLA professor examined the causes behind the Great Depression and published some startling findings. It is "common knowledge" that President Herbert Hoover's non-intervention in the economy and pro-business stance caused the Depression, which lasted from 1929-1941.

Instead, Professor Lee Ohanian has stated that interventionist and pro-labor policies undertaken by the Hoover Administration helped cause and prolong the economic disaster. Ohanian was quoted as stating: "These findings suggest that the recession was three times worse — at a minimum — than it would otherwise have been, because of Hoover."

Hoover responded to the initial economic downturn by placing a freeze on wages-- causing them to stay artificially high and accelerating layoffs. Increasing unemployment further damaged the economy as money evaporated. With less money in the market, less goods were demanded and thus less were made, and employment declined further.

Further, Hoover was afraid of a massive backlash from Big Labor: And because of a series of recent legislative and court decisions that had expanded the power of organized labor, he also worried about the possibility of crippling strikes if such wage cuts were to come to pass.

Perhaps our current leaders could take a note from Hoover, who is widely believed to be one of the worst Presidents in American history.

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Mr. K said...

Compound the idiocracy of Hoover with FDR'S big spending programs, we we're screwed. Luckily, war world 2 occurred..

Homoopathie said...

Hoover himself kept insisting that he was no laissez-fairist. In his acceptance speech for the GOP nomination in 1932 he laid out the many things he did to combat the depression. People should read it.

Anyway, the difficulty for interventionists is that if they admit Hoover did many of the things Roosevelt did or wanted to do, then they will have to distinguish forms of intervention. Thus they might have to know something instead of simply *feeling* something