Thomas Sowell

What can be even worse than a stock market crash -- including the great crash of 1929 -- are politicians rushing in to fix things. At one time, it was widely assumed that the 1929 crash led directly to the Great Depression that lasted throughout the decade of the 1930s. Now, more and more people who have studied that era have come to see what the government itself did to help as being the biggest reason why the depression went so deep and lasted so long.

Even a liberal economist like John Kenneth Galbraith described the actions of the Federal Reserve in response to the 1929 crash as "shockingly incompetent." Neither Republican President Herbert Hoover or his Democratic successor Franklin D. Roosevelt had a clue about economics or a policy that made any sense.

Both sought to keep prices -- including wages -- up, despite the fact that the money supply had declined by one third. How was the country supposed to buy all the output at existing prices, and employ all the workers at existing wages, when there was so much less money?

One of Herbert Hoover's biographers said aptly that he was a great man but not a great president. Anyone who doubts his greatness should study the history of his massive program to feed starving people in Europe during and after the First World War.

Most people would have raised the money first and then bought the food, but Hoover realized that people would be dying while he was raising money. So he risked his own personal fortune by buying the food first, hoping to raise enough money later from donations to recover all the millions of dollars it would take to pay for the food. It worked out in the end, but it didn't have to.

Had Hoover never become president, he would have gone down in history as simply one of the great humanitarians of the 20th century. As it was, he was demonized politically for decades as the calloused president who refused to take responsibility to help those ruined by the depression.

In reality, it was Hoover -- not FDR -- who became the first president to throw the power of the federal government into the effort to get the country out of a depression. In recent years, it has become more widely acknowledged that Roosevelt's New Deal was essentially Hoover's policies raised to the next exponent, spending on a more lavish scale and saddling the country with counterproductive programs that have lasted into the next century.

Thomas Sowell

Thomas Sowell is a senior fellow at the Hoover Institute and author of The Housing Boom and Bust.

Creators Syndicate