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Great Myths of the Great Depression

Great Myths of the Great Depression

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Published by abhii
Great Myths of the Great Depression
Great Myths of the Great Depression

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Published by: abhii on May 07, 2009
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11/17/2012

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Mckic Ctr fr Public Plic
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Great Myths of the Great Depression 1
 
GreatMyths
of the
 GreatDepression
“HERBERT HOOVERbelieved government should playno role in theeconomy.”“GOVERNMENT PROGRAMShelped lower unemployment byputting many Americans to work.”“FRANKLIN ROOSEVELT’S‘New Deal’ saved America from thefailure of free-market capitalism.”
This edition is a joint project of the Mackinac Center for Public Policyand the Foundation for Economic Education
T a r yth ar dpl by t fct in t y by oms 
Lawrc W. Re 
 
 
Mckic Ctr fr Public Plic
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Great Myths of the Great Depression 2
 
Great Myths o the Great Depression by Lawrence W. Reed. Original edition printed in 1981.Tis edition was printed in 2008 — during the 20-year anniversary o the Mackinac Center or Public Policy —as a joint project o the Mackinac Center and the Foundation or Economic Education.
To JaMes M. Rodney grt fri f truth, chrctr  librt
 
Mckic Ctr fr Public Plic
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Great Myths of the Great Depression 1
 
 s
tudents today are oten given a skewed account o the Great Depression o 1929-1941 thatcondemns ree-market capitalism as the cause o, and promotes government intervention as thesolution to, the economic hardships o the era. In this essay based on a popular lecture, MackinacCenter or Public Policy President Lawrence W. Reed debunks the conventional view and traces thecentral role that poor government policy played in ostering this legendary catastrophe.
our workers was out o a job atthe Depression’s nadir, and ugly rumors o revolt simmered or therst time since the Civil War.“Te terror o the Great Crashhas been the ailure to explain it,writes economist Alan Reynolds.“People were let with theeeling that massive economiccontractions could occur atany moment, without warning,without cause. hat ear hasbeen exploited ever since as themajor justication or virtually unlimited ederal interventionin economic aairs.”
1
Old myths never die; they justkeep showing up in economicsand political science textbooks.With only an occasionalexception, it is there you will ndwhat may be the 20th century’sgreatest myth:
Capitalismand the free-market economywere responsible for the Great  Depression, and only government intervention brought about  America’s economic recovery.
A Modern FAiry TAle
According to this simplisticperspective, an important pillaro capitalism, the stock market,crashed and dragged Americainto depression. PresidentHerbert Hoover, an advocateo “hands-o,” or
laissez-faire
,economic policy, reused to usethe power o government andconditions worsened as a result.It was up to Hoover’s successor,Franklin Delano Roosevelt,to ride in on the white horseo government interventionand steer the nation towardrecovery. he apparent lessonto be drawn is that capitalismcannot be trusted; governmentneeds to take an active role inthe economy to save us rominevitable decline.But those who propagate this version o history might justas well top o their remarksby saying, “And Goldilocksound her way out o the orest,
THE GREAT DEPRESSION deastated eerpart of Aeria, een its saest tons.
inTroducTion
Many volumes have been writtenabout the Great Depression o 1929-1941 and its impact on thelives o millions o Americans.Historians, economists andpoliticians have all combed thewreckage searching or the “blackbox” that will reveal the cause o the calamity. Sadly, all too many o them decide to abandon theirsearch, nding it easier perhapsto circulate a host o alse andharmul conclusions about theevents o seven decades ago.Consequently, many peopletoday continue to accept critiqueso ree-market capitalism thatare unjustiied and supportgovernment policies that areeconomically destructive.How bad was the GreatDepression? Over the our yearsrom 1929 to 1933, production atthe nation’s actories, mines andutilities ell by more than hal.People’s real disposable incomesdropped 28 percent. Stock pricescollapsed to one-tenth o theirpre-crash height. he numbero unemployed Americans roserom 1.6 million in 1929 to 12.8million in 1933. One o every 
Great Myths 
of the
Great Depression

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