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Herbert Hoover Speeches

Economic Security and the Present Situation

Herbert H. Hoover

Economic Club of Chicago, Chicago, Illinois

I have been led to make this address by the urgent appeal of your invitation.  You said in part:

"In the main, we are a group of young men representative of the countless counterparts of the economic middle class Americans.  Our future and the country's welfare are bound together.  We were born without golden spoons.  We cannot retire.  We haven't the means.  Nor does our vitality afford any inclination to do so.  We have young and growing families, and these ultimate responsibilities are sacred to us.

"This group . . . have more reason to be disturbed at certain economic trends. . . . We are harassed and nervous lest the uncertainties and direction in our economic life will place an unbearable load upon our ability to plan ahead. . . . We believe you could analyze for the average younger man . . . just what is underneath this confusion, and what is wrong with it all.  We need leadership in sound economic and social philosophy.”

You raise the whole question of economic security and future opportunity.

Your letter echoes the anxiety of millions of Americans for the security of their jobs, their savings, the opportunity to better themselves and their children.  They are thinking of the long years before they are entitled to an old age pension.

I approach that summons with great humility.

These questions range far above partisanship.  The progress of democracy requires that we present different points of view.  We must pound out reason and the basis of co-operation on the anvil of debate.

By the economic middle class I take it that you mean all the people who have to support themselves.  You mean the people who have sacrificed years of devotion to learn to do their jobs skillfully.  They are the creative people.  They are the people who want to get forward.  They are the quiet, decent people who are busy keeping things going.  They seldom appear in the press except when they die.  Unless this great group has a chance the whole will fail.  The have to carry the burdens of the unfortunate.


No Anxieties from Abroad

If we look over the national scene we will find every city, village and hamlet torn with dissension and a feeling of insecurity and even fear.

This anxiety does not come from outside our borders.  America almost alone of all the countries in the world is secure from the dangers of war.  There is not the remotest fear that our national independence will be challenged from abroad.

We possess the resources and the equipment to produce more than mere food, shelter, and clothing for the whole of our population.

We are still able to contend for the right to govern ourselves.  Ours has been a great adventure in free men and free ideas and free enterprise.  That experiment has not failed.  At present it has become muddled.


The Present Recession

These anxieties, distractions and fears swell up from something far deeper in our national life than this immediate business recession.

I like this new word "recession.”  It is no doubt easier to bear than those old English words "slump” or "depression.”  It no doubt softens the pain from falling off the roof if you call it a "recession.”  I can be wholly objective on this depression because certainly I did not create it.

This recession need not be serious.  The reason I believe this is that we are not today dragged by two of the terrible horsemen of the world-wide crisis beginning in 1929.

No major depression comes without a large element of credit collapse.  There is today no inflated bubble of speculative private credit as in 1929.  There is no bubble of European inflation and unliquidated war finance, the collapse of which pulled down the whole world.  The world economic movement is still upward.

The grim recollections of the Great World Depression naturally contribute to fears of the present situation which reason does not confirm.

What is imperative for the moment is relief from pressures which stagnate billions of industrial and home construction and millions of jobs for men.  But it is currents deeper than this recession that we are discussing tonight, although this recession is one of the indications of profound currents.


Past Movements in Economic and Social Forces

Perhaps we could get under the surface of these deeper distractions by a short analysis of the shift in economic and social forces in recent years.

We had for nearly a century industrial pioneers who mainly devoted themselves to building up the great industrial tools provided by scientific discovery.  Those generations did a good job.  They won for America the greatest economic triumph in all history.  That is the unique ability to produce a plenty for a wholesome standard of living and comfort to all the people.  Private initiative and enterprise proved to be the very mother of plenty.

It has social weaknesses.  That generation gave too little heed to equitable diffusion among all the people of the output of their triumph in production.

Some thousands of a marginal group out of 120,000,000 got too much of the productive pie for the service they gave.  Some millions of another marginal group got too little.  But we had so triumphed in the long journey of mankind away from scarcity and want that we began to see the promised land of abolished poverty.

Our greatest economic weakness was the organization and shocking abuses in finance and banking.  Our segment of the war depression was deepened by our credit inflations and failures.  Our people were amply warned.  But democracies seldom act until the shock comes.  Then they get impatient.

From the miseries of the depression the whole economic system was condemned without discrimination as to its strengths or its faults.

