Events of the 1920s
The Roaring Twenties were an era dominated by Republican presidents:
Warren Harding (1920-1923), Calvin Coolidge (1923-1929) and Herbert Hoover
(1929-1933). Under their conservative economic philosophy of laissez-faire
("leave it alone"), markets were allowed to operate without government
interference. Taxes and regulation were slashed dramatically, monopolies
were allowed to form, and inequality of wealth and income reached record
levels. The country was on the conservative's preferred gold standard,
and the Federal Reserve was not allowed to significantly change the money
supply.
The fact that the Great Depression began in 1929, then, on the Republicans'
watch, is a great embarrassment to conservative economists. Many try to
blame the worsening of the Depression on Hoover, for supposedly betraying
the laissez-faire ideology. As the time line in the next section
will show, however, almost all of Hoover's government action occurred during
his last year in office, long after the worst of the Depression had hit.
In fact, he was voted out of office for doing "too little too late."
The only notable exception to his earlier idleness was the Smoot-Hawley
tariff of 1930, whose minor impact we shall explore in more detail later
on.
But much more importantly, the economy was clearly turning downward
even before Hoover took office in 1929. Entire sectors of the economy were
depressed throughout the decade, like agriculture, energy and mining. Even
the two industries with the most spectacular growth -- construction and
automobile manufacturing -- were contracting in the year before the stock
market crash of 1929. About 600 banks a year were failing. Half the American
people lived at or below the minimum subsistence level. By the time the
stock market crashed, there was a major glut of goods on the market, with
inventories three times their normal size.
The fact that all this occurred even before the first act of
government intervention is a major refutation of laissez-faire ideology.
|
|
|
|
|
|
|
|
|
|
|
|
You are visitor number:
