The madness of this scheme and its economic destruction has been proved out, and the response and results of the 1929 crash and the ensuing depression warrants its rejection. This inverted thinking causes great calamity, so:
While high wage rates are actually the consequence of greater productivity and capital investment, this theory put the cart before the horse by claiming the high wage rates were the cause of high productivity and living standards. It followed, of course, that wage rates should be maintained, or even raised, to stave off any threatening depression. [President Herbert] Hoover began championing this theory during the Unemployment Conference of 1921. Employers on the manufacturing committee wanted to urge lowering wage rates as a cure for unemployment, but Hoover successfully insisted on killing this recommendation.
Professor Lee Ohanian summaries Herbert Hoover’s economic policies and results very concisely and accurately. Hoover’s economically destructive intervention “raised real wages substantially above market-clearing levels which in turn kept employment and output low… In November 1929… [Hoover] told [the leaders of major industrial organizations] that at a minimum, they should not cut wages, and preferably would raise wages. He also advised to them to share work among employees [instead of reducing the number of employees to required levels]. This manipulation of industry had devastating results. “The industrial labor market distortion is suggested by the fact that higher real wages coincide with substantial employment loss.” Essentially “Herbert Hoover’s approach to economics had more in common with his successor [Roosevelt] than it did with the two men [Harding and Coolidge] preceding him in the White House.”
 Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. His consulting firm, Applied Austrian School Economics, provides in-depth assessments and reports of financial markets and global economies.
 I.E.C. stands for Irrational Economic Cycle.
 Frank Shostak, January 25, 2012, “Is the United States in a Liquidity Trap?” Mises Daily, (Auburn, AL: Ludwig von Mises Institute), [http://mises.org/daily/5881].
 W. Michael Cox and Richard Alm, July 6, 2012, “Sorry, Keynesians, More Spending Doesn’t Boost Jobs,” Investor Business Daily, [http://news.investors.com/article/617318/201207061734/government-stimulus-doesnt-creat-more-jobs.htm?p=full].
 Murray N. Rothbard, 2008 (originally published in 1963), America’s Great Depression, (Auburn, AL: The Ludwig von Mises Institute), pp. 204-205.
 Lee E. Ohanian, August 2009, “What – or Who – Started the Great Depression?” (National Bureau of Economic Research: Cambridge, MA), Working paper 15258, p. 2, [http://www.nber.org/papers/w15258].
 Lee E. Ohanian, August 2009, “What – or Who – Started the Great Depression?” (National Bureau of Economic Research: Cambridge, MA), Working paper 15258, p. 7, [http://www.nber.org/papers/w15258].
 David Stokes, August 13, 2013, “Harding Dies – Coolidge Takes Charge,” Townhall.com, [http://townhall.com/columnists/davidstokes/2013/08/02/harding-dies–coolidge-takes-charge-n1654280/page/full].
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