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Herbert Hoover's Ghost Haunts Markets, Democrats

Author: Amity Shlaes, Former Hayek Senior Fellow for Political Economy
March 19, 2008


No question, Bear Stearns Cos. evokes the crash of 1929 and the Great Depression that followed it. Politicians are already making analogies to Herbert Hoover, the demon of that period, and Franklin Roosevelt, the angel.

On March 16, Senator Charles Schumer of New York said on television: “We’re in the most serious economic problem we’ve been in a very long time—much worse than 2001. The president’s hands-off attitude is reminiscent of Herbert Hoover in 1929 and 1930.”

Within 24 hours, Representative Rahm Emanuel, an Illinois Democrat, was weighing in with his own 1930s comparison. Roosevelt had pulled a country out of Depression and united it; President George W. Bush was doing the opposite, he said.

You get the picture: Bush is like Hoover, the do-nothing. Democrats are like Roosevelt, the activist.

It’s worthwhile to go back to that Depression period to see what people actually did or didn’t do and who resembles whom. The reality differs from the cartoon.

Come October 1929, and the first big drops in the Dow, President Hoover pleaded for market confidence. “We are undoubtedly in a plane of prosperity, and we wish to hang on to prosperity,” he told the New York Times.

On March 14, Bush made a similar pitch before the Economic Club of New York: “We’re a resilient economy, and I believe that the ingenuity and resolve of the American people is what helps us deal with these issues.” So far, so Hoover-ish.

Housing Bailout Anyone?

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