Free markets from blame

As more jobs are cut, more companies' profits decrease and more dreams are delayed, the American people demand to know: Why is all of this happening? What piece of the economy broke and has lightened our wallets and weighted our shoulders?

Too often, free-market capitalism has been the scapegoat of choice. President Barack Obama espoused this view in his inaugural address: "This crisis has reminded us that without a watchful eye, the market can spin out of control." Blogger Arianna Huffington declares it "time to drive the final nail into the coffin of laissez-faire capitalism."

But if we put hammer to nail as Huffington and surely others would like, if we let history show that capitalism was incurably ill and needed to die, we risk repeating history yet again as the real culprit -- government intervention in the economy -- skates by. 

You see, all this has happened before. There was a time in this nation's past when the going got really tough. Jobs weren't cut, they were slashed. Profits didn't decrease, they plunged. Dreams weren't delayed, they were crushed. Nothing in peace time has ever afflicted as many Americans as much as the Great Depression. Who was to blame then?

President Herbert Hoover and his laissez-faire policies were at fault. Hoover's failure ran so deep that it took his successor nearly a decade to sort it all out. Or so goes the story, as told by historians who surely were influenced by the Huffingtons of the time.

But Hoover was lucky if he knew how to pronounce "laissez-faire." Unemployment in 1930 was 8.9 percent. It skyrocketed from there to 25 percent by 1933, the year of President Franklin D. Roosevelt's inauguration. And what did Hoover do in that time? He certainly didn't keep his hands off the economy.

First and most notoriously, there was the Smoot-Hawley tariff in June 1930, a piece of legislation referred to by some as the most protectionist in national history. The act strangled international trade and was so vast in scope that even clocks and sauerkraut were not safe from the government's outstretched fist. This incited a tariff war with America's trading partners. Then with the Revenue Act of 1932, Hoover jacked taxes up through the roof for the top bracket from 24 percent to 63 percent (a number FDR would raise at one point to 95 percent).

Hoover's interventionist policies didn't expire with his presidency. FDR, although initially accusing his predecessor of steering the U.S. toward socialism, continued his policies and thus the Depression until the next decade. "We didn't admit it at the time," confessed FDR advisor Rexford Guy Tugwell decades later, "but practically the whole New Deal was extrapolated from programs that Hoover started."

Now historians are poised to credit former president George W. Bush too with the legacy of a staunch free market proponent, despite his astronomical spending on the economic stimulus plan, the bailout of the financial industry and more.

But from Toledo, Ohio's 1933 unemployment rate of 80 percent to the 425-person layoff at the Springettsbury Twp. Harley-Davidson plant last week, it's not too little government interference that has, does and will hurt the economy -- it's too much.