11 July 2011

Rethinking the Great Depression and the New Deal

I've become increasingly interested in the history of the 1930s, and I just finished Eric Rauchway's The Great Depression and the New Deal: A Very Short Introduction.  It has become increasingly clear to me that there are major holes in the dominant historical narrative about the Great Depression, the New Deal, and the Roosevelt administration.  The standard, high-school-textbook version of the story goes something like this:

"Greedy stock market speculators caused the stock market crash of 1929, which triggered the worst depression in American history; President Herbert Hoover believed in an outdated laissez-faire economic philosophy, so he did nothing; thankfully, President Roosevelt was elected, and his New Deal policies saved capitalism and helped the common man survive the Great Depression; and finally, World War II was an enormous boon to the U.S. economy, and it finally solved the problem once and for all."

Those of us with a preference for economic liberty and peace should be greatly disturbed by this story.  If true, it suggests that the best ways to fix a broken economy are (1) total war, including conscription; and (2) dramatic increases in government taxation, spending, regulation, and redistribution.

Thankfully, there are convincing reasons to believe that the standard narrative is wrong.  There is a lot more I need to read on the topic, but here are some resources and ideas that I look forward to exploring further:

-Murray N. Rothbard, America's Great Depression (free PDF and ebook)
-George Selgin, "The Economics of America's Great Depression" (course syllabus in PDF format with many links to readings).  My interest in this topic is largely attributable to a fantastic lecture I heard Selgin deliver in June.
-David Gordon, "What you must read about the Great Depression," Mises Daily, 2/22/09
-George Selgin, review of Hall and Ferguson's The Great Depression.

Stephen Davies, "Top 3 Myths About the Great Depression and the New Deal," LearnLiberty.org:

In my next post, I will share excerpts from Rauchway's The Great Depression and the New Deal, which - unlike the libertarian works linked to above - is firmly on the side of the standard narrative.


George Selgin said...

Hello, Ryan. You are quite right to question Rauchway's account, which though good in parts is quite (conventionally) misleading in others.

My own favorite general and brief treatment of the economics of the great depression is Jim Powell's FDR's Folly, which summarizes much of the relevant economic research revising standard accounts.

Ryan McCarl said...

Hi George,

It's great to hear from you - thanks for your comment and for taking the time to read my post.

I found that Rauchway often seems to present evidence that supports critics of the New Deal, but then conclude with conventional platitudes that are not supported by the evidence he has just presented. In one spot, if I remember correctly, he talks about the negative effects and general unpopularity of the NRA, but concludes by stating that FDR's actions were necessary to save the capitalist system.

I will check out the Powell book - thank you for the recommendation and for your great work on this issue.