Foundational Economic Myth of Our Era: 'Government Cured the
by Gary North: The
Slow Death of the New York Times
Thomas Sowell recently challenged the Great Myth of FDR and
the Great Depression.
downturn in all those years ever lasted as long as the Great Depression
of the 1930s, when both the Federal Reserve and the administrations
of Hoover and of FDR intervened.
that has come down to us says that the government had to intervene
when there was mass unemployment in the 1930s. But the hard data
show that there was no mass unemployment until after the federal
government intervened. Yet, once having intervened, it was politically
impossible to stop and let the economy recover on its own. That
was the fundamental problem then and now.
This myth was
challenged by Murray Rothbard in America's
Great Depression (1963). I read it a few months after it
was published. I was one of the few people who did. The book was
savagely attacked when it was reviewed at all. It undermined the
Democrats' myth of FDR as savior and the Republicans' myth of Hoover
as a victim of uncontrollable circumstances. FDR extended the worst
of Hoover's policies, and the depression dragged on for another
book was ignored by academia. Two decades later, Paul Johnson used
it in his great book, Modern Times (1983), to explain why the Great
Depression accelerated under Hoover's policies of legalized price
floors and tariffs (Smooth-Hawley).
doing what governments around the world were doing. Government policies
turned the recession into the Great Depression.
able to draw on books published during the Great Depression. One
was by Lionel Robbins, a disciple of Ludwig von Mises: The
Great Depression (1934). It was published by Macmillan in
Great Britain. He explained why government policies was prolonging
the recovery. Another book was Banking
and the Business Cycle (1937), which laid the blame on the
Federal Reserve's policies in the 1920s. It was also published by
Macmillan. Both are available as free downloads or for purchase.
But in 1936,
Macmillan published Keynes's General
Theory. That book won the ideological battle.
Yet the real
problem stretched backward to World War I and the abandonment of
the gold coin standard in Europe. This was explained after the War
by economist Benjamin Anderson,. He carried the story through World
War II. His articles were published through the era of the Great
Depression by the Chase Bank. His book, Economics
and the Public Welfare was published in 1949, the year of
his death. It was universally ignored. The Keynesian takeover of
academia was almost complete in 1949.
North [send him mail]
is the author of Mises
on Money. Visit http://www.garynorth.com.
He is also the author of a free 20-volume series, An
Economic Commentary on the Bible.
2011 Gary North
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