What Should Herbert Hoover Have Done Differently?

[Amadeus]

Prior to 1930, Herbert Hoover was one of the most acclaimed Americans of his time: heralded as "the Great Engineer," he won applause for his relief efforts during WWI and his tenure as the nation's third Secretary of Commerce. In 1928 he was elected President in a landslide promising to abolish poverty and put, "a chicken in every pot." Yet following the Stock Market Crash of 1929, Hoover struggled to effectively respond to the Great Depression and he was obliterated by Franklin D. Roosevelt in the 1932 election.

Today, Hoover is viewed as one of America's worst Presidents for his poor leadership during the nation's greatest economic crisis. What should Hoover have done differently to combat the Great Depression? Did Hoover have any means at his disposal from 1929 to 1932 that might have mitigated the effects of the depression?

 

[GuildedAgeNostalgia]

No tariffs

 

[marktaha]

Bringing in a British- style welfare state.

 

[Carl Schwamberger]

Im unsure Hoover could have been effective in overcoming the more economically or socially conservative elements in Congress. There was a widespread opinion the Depression was a temporary event, much like the previous 'Panics' ect... A large number of folks were clinging to the idea things would return to normal in a few more months or next year. By the time Roosevelt took office the bankruptcy of the quick recovery doctrine was clear. A lot more people were willing to support radical ideas.

Hoover was also stalled by the doctrine that none of this was the business of the Federal government. There were still plenty of Congress critters and their supporters who thought Federal intervention as violating states rights, and the doctrine that the people know best & actions organized in distant Washington DC amounted to tyrannical dictatorship.

 

[Carl Schwamberger]

No tariffs

This would have been helpful. Unfortunately circumstance favored protectionism. 19th Century 'Free Trade' that favored British and US expansion & prosperity was passing as a favored doctrine of politicians everywhere. For a lot of reasons, many still not understood, the rate of economic expansion of the latter 19th Century was slowing and people were turning to protectionism or all stripes. Tariffs, autarky, mercantilism, ect... ect... were emerging in old and new clothing.

 

[marathag]

Now in some ways, I feel FDR's policies extended the duration of the Depression as it was in trying to remake the economy, like the later ruled unconstitutional NRA(no not the Gun one, the Recovery one) and other Policies

Unlike the earlier German Recession where Hyperflation was tried to get out of it, Hoover's crew tried deflation, tightening the Money Supply.
The Depression wasn't so different than the earlier 'Panics' as it started, as it seemed.
And that action was exactly the wrong thing to do at that point

With not enough Money in circulation, Consumer spending drops, causing layoffs, and then those unemployed workers cut spending even more, an ever worsening spiral of economic collapse. That what's going on in 1930

Didn't help that Gold based currency is inherently deflationary.
Note more Banks failed after the Election, than before

This is one reason that prevented the Federal Reserve from funding crashed Banks, expand the Money supply to tottering or even stable Banks to stimulate the economy by Loans, and last do Government deficit spending thru increased Military Spending or Public Works

First thing is for Hoover to realize that the Crash was just the tip of the Iceberg of economic trouble ahead, and not just a correction of the Market, a normal Recession.
Next that even as limited as the Fed was, only about 1/3 of all Commercial Bank were part of the Federal Reserve system.
So when those Banks failed, the deposits were gone, savings wiped out, with no chance of the limited Fed having any chance to 'save' them

 

[Tanner151]

Was Hoover for sure going to be President that year? Was there another Republican contender in 1928 that would have spared Hoover the presidency and possibly have him come back in the 40s as a presidential candidate?

He seemed like a good administrator and guy, just got handed a shit hand in 1929.

 

[Workable Goblin]

Hoover was also stalled by the doctrine that none of this was the business of the Federal government. There were still plenty of Congress critters and their supporters who thought Federal intervention as violating states rights, and the doctrine that the people know best & actions organized in distant Washington DC amounted to tyrannical dictatorship.

All that being said, there was one much more important proponent of this type of conservative idea: Hoover himself! While it's not like he did nothing to fight the Depression, contrary to some views, he did tend to favor the state and local governments taking the lead, even though it should have been pretty quickly obvious that they just didn't have the resources to do a lot of what was necessary. Similarly, he was much too wedded to the idea of a balanced budget, which resulted in him raising taxes to balance the budget in the middle of the Depression; of course, Roosevelt did this as well, and it was a mistake then, too.

What Hoover should have done, in hindsight, is actually fairly obvious: cut tariffs, cut taxes, expand spending, print lots of money, and end the gold standard. In other words, engage in massive fiscal and monetary stimulus, the modern playbook for responding to recessions and depressions. It's just that this was so completely out of the worldview of people at the time, and especially Republicans, that it's virtually impossible to imagine any U.S. president doing them in 1929, 1930, or 1931; or that he could get such policies past Congress at that time. Probably the most you could reasonably have him do is veto Smoot-Hawley, which was after all opposed by elements of the Republicans, but that won't really help that much.

