America’s Great Depression: Fifty and Relevant

AGD at 50 and the Quote for the Week

The first edition of Rothbard’s magnificent America’s Great Depression was published 50 years ago in 1963. Historian Paul Johnson in the introduction to the 5th edition (2000, LudwigVon Mises Institute), called the book Rothbard’s  “intellectual tour de force” and argued that “It has stood the test of time.” This was true in 1999 when Johnson penned the introduction. It is even more true now. The lessons Rothbard provided relative to 1929-1933 were not learned. The money and credit inflation of the “Great Moderation” culminated in the bust of 2007 just as the inflationary boom of the 1920s led to the bust of 1929. Interventionist policies today continue to strangle the economy just as the policies of Hoover and Roosevelt turned a ‘garden variety recession’ into the Great Depression.

The lesson (pp. 336-337) that was available to Fed chairman, both Greenspan and Bernanke, the economic professions, and policy makers:

Economic theory demonstrates that only governmental inflation can generate a boom-and-bust cycle, and that the depression will be prolonged and aggravated by inflationist  and other interventionary measures. In contrast to the myth of laissez-faire, we have shown in this book how government intervention generated the unsound boom of the 1920s, and how Hoover’s new departure aggravated the Great Depression by massive measures of interference. The guilt for the Great Depression must, at long last, be lifted from the shoulders of the free-market economy, and placed where it properly belongs: at the doors of politicians, bureaucrats, and the mass of “enlightened” economists. And in any other depression, past or future, the story will be the same

The story alas was and is the same again. It need not have been.



  1. John,

    The balance of your Rothbard quote is spot on but Rothbard makes a huge leap of faith when he states, “Economic theory demonstrates that only governmental inflation can generate a boom-and-bust cycle, and that the depression will be prolonged and aggravated by inflationist and other interventionary measures.” Both Rothbard and Friedman make much of the monetary policy and the prosperity of the 1920s causing the Great Depression, but in truth Andrew Mellon was in fact sending the government budget surpluses back to the productive economy. The growth Mellon’s policies allowed in the 1920s was actually pretty close to the normal growth of the 19th Century.

    The Great Depression came not from monetary errors but from Hoover’s intervention. Hoover marginalized Treasury Secretary Mellon not allowing him to continue his policies. He disagreed so much with Hoover that he refused to ever present Hoover’s budgets to congress himself. Hoover spent the budget surpluses and instituted massive interventions in the economy. That is what created the Depression. Then FDR followed Hoover by expanding his policies in an explosion of Progressive foolishness adding “Great” to the Depression.

    Once again Rothbard is a great historian but his economic analysis is suspect, even from an Austrian perspective.

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