Introduction

The farm sector of the American economy had struggled in the 1920s, but overall by 1928, the United States had enjoyed eight years of unprecedented prosperity under Republican Presidents Harding and Coolidge. As the 1928 presidential race drew to a close, the Republican candidate, former Secretary of Commerce Herbert Hoover, outlined the Republicans’ governing philosophy, which he credited with producing the prosperity. Seven months after Hoover took office, in October 1929, the stock market crashed. After two weeks, it recovered somewhat, but then began a long-term decline, as the American economy fell into what became known as the Great Depression.

The fall in the stock market and the resulting loss of wealth was not the sole cause of the Depression. Economists still debate what broader effect the stock market crash had on the American economy and why the Great Depression was so severe and so prolonged. Two factors that postdate the stock market crash and are part of the current debate – the decrease in foreign trade and the failure of the banking system – were noted by contemporaries. However, contemporaries tended to agree that the US government should ensure the soundness of the financial system by setting its own financial house in order. This meant reducing its debt by curtailing its expenditures and even raising taxes, if necessary. Today, most economists would consider such measures counterproductive during a depression. High tariffs restricting trade did not encourage recovery, and reductions in government spending removed an economic stimulus that might have helped. (Economic orthodoxy began to change with the publication of John Maynard Keynes’ The General Theory of Employment, Interest and Money, in 1936, which called for governments to increase spending and deficits during a downturn.)

Hoover responded to the economic difficulties according to the principles he had articulated in 1928. The American system was sound, he thought, and would recover with only limited assistance from the government. As the economic situation worsened, however, Hoover did propose a series of measures to deal with the crisis, including the establishment of the Reconstruction Finance Corporation (RFC), a government entity that lent money to state and local governments, banks, and other businesses.

Franklin Delano Roosevelt, the leading Democratic candidate for President in 1932, argued that the American system as championed by Hoover was not sound and needed to be changed.

In a series of speeches in 1932 (The Forgotten Man, his Acceptance Speech at the Democratic Convention, and “Commonwealth Club Address”), Roosevelt explained why he thought the Depression had occurred and what had to be done to restore the country to economic health. This was the “New Deal” that Roosevelt offered the American people.

In his final weeks in the Oval Office, as the economic crisis reached its most severe stage, Hoover argued that President-elect Roosevelt had made the situation worse by refusing to commit himself to balancing the budget and maintaining a sound currency. Hoover first offered his account verbally to one of his closest political allies, Senator Simeon Fess of Ohio. At Fess’s request, Hoover put his remarks in writing in a letter he sent the Senator.


Herbert Hoover, “Principles and Ideals of United States Government,” October 22, 1928, Public Papers of the Presidents of the United States – Herbert Hoover: 1929: Containing the Public Messages, Speeches, and Statements of the President, March 4 to December 31, 1929 (Washington, DC: United States Government Printing Office, 1974), 577–591. Available online at the Miller Center, University of Virginia, https://goo.gl/UWvKy1.


. . . When [World War I] closed, the most vital of all issues both in our own country and throughout the world was whether Governments should continue their wartime ownership and operation of many instrumentalities of production and distribution. We were challenged with a peace-time choice between the American system of rugged individualism and a European philosophy of diametrically opposed doctrines – doctrines of paternalism and state socialism. The acceptance of these ideas would have meant the destruction of self-government through centralization of government. It would have meant the undermining of the individual initiative and enterprise through which our people have grown to unparalleled greatness. . . .

There is, therefore, submitted to the American people [in the election of 1928] a question of fundamental principle. That is: shall we depart from the principles of our American political and economic system, upon which we have advanced beyond all the rest of the world, in order to adopt methods based on principles destructive of its very foundations? And I wish to emphasize the seriousness of these proposals. I wish to make my position clear; for this goes to the very roots of American life and progress.

I should like to state to you the effect that this projection of government in business would have upon our system of self-government and our economic system. That effect would reach to the daily life of every man and woman. It would impair the very basis of liberty and freedom not only for those left outside the fold of expanded bureaucracy but for those embraced within it.

Let us first see the effect upon self-government. When the Federal Government undertakes to go into commercial business, it must at once set up the organization and administration of that business, and it immediately finds itself in a labyrinth, every alley of which leads to the destruction of self-government.

Commercial business requires a concentration of responsibility. Self-government requires decentralization and many checks and balances to safeguard liberty. Our Government to succeed in business would need become in effect a despotism. There at once begins the destruction of self-government.
. . .

The effect upon our economic progress would be even worse. Business progressiveness is dependent on competition. New methods and new ideas are the outgrowth of the spirit of adventure, of individual initiative and of individual enterprise. Without adventure there is no progress. No government administration can rightly take chances with taxpayers’ money. . . .

The Government in commercial business does not tolerate amongst its customers the freedom of competitive reprisals to which private business is subject. Bureaucracy does not tolerate the spirit of independence; it spreads the spirit of submission into our daily life and penetrates the temper of our people not with the habit of powerful resistance to wrong but with the habit of timid acceptance of irresistible might.

Bureaucracy is ever desirous of spreading its influence and its power. You cannot extend the mastery of the government over the daily working life of a people without at the same time making it the master of the people’s souls and thoughts. Every expansion of government in business means that government in order to protect itself from the political consequences of its errors and wrongs is driven irresistibly without peace to greater and greater control of the nations’ press and platform. Free speech does not live many hours after free industry and free commerce die.

