Changing View

       I have been reading a book that has significantly altered my view of the Great Depression. The author bestowed it a grand title: Freedom from Fear. Just in the first chapter, it has demoted the role of the stock market crash of 1929, presenting evidence to remove it as a cause of the ordeal. And after the crash, the book radically contradicts the image of President Hoover as a casual executive passively accepting the disaster as a downward turn that will pass on its own; instead the great humanitarian of World War I acted quickly to counteract the effects of disaster. Under such a light my view, and the view of many others, is not only faulty, but grotesquely unjust as well.

       My previous view placed the stock market crash in a position of prominence; that the disaster’s devastation weighed heavily across the nation, and led to a cascading failure of the banking system; the book changed that view. The first complacent misconception shaken was the assumption that the crash was to such an extent that it would not be recovered from to any significant degree for years. The book eliminated this thought by presenting the fact that the stock market recovered over 20 percent of its losses; more potently it diminished the significance the crash’s effect by showing that from the point of view of the people who lived through the time, they saw the market as inflated, and so a 20 percent recovery from the inflated high was a restored normal market, not a truncation of what should have been. Along with recovery cushioning the effects of the crash, the crashes significant diminishes further when analyzing the number of American’s who participated in the stock market. The book reports that the number of persons with investments in the market had been inflated: from 20 million the actual number was closer to 1 million. Such evidence shows that the damage done by the crash was not as great as previously thought, but the most significant evidence that strikes at the idea that the crash caused the depression comes for the health of corporations and banks. For a crash that is supposed to be so destructive, it failed to destroy any major corporations, and the health of the banks continued to be sounded. Under such evidence, one must reevaluate the role of the stock market crash of 1929 in the narrative of the Great Depression.

      I have for some time now believed that we are a terribly unfair species because we caricature others and focus on what we want to see rather than the truth. Regarding President Hoover, I have fallen for the same complacent self-confirmation bias; it seems that rather than passively sitting by waiting for the market to heal itself the President took action to solve the problem. To counter deflation, he procured agreements from major businesses to keep wages where they were rather than lowering them; while at the same time he urged the states to increase their spending on public projects. The evidence is unmistakable that Hoover well understood the notion of spending center to the business cycle to stabilize the economy; and he did not just encourage others to spend. As President, he infused federal dollars into the economy to counter the unemployment problem by expanding federal spending on public projects; sadly the reason the effects were limited was because federal government expenditures at the time composed only 3percent of GDP, a contrast with today which is 20 percent. Beyond the perception that he took no actions to remedy the disaster, it seems that I have neglected the context and limited information under which Hoover labored. The book reports that after taking all of those steps to counter the downward spiral Hoover only declared that the Depression was over because he was working without the correct information about the actual condition of the economy; but moreover neither he nor many, if not everyone else, had a proper understanding of the devastating nature of the crisis because the nation had never experienced this within living memory. That does not entirely absolve him, but given every thing he had done the Great Humanitarian acquitted himself quite well, we must try not to be so sure of our opinions.