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Herbert Hoover: Godfather of the New Deal

Written by Gary North on December 24, 2016

Herbert Hoover was worth $4 million in 1914 as a mining engineer and mine owner. This was before World War I, when the dollar bought 25 times more than it does today. He was good at what he did in the private sector.

He gained national fame as a World War I relief administrator: Belgian relief. The Germans let him do this because it freed up food for the German Army: no need to feed occupied Belgium. This is now how the history books tell it. This was the next phase of the legend of “Hoover the Engineer.”

Harding appointed him Secretary of Commerce. Hoover then oversaw the nationalization of the airwaves. He created the Federal Radio Commission, which became the Federal Communications Commission. Instead of selling air space to the highest bidder — the free market solution — he let the FCC license and periodically re-license broadcasters. This became the basis of the second most important cartel after the banking cartel: the media cartel. This was the origin of the mainstream media.

Coolidge kept him on, but he had contempt for him. He called him the “wonder boy.” He once said: “That man has offered me unsolicited advice every day for six years, all of it bad.”

Then he became President. He became the heir of a boom created by the Federal Reserve System’s fiat money. His actions turned what would have been a sharp recession into a depression — a word he coined to replace “panic.”

He then started spending vast quantities of federal money. He also pressured businesses to hold up wages above the market wage levels, industry by industry. This created unemployment. His government created the Reconstruction Finance Corporation to provide government loans to high-risk businesses. Franklin Roosevelt retained the RFC.

The percentage increase of government spending under Hoover’s four years was greater than FDR’s during the first seven years.

Yet even Coolidge deserves some of the blame. Professor Randall Holcombe has described what happened under the Republicans, 1921-33.

If one looks only at total federal spending, it appears that the Republican administrations of Harding and Coolidge are a period of retrenchment sandwiched between the big-spending Democratic administrations of Woodrow Wilson and FDR. The Hoover administration does not fit this view even when examined superficially, because the percentage increase in spending during those four years exceeded the growth in the first seven years of FDR’s New Deal, before World War II caused spending to skyrocket. Despite the conventional wisdom that big government began with FDR, a closer examination reveals that even the Harding and Coolidge administrations were periods of substantial government growth. It was masked, though, by the reduction in war-related spending following World War I. The 1920s, then, were actually a continuation of Progressive Era government expansion, which would last through the New Deal.

(For the rest of my article, click the link.)

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