Legacies Revisited: Hoover and The Great Depression

By: Chris Gomez

The 1920s were a turbulent period of economic growth, excess and then ultimately, calamity. In our history books, the severity of the Great Depression is typically laid at the feet of President Herbert Hoover. Is this scarring accusation correct or a misnomer? We will discuss Hoover’s legacy.

Hoover began his career in politics with his assignment to head the Food Administration during World War I under President Woodrow Wilson. This experience had a profound effect on him and did influence his personal views on humanitarian issues which would later gain him acclaim. He became sympathetic to the idea of the state as an instrument to cure poverty and suffering, but did not disregard his view that a free market system centered on individualism and less government intervention was optimal. Hoover’s tenure as Commerce Secretary began in 1920 under President Harding and later Coolidge. This began a period of overall success for the American economy. This success, however, was not to last as we consider some of the unsound fiscal policy that became prevalent throughout the world. To understand President Hoover and his ensuing policy priorities we must examine the pre-existing economic conditions globally and domestically.


When considering the global conditions, prior to World War I, many countries operated on the gold standard where paper currency was linked to and could be exchanged for an amount of gold. The main benefit of this system was that there were checks on inflation due to the limited ability to expand the supply of money. In order to fund the war effort, several of the countries, with the exception of the U.S., temporarily left the gold standard and let their currencies trade without backing, also known as fiat currency. The ensuing period of the 1920’s saw an attempt by Britain to return to the gold standard at a price economically impossible due to the wartime inflation. The idea was to go back to the legitimacy of the gold standard while forsaking the rule of convertibility and breaking the checks on inflation. Britain was attempting to reassert itself as the number one global superpower by enjoying the immediate economic benefits of inflation while pushing off the long term effects onto other countries. Several central banks of the nations were part of this collaborative effort. This, along with several other issues such as Germany being unable to independently pay its excessive war reparations created economic problems in Europe that would create a cycle of unpaid debt that would also impact the U.S. The global economic picture was beginning to appear bleak.

In terms of the domestic context, as Commerce Secretary, Hoover helped promote the deregulation, low tax rates and overall economic freedoms prevalent during the Harding and Coolidge administrations. He also warned of excessive stock speculation in the domestic U.S. and encouraged sound, but not overzealous government policy to monitor the situation. This was a good concept, but unfortunately it was ignored by others in the respective administrations. These administrations failed to adequately address the growing problems that were beginning to take place in the U.S. They did not adequately consider fair regulation of the market system and this would later become a major area of concern. Once Hoover assumed the Presidency, the stock market crash became a reality. The agricultural market in the U.S. was suffering and the years of unregulated stock speculation caught up with the U.S. economy.

In defense of Hoover, he was simply a man in the wrong place at the wrong time. Major global culprits behind the Depression were central banks that helped facilitate unsound European economic policy in addition to overzealous nations placing unrealistic reparation expectations on Germany following World War I. Debts were not repaid and this created an unhealthy economic chain reaction. These factors greatly unsettled the global economic climate. Domestically, there was not fair monitoring of stock speculation during the decade leading up to the crash and the agricultural sector was suffering. In the early stages of Hoover’s presidency, he was greeted with the stock market crash and arguably did not have enough time to fully apply his policy agenda to address it. To claim that he was the cause of the Great Depression, is wholly inaccurate and distorts the historical record. Ironically, as established, in the decade preceding the crash, Hoover was one of the minority voices in two administrations voicing his concern about the direction of the U.S. economy. If his propositions were applied sooner, it may have provided meaningful reforms that may have staved off some of the worst effects of the Great Depression, if not not rebounding from it in a shorter timeframe.

Now let us analyze Hoover’s actions after the crash. Hoover did not create the Depression but a question lingers; did his policies as President make it worse? Overall, the short answer is no they did not, but he was not given enough time to apply all his policy goals which may have shortened its timeframe. Hoover was a man greatly concerned about the effects of overzealous government intervention in the economy believing that it was a gateway toward socialism. Initially, he sought to continue promoting tax cuts as a means to ease the burden on the nation. One of his central focuses was also on state and local governments to work in collaboration with the federal government and private sector to address the economic issues facing the nation. He was adamantly against a central planning big government model to address the issues and post-presidency he would continue to be critical of this philosophy. During his term as he sought to lead the nation out of the Great Depression, he frequently reached out to major business leaders in the private sector and promoted laws that would focus on state centered relief disbursements.

He did, however, sign into law the enactment of the Reconstruction Finance Corporation, a government organization that was meant to invest in railroads, insurance companies and other large businesses as a way to limit the fallout. This was one of his few major legislative initiatives that sought to create a strong federally infused boom to the economy. His (mostly) non-interventionalist policy priorities, however, led to him being ostracized by the people and not re-elected for a second term. After President Franklin D. Roosevelt was elected, the Depression would continue for eight more years leading up to the dawn of WWII. The Roosevelt era would usher in the New Deal and a large scale government infusion into the economy.

Hoover represents an important figure in history. Hoover’s overarching vision was to rebuild the economy with policy encouraging the federal government to serve a collaborative, rather than central role. If he was able to fully integrate this into action, it could be argued that the Great Depression may have been significantly shortened. It could also be argued that Roosevelt’s actions that created a greater expansion of government into economic matters may have slowed the recovery. Hoover saw the New Deal as the road into socialism for the United States and spoke out against the efforts of Roosevelt. Politically ruined as he was, this did not garner much attention but his ideals have survived into today.

Today, the Hoover Institution stands at Hoover’s alma mater Stanford and promotes the ideas of free markets and individualism. It continues to carry out his legacy. Hoover was not a perfect President, yet there is a lot to be gleaned from his policy views and a large sense of unknown regarding what would have become of his policies if they had been given more time to work. His free market goals with an intent to reign in overzealous government intervention were optimal and continue to be considered today. To conclude, Hoover is a misrepresented President and contributed a lot to the intellectual forum that considers sound free market economic policy.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s