Before recovery had been attained came a set of ideas under the euphonious title of "Planned Economy.”  They brought a conflict between two fundamentally opposite philosophies of government and economics in operation at the same time.

Whether Planned Economy is an infection from Europe of creeping collectivism or whether it is a native American product is less important than its actual results upon us.  I shall analyze it solely from its practical aspects.


Confusion in the Present Direction of Economic and Social Forces

We must not confuse true liberal reforms with Planned Economy, which has other purposes.  Constant reform is a necessity of growth.  The objectives of this administration in reforms directed to cure business abuses, to remedy social ills, old age needs, housing, sweated labor, etc., are right.  Nor is "Planned Economy” necessary to bring them about.

The central idea of Planned Economy which concerns me is the gigantic shift of government from the function of umpire to the function of directing, dictating and competing in our economic life.  No one will deny that the government is today increasingly controlling prices, wages, volume of production and investment.

Its weapons include politically managed currency, managed credit, managed interest rates, huge expenditure in pump priming and inflation of bank deposits.  Further weapons are to use relief funds to build the government into competitive business. It has stretched the taxing powers deep into the control of business conduct.  Regulation to prevent abuse has been stretched into instruments of dictation.  The policeman on the streets of commerce to expedite the traffic, to keep order and stop robbery, now orders our destination and tells us what to do when we get there.  It will be a depressing day for America when the farmer can be put in jail for failure to obey the dictates of Washington as to what he may sow and what he may reap.

I do not agree with these New Deal objectives, for there are here fundamental conflicts with free men in which there is no compromise, no middle ground.


Its Results

We have now had nearly five years' experience with these ideas.  They were put forward as only for an emergency.  And yet every session of Congress faces demands for more and more.

The very forces of Planned Economy involve constantly increasing delegation of discretionary power to officials.  They involve constantly greater centralization of government.  They involve conflicts with the Constitution.  They involve minimizing the independence of the Congress and the Judiciary.  They involve huge deficits, great increase in debt and taxes and dangers of inflation.

Somehow I do not believe these things make for either economic or social security or enlarge the opportunities of the people.

The results are obvious violations of common sense.  Transient political officials cannot plan the evolution of 120,000,000 people.  We cannot assume that Americans are incapable of conducting their own lives and their daily affairs for their own good.  We cannot increase standards of living by restricting production.  We cannot spend ourselves into prosperity.  We cannot hate ourselves into it either.  We cannot constantly increase costs of production without increasing prices and therefore decreasing consumption and employment.  We cannot place punitive taxes on industry without stifling new enterprise and jobs.

However, the consumer is the nemesis of all Planned Economy.  It may control production.  It cannot control the consumer.  He is on strike in residential building today because he does not like the distorted building costs.

Today in a system part free the citizen confronts a new and unpredictable factor in conducting his affairs.  That is political action. The people move hourly upon their own judgments as to supply and demand, as to prices and outlook.  But today every plan in life is a bet on Washington.  Every investment of savings is a gamble on the currency.  Every future price is another bet on Washington.

Do these things make for increase in either the economic security or enlarged opportunity of the people?  Do they not lead to confusion?

When the government expands into business then in order to protect itself it is driven irresistibly toward control of men's thoughts and the press.  We see it daily in propaganda.  We have seen the Labor Board doing it in the last week.

Group conflicts in the country have been magnified.  We have become a sadly divided America.  In the words these groups use and the reprisals they undertake they have brought us fear, confusion, worry, and distraction.  If every group gets all it asks for, nobody will get anything.

Do these things make for economic security or equal opportunity?

There are considerations of government far higher than money or comfort.  That is its relations to moral and spiritual values.  Part of these Planned Economy measures are a surrender of the spiritual for the material.  Part of them proceed by unmoral steps.  No government can reform the social order unless it set higher standards of morals and rectitude than those whom it governs.

I ask you:  Is there economic security without moral security?

All these things affect the mind and spirit of a people.  For lack of a better term we call it public psychology.  And "psychology is the twin brother of economics.”  Politicians may be psychologists but they are a poor twin for economists.

I leave it to you to inventory the instabilities of optimism and discouragement during the past year.

In your invitation to me you asked the cause of the confusion, harassment and uncertainties of the day.  Perhaps this is enough of an accounting.  I could give you more.


