The Titanic probably holds the world's record for the widest gap between what a ship promised and what it actually delivered. Notwithstanding it's incredible size, speed and the finest luxury, only several days after beginning its maiden voyage it became an unmitigated disaster bringing terror or death to thousands. There are parallels with the Titanic and the administration of our nation's 31st president, Herbert Hoover (1874-1964). The Hoover administration held great promise for this nation. Yet only months after taking office in March 1929 it became regarded as an unmitigated disaster.
Perhaps no man that ran for president has been as superlatively qualified as Hoover. Very few of our presidents have understood private business as well as Hoover did. Orphaned at the age of nine, he worked very hard through his teen years. After graduating from Stanford in 1895 he worked for a London-based mining firm in Australia and China and throughout the world becoming a partner in the firm. He established his own firm, which had offices in New York, San Francisco, England, France, Russia and Burma. His 1909 textbook, "Principles of Mining," one of at least 16 books he authored, was used for decades in mining schools.
He was so brilliant in turnaround leadership and setting in order the finances of troubled mine companies that he became known as the "doctor of sick mines." By 1913, he was worth $4 million when the average annual income was about $750. He was so confident that a person's success was dependent on their individual motivation that he said, "If a man has not made a million dollars by the time he is 40, he is not worth much."
He was a self-made man who lived the American Dream on a grand scale.
This did not prevent him from sympathizing with and serving those less fortunate than himself. His Quaker background fostered volunteerism and service that knew no bounds. During World War I he worked fourteen hours daily to help administer to eleven million starving Europeans. In the aftermath of the war, he did all he could to help feed twenty million starving people. It is estimated that through his efforts he saved more lives than any other person who ever lived.
While he was the Secretary of Commerce (1921-1928) in two Republican Administrations the economy experienced spectacular growth in that pro-business era. He has been regarded as the best commerce secretary who ever served. When he ran for president in1928 he beat his Democratic opponent by 444 electoral votes to 87. Four years later when he ran for re-election he lost to Democrat Franklin Roosevelt, who crushed him in the Electoral College by a vote of 472 to 59. Four years after that Roosevelt invoked the memory of Hoover to pulverize his Republican opponent in the electoral college 523 to 8. Roosevelt's all time record victory occurred in spite of the fact that Roosevelt ran for reelection with unemployment at over 16 percent.
What happened to make Hoover -- a man who had unprecedented qualifications -- to have a presidency so disastrous that even many of his former supporters would not speak to him? Was there a scandal? Had he been fraudulent?
Several months into his presidency, in October 1929, the stock market crashed and the economy went into a freefall. Hoover, unlike President Obama, was unable to stop the economic freefall and by the end of his term, the stock market had lost close to 90 percent of its value.
A majority of Americans, unaware of the inherent tendencies of capitalism and unwilling to blame capitalism, unjustly held Hoover personally responsible for the catastrophic situation.
This supremely well-qualified president did everything he could to improve the economy. He failed because he was committed to limiting the national government's role in helping the economy. He felt that states, which did 80 percent of all governmental spending at the time, should lead in boosting their economies. Similar to now, the states, which had to balance budgets, instead drastically cut back on employment. The states' financial policies became part of the problem and not the solution. Churches and charities, which also had to balance budgets, also cut back and became another part of the problem.
Hoover illustrates that there is no amount of experience with entrepreneurship and business in the private sector that guarantees one will understand the larger economy. Indeed, the branch of economics that examines the big picture (what is referred to as macroeconomics) wasn't even developed until 1936, when John Maynard Keynes published his groundbreaking book.
It is possible to know all there is to know about running a business -- even a very large business -- and still be clueless about how to deal with the economy as a whole. Today there are people who would like us to forget what we learned from the lessons of Hoover's approach to the Great Depression, and go back to the small and less involved government that failed to save the economy. If the theories of the conservative politicians were true, Hoover would have easily rescued the economy.
Jones lives in West Haven.