Steven Horwitz in The Freeman debunks the “high school history” notion that President Hoover was a proponent of laissez faire capitalism which caused the Great Depression. They’ve got the right culprit, but the wrong crime:
One of the most pernicious myths in the economic history of the twentieth century is the belief that the Great Depression was caused, or at least worsened, by Herbert Hoover’s dogmatic commitment to a “do nothing” laissez-faire policy in the aftermath of the stock market crash. This argument is part and parcel of the set of beliefs about the Great Depression that I have dubbed the “high school history” version of that event. (It includes the claims that laissez faire caused it, Hoover’s inaction worsened it, the New Deal did wonders, and World War II got us all the way out.) This claim about Hoover’s dedication to laissez faire is, as I have suggested, utterly false.
In fact Herbert Hoover was long known as a Progressive who favored much more government intervention in the economy. From his days with the U.S. Food Administration in World War I through his time in the 1920s as secretary of commerce, Hoover constantly pushed his beliefs that laissez faire did not work and that government must take a more active role. When the economy went south during his first year as president, it came as no surprise that he put those beliefs into action.
Hoover not only signed the Smoot-Hawley Tariff, as everyone knows, he also encouraged businessmen to keep wages up, expanded the real amount of government spending, reduced immigration to near zero, set up all manner of government lending facilities, and increased the budget deficit. Along with the Federal Reserve System’s failure to do its job, resulting in a 30 percent drop in the money supply, these Hoover interventions were responsible for turning what might have been a severe, but short recession into a Great Depression. So the “high school history” story is right to blame Hoover — but it does so for exactly the wrong reasons.
But it’s been a great way to tarnish free market advocates and effortlessly refute their arguments, because “everybody knows” that laissez faire doesn’t work. Our high school teachers wouldn’t have mislead us all about that, would they?
