Are We Really Facing Another "Great Depression"?

Steven Laib stevenlaib at SBCGLOBAL.NET
Mon Dec 29 18:27:03 MST 2008

See Also, America's Great Depression by Murray Rothbard for additional 
backing of Sowell's position.

Steve Laib

John A. Quayle wrote:
> Emacs!
> *Another Great Depression?
> *By Thomas Sowell
> December 23, 2008
> With both Barack Obama's supporters and the media looking forward to 
> the new administration's policies being similar to President Franklin 
> D. Roosevelt's policies during the 1930s depression, it may be useful 
> to look at just what those policies were and-- more important-- what 
> their consequences were.
> The prevailing view in many quarters is that the stock market crash of 
> 1929 was a failure of the free market that led to massive unemployment 
> in the 1930s-- and that it was intervention of Roosevelt's New Deal 
> policies that rescued the economy.
> It is such a good story that it seems a pity to spoil it with facts. 
> Yet there is something to be said for not repeating the catastrophes 
> of the past.
> Let's start at square one, with the stock market crash in October 
> 1929. Was this what led to massive unemployment?
> Official government statistics suggest otherwise. So do new statistics 
> on unemployment by two current scholars, Richard Vedder and Lowell 
> Gallaway, in their book "Out of Work."
> The Vedder and Gallaway statistics allow us to follow unemployment 
> month by month. They put the unemployment rate at 5 percent in 
> November 1929, a month after the stock market crash. It hit 9 percent 
> in December-- but then began a generally downward trend, subsiding to 
> 6.3 percent in June 1930.
> That was when the Smoot-Hawley tariffs were passed, against the advice 
> of economists across the country, who warned of dire consequences.
> Five months after the Smoot-Hawley tariffs, the unemployment rate hit 
> double digits for the first time in the 1930s.
> This was more than a year after the stock market crash. Moreover, the 
> unemployment rate rose to even higher levels under both Presidents 
> Herbert Hoover and Franklin D. Roosevelt, both of whom intervened in 
> the economy on an unprecedented scale.
> Before the Great Depression, it was not considered to be the business 
> of the federal government to try to get the economy out of a 
> depression. But the Smoot-Hawley tariff-- designed to save American 
> jobs by restricting imports-- was one of Hoover's interventions, 
> followed by even bigger interventions by FDR.
> The rise in unemployment after the stock market crash of 1929 was a 
> blip on the screen compared to the soaring unemployment rates reached 
> later, after a series of government interventions.
> For nearly three consecutive years, beginning in February 1932, the 
> unemployment rate never fell below 20 percent for any month before 
> January 1935, when it fell to 19.3 percent, according to the Vedder 
> and Gallaway statistics.
> In other words, the evidence suggests that it was not the "problem" of 
> the financial crisis in 1929 that caused massive unemployment but 
> politicians' attempted "solutions." Is that the history that we seem 
> to be ready to repeat?
> The stock market crash, which has been blamed for the widespread 
> suffering during the Great Depression of the 1930s, created no 
> unemployment rate that was even half of what was created in the wake 
> of the government interventions of Hoover and FDR.
> Politically, however, Franklin D. Roosevelt could not have been more 
> successful. After all, he was the only President of the United States 
> elected four times in a row. He was a master of political rhetoric.
> If Barack Obama wants political success, following in the footsteps of 
> FDR looks like the way to go. But people who are concerned about the 
> economy need to take a closer look at history. We deserve something 
> better than repeating the 1930s disasters.
> There is yet another factor that provides a parallel to what happened 
> during the Great Depression. No matter how much worse things got after 
> government intervention under Roosevelt's New Deal policies, the party 
> line was that he had to "do something" to get us out of the disaster 
> created by the failure of the unregulated market and Hoover's "do 
> nothing" policies.
> Today, increasing numbers of scholars recognize that FDR's own 
> policies were a further extension of interventions begun under Hoover. 
> Moreover, the temporary rise in unemployment after the stock market 
> crash was nowhere near the massive and long-lasting unemployment after 
> government interventions.
> Barack Obama already has his Herbert Hoover to blame for any and all 
> disasters that his policies create: George W. Bush.
> ---
> */Thomas Sowell is a senior fellow at the Hoover Institution, Stanford 
> University, Stanford, CA 94305. His Web site is 
> <>.
> --------------------
> Note -- The opinions expressed in this column are those of the author 
> and do not necessarily reflect the opinions, views, and/or philosophy 
> of GOPUSA.
> /*

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