Many volumes have been written
about the Great Depression of 1929-1941 and its impact on the lives of millions
of Americans. Historians, economists and politicians have all combed the
wreckage searching for the "black box" that will reveal the cause of the
calamity. Sadly, all too many of them decide to abandon their search, finding
it easier perhaps to circulate a host of false and harmful conclusions about
the events of seven decades ago. Consequently, many people today continue to
accept critiques of free-market capitalism that are unjustified and support
government policies that are economically destructive.
was the Great Depression? Over the four years from 1929 to 1933, production at
the nation's factories, mines and utilities fell by more than half. People's
real disposable incomes dropped 28 percent. Stock prices collapsed to one-tenth
of their pre-crash height. The number of unemployed Americans rose from 1.6
million in 1929 to 12.8 million in 1933. One of every four workers was out of a
job at the Depression's nadir, and ugly rumors of revolt simmered for the first
time since the Civil War.
"The terror of the Great Crash
has been the failure to explain it," writes economist Alan Reynolds. "People
were left with the feeling that massive economic contractions could occur at
any moment, without warning, without cause. That fear has been exploited ever
since as the major justification for virtually unlimited federal intervention
in economic affairs."
never die; they just keep showing up in economics and political science
textbooks. With only an occasional exception, it is there you will find what
may be the 20th century's greatest myth: Capitalism and the free-market economy were
responsible for the Great Depression, and only government intervention brought
about America's economic recovery.