The Alternative System

You asked for the alternative economic and social system.

What sort of an America do we want?  What should be our foundations?  What should be our ideals?

American young men and women should have the right to plan, to live their own lives with the limitation that they shall not injure their neighbors.  What they want of government is to keep the channels of opportunity open and equal, not to block them and then send them a tax bill for doing it.  They want rewards to the winners in the race.  They do not want to be planed down to a pattern.  To red-blooded men and women there is a joy of work and there is joy in the battle of competition.  There is the daily joy of doing something worth while, of proving one's own worth, of telling every evil person where he can go.  There is the joy of championing justice to the weak and downtrodden.  These are the battles which create the national fiber of self-reliance and self-respect.  That is what made America.  If you concentrate all adventure in the government it does not leave much constructive joy for the governed. 

Let me shortly sketch what I conceive to be a philosophy of government and economics which would promote this sort of living and would preserve free men and women in our modern world.  It is no magic formula.  It does not lend itself to oratory.

Economic Phases

First:  The main anchor of our civilization must be intellectual and spiritual liberty.  Ideas, invention, initiative, enterprise and leadership spring best from free men and women.  The only economic system which will not limit or destroy these forces of progress is private enterprise.

Second:  In the operation of the economic system there is but one hope of increased security, of increased standards of living, and of greater opportunity.  That is to drive every new invention, every machine, every improvement, every elimination of waste unceasingly for the reduction of costs and the maximum production that can be consumed.  We must work our machines heartlessly, but not our men and women.

By these means we sell goods cheaper.  More people can buy.  And thereby we have higher wages, more jobs and more new enterprise.  New industries and new articles add again to the standards of living.  That is the road to more jobs; it is the cure of temporary machine displacement.  That is no robbery, it is progress.

Governmental Phases

Third:  To preserve freedom and equal opportunity we must regulate business.  But true regulation is as far from government-dictated business as the two poles.

The vast tools of technology and power can be used for oppression.  They can be used to limit production and to stiffly competition. There can no more be economic power without checks and balances than there can be political power without checks and balances.  We must compel competition in a large area of business.  It is a restless pillow for managers, but it is the motive power of progress.  Where we decide as in utilities that special privilege shall be given we must directly or indirectly regulate profits.  We must regulate banking and finance to prevent abuse of trust.  But Democracy can be master in its own house without shackling the family.

Fourth:  A system of free men implies a vast amount of competence, of self-imposed discipline, and of responsibility.  It implies co-operation between groups and sections outside of government and with government.  The more co-operation the less government.

Social Phases

Fifth:  No system can stand on pure economics.  The economic and social gears must be enmeshed.  The primary objective of our system must be to eliminate poverty and the fear of it.

Men cannot be free until the minds of men are free from insecurity and want.  But security and plenty can be builded only upon a release of the productive energies of men.  Moreover, economic security and even social security can be had in jail but it lacks some of the attractions of freedom.

Such an economic system as I have mentioned would constantly diminish the marginal group who do not get a just share of the production pie.  And the pie would be far bigger. 

Through income and estate taxes, we can take care of the marginal group who get too much.

The economically successful must carry the burdens of social improvement for the less fortunate by taxes or otherwise.  Child labor, health, sweated labor, old age, and housing are but part of our social responsibilities.  The nation must protect its people in catastrophes beyond their control

These are indeed but highlights of a system free from so-called Planned Economy.  This is no philosophy of laissez faire or dog eat dog.  It is a philosophy of free men with the responsibilities of freedom.  It requires no tampering with the Constitution or the independence of the Judiciary.  It is system of faith in the competence, the self-discipline and the moral stamina of the American people and the divine inspiration of free men.  It is a system of forward movement to far greater attainment.

Our transcendent need at this moment in America is a change in direction toward this system.

A confident, alert, alive and free people, enthused with incentive and enterprise, can quickly repair losses, repay debts, and bury mistakes.  It can build new opportunity and new achievement.


All this is but the underlying basis upon which to work.  And we need to work out a host of problems.  We need their re-examination within these principles that we may find new and forward solutions.  Time permits me to outline but a few as illustrations.

Reform in Regulatory Methods

We need for instance an unbiased examination of the whole experience with administrative law in regulation against business abuse.  As I have said, it has been stretched over into personal government and punitive action.  But the border lands are not easy to determine.

