Americans supported what is called a laissez-faire economy. They believed that the economy would regulate itself, through competition, and that no government intervention was necessary. Herbert Hoover, President as the Great Depression unfolded, rigorously supported a laissez-faire economy. He felt it was immoral for the government in intervene in any way into the affairs of business. However, even President Hoover had to do something as the American economy slowly deteriorated.
Hoover took action. He went to business leaders, and asked them to work with the government to alleviate America's economic impasse. He told business to hire more workers, while producing fewer goods. By doing this, Hoover said, they would be employing more of the American people, while reducing the surplus that was their downfall.
What President Hoover failed to see, was that by hiring more people, businesses would be setting themselves up to produce more not less. It would be not only uneconomical, but illogical to attempt less production with more employees. Seeing the err in this attempt at economic salvation, President Hoover looked elsewhere for the answer to America's imperative issue.
President Hoover felt that, if he could simply balance the economy, America's problems would be solved. This, however, was once again a partially rationalized attempt a solving a problem too complex for its solution. Here is the flaws in President Hoover's thinking:
This cycle was the primary flaw in Hoover's balanced budget solution to what led to America's economic depression.
Unequal Distribution of Wealth
Unequal Distribution of Corporate Power
Poorly Structured Banking
Foreign Balance of Payments