 

[marktaha]

I've a horrible feeling that that would have meant Inflation

 

[marathag]

I've a horrible feeling that that would have meant Inflation

Deflation, not enough Money chasing too many goods, is far worse than Inflation, too much Money chasing too few goods.

 

[Kaiser of Brazil]

Not sending tanks to smash the Veterans of the Bonus Army in 1932 would’ve been nice.

 

[Finbarr the Fair]

I've a horrible feeling that that would have meant Inflation

And??

Mild inflation is far better than deflation, defaults and depression caused by bank failures.

See the difference between the UK and France in 1931-6.

 

[Maeglin]

There are several structural problems...

• Politically, the Republicans had been the party of tariffs since their founding. Hoover eliminating tariffs would have resulted in the same sort of internal party squabble you saw among the Democrats when they tackled Civil Rights.
• The Supreme Court was downright reactionary on economics.
• Hoover was an intelligent man, who believed in listening to the experts. Problem is, the expert advice was universally bad at that moment in time. It wasn't until later that the economic tools were developed to fix this sort of mess.
• European Welfare States were not developed until after the New Deal. Even New Zealand's was not until 1935, and Sweden 1933. No helpful international precedents for Hoover to model off.

That leaves taking the USA off the Gold Standard. Which, to be fair, would have been an excellent move (and not just for the USA). The question is whether Hoover could have gotten away with that politically in late 1929 or early 1930.

 

[Maeglin]

Was Hoover for sure going to be President that year? Was there another Republican contender in 1928 that would have spared Hoover the presidency and possibly have him come back in the 40s as a presidential candidate?

He seemed like a good administrator and guy, just got handed a shit hand in 1929.

The easiest solution is have Coolidge stand for re-election. Problem is, he'd be worse on the Depression than Hoover.

 

[marathag]

That leaves taking the USA off the Gold Standard. Which, to be fair, would have been an excellent move (and not just for the USA). The question is whether Hoover could have gotten away with that politically in late 1929 or early 1930.

Thru the Fed, could have tried to do more to help prevent the continuing Bank Runs, that were cascading to Bank Failures in Tennessee in late 1930 that would soon spread.
While going off Gold would certainly help, He would never have considered to do FDR's Executive Order on Gold, he may have done one to allow Non-Fed member Banks to Borrow from the Fed.
If people think their local Banks are supported, they won't do Runs and keep their Money under the Mattress, but in the Bank, where it can circulate

That may have been enough to keep the slight Recovery of 1930 going thru the Election

 

[Workable Goblin]

There are several structural problems...

I specifically noted that the correct actions were so far out of the political reality of people at the time that they could not actually have happened. But that doesn't make them wrong, it just makes them impossible, politically speaking. From a modern perspective, it's screamingly obvious what he should have done, because it's the same playbook that has been deployed against recessions since the end of the Depression to general success, especially in preventing repetitions of the Depression itself.

Politically, the Republicans had been the party of tariffs since their founding. Hoover eliminating tariffs would have resulted in the same sort of internal party squabble you saw among the Democrats when they tackled Civil Rights.

Practically speaking, as I noted, he could have vetoed Smoot-Hawley; this tariff was hardly universally approved of within the Republican Party, and it would have helped somewhat. I think that's about the limit of what he could reasonably have done, though, aside maybe from bailing out banks and preventing bank runs.

 

[marktaha]

Deflation, not enough Money chasing too many goods, is far worse than Inflation, too much Money chasing too few good

 

[marktaha]

As a saver, I am totally opposed to inflation- full stop.Deflation means things get cheaper.

 

[RamscoopRaider]

As a saver, I am totally opposed to inflation- full stop.Deflation means things get cheaper.

Deflation is far worse for the economy in general. Every period of deflation correlates with a period of bad economic times, inflation not so much, too much inflation is bad, but even a little deflation is bad. Deflation means there is less money to go around. That makes it harder to borrow money, which everyone does, individuals, business, governments. It makes it harder for individuals to get things like mortgages and car loans, thus buy those things. It means businesses can't borrow to deal with temporary shortfalls or to gear up or address seasonality. It makes financing large capital projects more difficult. All of these are really bad

Too much money means you pay too much for something, but you still have that something and it got sold. Too little money means you can't buy that something, and you don't have it, and the person who wanted to sell it can't get rid of it

 

[marathag]

Deflation means things get cheaper.

Meaning the company/wholeseller/retailer don't get their normal cut
less profit, or even lose money.
that way leads to bankruptcy all around
when everything you sell is a loss-leader, you won't be around for business long.
In this deflationary state, they also can't get loans to tide the business over, so bills can't be paid.
The contagion speads