The View From 1776

The Depression: What Went Wrong?

A review of “Rethinking the Great Depression,” by Gene Smiley.

Richard Vedder’s review of Mr. Smiley’s book provides an excellent summary of competing economic theories about the causes of the 1930s Depression and why it was so agonizingly prolonged.

He concludes:

“Europe by and large got out of the Depression faster than the U.S., whereas double-digit unemployment persisted in the United States into the 1940s. The reason is simple: New Deal economic policy was counterproductive. Roosevelt’s NRA and Wagner Act institutionalized and extended the high-wage policy so disastrously introduced by Hoover. The intense anti-business attitudes of the president and his associates, so vividly described by Smiley, added to the low level of business confidence and the sluggishness of investment in the later 1930s.”

For more details regarding the feckless policies of the New Deal, see The Economics of Liberal Values - Part Two and
The Economics of Liberal Values - Part Three: Consumption vs Savings.

Regarding the Wagner Act, see Labor Unions: Socialism’s Shock Troops.

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