Many of these measures, old and new, should be reformed into definite statutory standards of business conduct and morals.  That would restore the people to government by law instead of government by whim of men.

Labor Problems

We need fresh and unbiased consideration of many fields in employer and employee relationships.

There are areas of conflict of interest, but there are greater areas of common interest  If these groups could themselves build on these common interests they might save great tragedies to our country.  Certainly the Labor Board has not been a solution.

We can well start with acceptance of the fact that collective bargaining by representatives of their own choosing makes greatly for economic security of the workers.

I have long believed that we cannot secure full economic security in the wage group until we face the question of assured annual income.  The greatest insecurity in the world is fear of losing the job.  I believe there are large wage groups where employers could extend this greatest of assurances of security in increasing degree to the mutual advantage of both sides.  It would be a great demonstration of co-operation in industry to accomplish it.

Again I believe methods could be worked out in industry itself by which so-called technological unemployment could be cared for and thus the mistaken opposition to new improvements and individual hardships could be solved. There are a host of other constructive fields.

Sweated Labor

We need a much more exhaustive consideration of the problem of sweated labor than it has received.  The present Wages and Hours Bill runs into Planned Economy fixing of wages.  It will reduce productivity at a time when the productive machines because of many shocks is already hesitating.  One phase of its consequences has not been ventilated.  Any general minimum wage will become a sort of moral wage and will inexorably tend to reduce wages in that vast majority of unorganized labor which today supports much higher minimums.

On re-examination we should envisage this question as solely one of sweated labor.  A sweated industry is an industry sick from destructive competition or devoid of effective collective bargaining. The better remedy would be to apply minimums only to those industries which have been found sick after proper diagnosis.  The minimum should be applied only while they are sick.  Certainly employers would be quickened to collective bargaining as a relief from the restrictions.  Such a program should be administered by restraining movement of goods into states where the minimums are maintained and not by centralizing more power in Washington.

Booms and Slumps

We need a new and exhaustive examination into the causes of booms and slumps.  And this involves an unbiased and searching consideration into our whole financial, credit, currency and banking regulations and their effects.  Certainly the remedy of Planned Economy has not worked.


The question of corporation life in its entirety needs study for deeper reforms than prevention of monopoly.

We need a searching inquiry by unbiased minds into our corporate structure and theory, not for purposes of destruction of this necessary engine of civilization but for simplification of the whole tangle of practice and of state and federal regulation.  But more important, we need seek for a way by which we may establish, without political control, a more general institutional sense and responsibility in large public corporations.  And at the same time we should search for a method in our smaller corporations by which we can restore the sense of personal relationships and the responsibility of partnerships.


We need an exhaustive examination of our whole tax system.  In old days taxes had little economic or social effect.  Now when they are 20 percent or 25 percent of the national income they have the most profound effect.  Having this effect we should devise them not to destroy initiative and enterprise.  And we could devise the method of levying them to produce most substantial effects.  I could imagine a taxing program that would improve our housing far more than any government loans.


My time is ending.  It would require several addresses to even partly traverse our multiple problems of agriculture, of currency, of foreign trade, of child labor, of old-age pensions, and a score of others.  May I say in conclusion, much of our problem of security and enlarged opportunity is more intellectual and moral than material.

Let us remember the standards of human conduct must be erected upon a far higher base than government regulations and government controls.  They spring from the Sermon on the Mount.

The season from Thanksgiving to Christmas and New Years is the time that Americans give life to the highest individual qualities of good-will, and resolve to do a better job.  Today as never before if we could life these qualities into national action, it would set American on a new road of hope and happiness.

Many have rightly urged an era of co-operation.  We need it.  We need co-operation to place America upon the right road to progress.  And we need co-operation between organized groups, outside of government.

It is difficult for timid minds to believe that free men can work out their own salvation.  Arrogant minds seeking for power live upon this timidity.  In the firm places of your minds you must take some new resolves.

Nations are built around important and stimulating enterprises which demand sacrifice, discipline and mutual consideration.  We gave all that in war.  But today the nation must have it in peace.

For we have a great enterprise.  That is to build our mechanisms so as to hold the greatest possession any nation has ever had.  That is human liberty.

These may be times of confusion and uncertainty.  But there are lights upon the horizon, for the eternal fires of freedom still burn.