Thursday, 11 December 2008

Historical warnings of the dangers of intervention

Via Tim Worstall, Polly Toynbee betrays her historical amnesia as well as her usual economic ignorance, with the claim that Herbert Hoover's response to the Great Depression was laissez-faire:

"The Conservatives, taking the anti-Keynesian line, have planted themselves firmly on the laissez-faire side of the argument – where Herbert Hoover was in the Great Depression"

Yet, Hoover, just like Toynbee, in fact dismissed laissez-faire economists as 'reactionary', and advocated and practiced unprecedented economic intervention, as his highly revealing summary of his programme during his 1932 presidential campaign demonstrates:

"We might have done nothing. That would have been utter ruin. Instead we met the situation with proposals to private business and to Congress of the most gigantic program of economic defense and counterattack ever evolved in the history of the Republic. We put it into action…. No government in Washington has hitherto considered that it held so broad a responsibility for leadership in such times…. For the first time in the history of depression, dividends, profits, and the cost of living, have been reduced before wages have suffered…. They were maintained until the cost of living had decreased and the profits had practically vanished. They are now the highest real wages in the world.

Creating new jobs and giving to the whole system a new breath of life; nothing has ever been devised in our history which has done more for … "the common run of men and women." Some of the reactionary economists urged that we should allow the liquidation to take its course until we had found bottom…. We determined that we would not follow the advice of the bitter-end liquidationists and see the whole body of debtors of the United States brought to bankruptcy and the savings of our people brought to destruction."

So is it that Polly is ignorant of programmes such as the Smoot-Hawley Tariff Act, the 1932 Revenue Act and the infamous Mexican Repatriation Programme, or does she simply believe 'laissez-faire' to be a synonym for unsuccessful or undesirable?

For more examples and analysis, see Murray Rothbard's essay on 'Hoover's attack on Laissez-Faire', from his 'America's Great Depression'

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