It is a false liberalism[1] that interprets itself into the Government operation of commercial business. Every step of bureaucratizing of the business of our country poisons the very roots of liberalism – that is, political equality, free speech, free assembly, free press, and equality of opportunity. It is the road not to more liberty, but to less liberty. Liberalism should be found not striving to spread bureaucracy but striving to set bounds to it. True liberalism seeks all legitimate freedom first in the confident belief that without such freedom the pursuit of all other blessings and benefits is vain. That belief is the foundation of all American progress, political as well as economic.

Liberalism is a force truly of the spirit, a force proceeding from the deep realization that economic freedom cannot be sacrificed if political freedom is to be preserved. Even if governmental conduct of business could give us more efficiency instead of less efficiency, the fundamental objection to it would remain unaltered and unabated. It would destroy political equality. It would increase rather than decrease abuse and corruption. It would stifle initiative and invention. It would undermine the development of leadership. It would cramp and cripple the mental and spiritual energies of our people. It would extinguish equality and opportunity. It would dry up the spirit of liberty and progress. For these reasons primarily, it must be resisted. For a hundred and fifty years liberalism has found its true spirit in the American system, not in the European systems.

I do not wish to be misunderstood in this statement. I am defining a general policy. It does not mean that our government is to part with one iota of its national resources without complete protection to the public interest. I have already stated that where the government is engaged in public works for purposes of flood control, of navigation, of irrigation, of scientific research or national defense, or in pioneering a new art, it will at times necessarily produce power or commodities as a by-product. But they must be a by-product of the major purpose, not the major purpose itself.

Nor do I wish to be misinterpreted as believing that the United States is free-for-all and devil-take-the-hind-most. The very essence of equality of opportunity and of American individualism is that there shall be no domination by any group or combination in this Republic, whether it be business or political. On the contrary, it demands economic justice as well as political and social justice. It is no system of laissez faire. . . .

Our people have the right to know whether we can continue to solve our great problems without abandonment of our American system. I know we can. We have demonstrated that our system is responsive enough to meet any new and intricate development in our economic and business life. We have demonstrated that we can meet any economic problem and still maintain our democracy as master in its own house and that we can at the same time preserve equality of opportunity and individual freedom. . . .

The American people from bitter experience have a rightful fear that great business units might be used to dominate our industrial life and by illegal and unethical practices destroy equality of opportunity.

Years ago the Republican Administration established the principle that such evils could be corrected by regulation. It developed methods by which abuses could be prevented while the full value of industrial progress could be retained for the public. It insisted upon the principle that when great public utilities were clothed with the security of partial monopoly, whether it be railways, power plants, telephones or what not, then there must be the fullest and most complete control of rates, services, and finances by government or local agencies. It declared that these businesses must be conducted with glass pockets.[2] . . .

One of the great problems of government is to determine to what extent the Government shall regulate and control commerce and industry and how much it shall leave it alone. No system is perfect. We have had many abuses in the private conduct of business. That every good citizen resents. It is just as important that business keep out of government as that government keep out of business. . . .

And what have been the results of our American system? Our country has become the land of opportunity to those born without inheritance, not merely because of the wealth of its resources and industry but because of this freedom of initiative and enterprise. Russia has natural resources equal to ours. Her people are equally industrious, but she has not had the blessings of 150 years of our form of government and of our social system.

By adherence to the principles of decentralized self-government, ordered liberty, equal opportunity and freedom to the individual, our American experiment in human welfare has yielded a degree of well-being unparalleled in all the world. It has come nearer to the abolition of poverty, to the abolition of fear of want, than humanity has ever reached before. Progress of the past seven years is the proof of it. This alone furnishes the answer to our opponents who ask us to introduce destructive elements into the system by which this has been accomplished. . . .

My conception of America is a land where men and women may walk in ordered freedom in the independent conduct of their occupations; where they may enjoy the advantages of wealth, not concentrated in the hands of the few but spread through the lives of all, where they build and safeguard their homes, and give to their children the fullest advantages and opportunities of American life; where every man shall be respected in the faith that his conscience and his heart direct him to follow; where a contented and happy people, secure in their liberties, free from poverty and fear, shall have the leisure and impulse to seek a fuller life.

Some may ask where all this may lead beyond mere material progress. It leads to a release of the energies of men and women from the dull drudgery of life to a wider vision and a higher hope. It leads to the opportunity for greater and greater service, not alone from man to man in our own land, but from our country to the whole world. It leads to an America, healthy in body, healthy in spirit, unfettered, youthful, eager – with a vision searching beyond the farthest horizons, with an open mind sympathetic and generous. It is to these higher ideals and for these purposes that I pledge myself and the Republican Party.

Study Questions

A. According to President Herbert Hoover, what were the major causes of the Great Depression, and what were the best ways to respond? How did Franklin D. Roosevelt’s views on the causes and solutions to the economic crisis differ from Hoover’s? How did the American system championed by Hoover differ from the New Deal offered by Roosevelt? How does “rugged individualism” differ from concern for “the forgotten man”? What were the different responses they offered to the “boom and bust” economic cycle? Was Roosevelt right to argue that he was following a bottom-up approach, while Hoover was following a top-down approach? What did Roosevelt mean when he said that the age of enlightened administration had come? Both Hoover and Roosevelt spoke of equality of opportunity. Did they mean the same thing by this phrase? How did each think such equality was best achieved?

B. How do the powers of the federal government implied in the New Deal compare to those Justice David Brewer described when delivering his opinion in In re Debs?

C. How might we evaluate these documents in light of the questions about moral virtue and market behavior raised in the colonial period? What role, if any, do the authors in this chapter see for virtue in the economy? What are the consequences of neglecting to consider virtue in this context?

Footnotes

  1. Liberalism here does not mean what we think of in modern terms as the opposite of conservatism. Instead, as Hoover goes on to explain, it refers to political and economic freedom.
  2. transparent finances