If there has ever been such a thing as
laissez-faire economics in American history - which, at best, has only existed in the convenience of rhetoric - it would come to a near complete halt with the advent of the Great Depression. The country's economy had been in depression before (this was not the first "Great Depression"), but never had so many banks failed, never had so many people been out of work, never had the world's economy been brought to such a grinding halt as it had in the 1930s. This economic crisis brought the United States to its knees in many respects, and it seemed as though the most logical remedies would come through government intervention.
As the economy spiraled downward after the Crash of '29, President Herbert Hoover refused to follow the advice of his Treasury Secretary Andrew Mellon: to leave the market to itself, repudiate all interventionist approaches, and return to
laissez-faire. Hoover saw that the most important way to combat the economic downturn was to inflate credit through the Federal Reserve and secure the already artificially high wages that emerged during the so-called Roaring '20s. He convinced many industrial leaders to not cut wages at all, despite weakening economic conditions. He also cut taxes heavily and increased government spending at a record pace. While refusing to involve the government in direct aid to the unemployed, working poor, and elderly, he attempted to spur the economy through transfer-payments to banks, aid to the struggling American farmer (who had been struggling since the end of World War One), and through the creation of numerous limited public works programs. The San Francisco Bay Bridge, the Los Angeles Aqueduct, and Boulder Dam were all born in the Hoover Administration. Though limited in overall scale, Hoover's policies were in some ways a repudiation of
laissez-faire while in others an attempt to cling to its ideology and general practice.
1But Hoover's overall policies were not enough, and most Americans (unfairly) blamed him for their plight and associated the breadlines and the makeshift communities of shacks created on garbage dumps and parks (Hoovervilles, as they were dubbed) with his administration's failures. By the end of his first term, the gross national product had dropped by one-third, one-quarter of the labor force was out of work, wages fell precipitously, as did overall prices. Despite Hoover's efforts to stave off economic catastrophe, the country was in much worse shape than in 1930. By the 1932 election his presidency was basically over. And the American people would affirm this with the landslide election of Franklin D. Roosevelt, who promised the American people a "new deal" for economic recovery.2
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