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Source link: http://archive.mises.org/9487/what-you-must-read-about-the-great-depression/

What You Must Read About the Great Depression

February 22, 2009 by

In the present recession, advocates of government intervention often evoke the specter of the Great Depression. Unless the government intervenes massively, we are told, we risk an economic collapse comparable to that of the 1930s. To see the fallacy of this claim, it is imperative to understand that government intervention both led to the Depression and prevented recovery from it. The following books, I hope, will assist those interested in grasping what happened in this vital historical era. FULL ARTICLE


Autonomaniac February 22, 2009 at 10:34 pm

Names have power. I think it would be more accurate to call that time The Lousy Depression, or the Deep Depression. ‘Great’ carries the connotation of ‘grandeur’.

ehmoran February 22, 2009 at 10:43 pm

This is greatest ensemble of the GD I’ve ever seen.

pbergn February 23, 2009 at 1:18 am

Excellent article…

Excellent reminder – those who forget history are bound to repeat it…

So sad that the lessons of history fall on deaf ears of our so-called “leaders”…

Ned Netterville February 23, 2009 at 10:11 am

Great and timely article, Mr. Gordon. I am particularly interested now in reading Gene Smiley’s work, because you say Smiley argues that the Depression did not end with WWII. I have been tearing my hair out every time I read that Keynesian-Nobel laureate proclaim that Roosevelt’s government should have spent more on New-Deal “economic stimulus” (read, schmimulus, which is Yiddish for stupid) programs because recovery was only achieved with the massive spending of WW II. Paul Krugman refers to War II as the one economic-stimulus program sufficiently large enough to bring about “recovery,” and points with Keynesian pride to the fact that the War achieved the state of “full employment,” which is the Nirvana desired by all Keynesian at which their economic policies are aimed regardless of costs. The facts that full employment only came to pass by forcing men into military service and killing many of them is never mentioned by Krugman. Nor does he bother to mention the forcible removal from the labor force of all Americans of Japanese extraction, nor the forced deprivation known as rationing of the many of the most wanted and needed consumer goods, nor the war’s destruction of so much of the world’s wealth, nor the onerous restrictions on travel, nor the substitution of war propaganda for free speech, and I could go on and on. He never mentions the fact that Keynes’ full-employment policies were first implemented in one country by one man–Hitler in Nazi Germany, where Keynesian full employment was realized by exterminating a good portion of the labor force (Jews and other undesirables), drafting children as young 14 years old into the war’s man-chewing machinery, and making virtually every German citizen morally complicit in murder and genocide.

Rui February 26, 2009 at 11:41 am

I have been doing some reading about the Great Depression and did get a chance to review a couple of the books/essays that you mentioned in your article. I also had a chance to read Mr. Kasriel’s post about GDP growth during that same time period, in which he noted that the trough for the first “recession” occured in March 1933, when Roosevelt entered office, and GDP grew for the next three years along with industrial productivity etc…In your mind what contributed to that growth since in previous years Hoover had implemented the tariffs, higher income taxes and the Fed had a loose monetary policy? How would Rothbard, since his book ends about that time and does not cover 1933-1941, Mises or Austrian theory in general, explain that time period of growth?

Thank you

fundamentalist February 26, 2009 at 1:38 pm

Rui: “How would Rothbard, since his book ends about that time and does not cover 1933-1941, Mises or Austrian theory in general, explain that time period of growth?”

I’m not sure how Rothbard might answer, but Austrian in general recognize that economic growth is natural to a relatively free market and it’s hard to keep down, though the state tries its best to kill it. A depression causes massive loss of wealth, but not all wealth. People naturally rebuild their wealth by saving more. My guess is that Americans saved a lot from 1929-1932 and those savings went into investments in business expansion.

Also, Hayek describes the recovery in terms of the Ricardo Effect in which consumer goods makers want to boost low profits by buying more labor-saving equipment. This shift from labor to capital-intensive production methods is described in every micro econ 101 test. The demand for labor-saving equipment, and to replace worn-out equipment, creates employment in the capital goods industries.

So increased savings by consumers and the Ricardo Effect naturally boost every modern economy in spite of the state’s efforts to keep the economy down. That said, employment is probably a better measure of how well the economy is doing than GDP, because state spending is included in GDP whereas much of the private sector isn’t. GDP grew dramatically during WWII as a result of state spending on the war, but citizens were growing poorer as all of that state spending got destroyed in the war instead of contributing to capital or improving living standards.

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