Great Myths of the Great Depression

by Lawrence W. Reed

Students today are often given a skewed account of the Great Depression of 1921-1941 that condemns free-market capitalism as the cause of, and promotes government intervention as the solution to, the economic hardships of the era. In this essay based on a popular lecture, Foundation for Economic Education President Lawrence W. Reed debunks this conventional view and traces the central role that poor government policy played in fostering this legendary catastrophe.

Lawrence W. ("Larry") Reed became president of the Foundation for Economic Education (FEE) in 2008. Prior to becoming FEE's president, he served for twenty years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its Department of Economics from 1982 to 1984. A champion for liberty, Reed has authored over 1,000 newspaper columns and articles, dozens of articles in magazines and journals in the United States and abroad.

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Genres: Economics, History, Politics, Nonfiction, American History

37 pages, Paperback

First published January 1, 2009

About the author

Lawrence W. Reed is the president of the Foundation for Economic Education (FEE) and the author or editor of several books, including Excuse Me, Professor: Challenging the Myths of Progressivism. Before joining FEE, he served as president of the Mackinac Center for Public Policy in Midland, Michigan, and chaired Northwood University’s department of economics. Reed has written some 1,500 articles for newspapers and magazines worldwide. He is a frequent guest on radio and television.

Reviews

[Paul (Life In The Slow Lane) · Rating 5 out of 5]

Did I myth something?

I knew Hoover was blamed for triggering the Great Depression (as was the free market economy). I didn't know that his successor, FDR, was responsible for making it last so long. It seems WW2 saved the US economy and FDR took the credit (or had credit attributed to him). Maybe FDR wasn't as great as I thought.

A worthwhile read if you have any interest in economics.

[Sean Rosenthal · Rating 5 out of 5]

Interesting Quote

"Of two men walking down the street at the start of 1933-one with a gold coin in his pocket and the other with a bottle of whiskey in his coat-the man with the coin would be an upstanding citizen and the man with the whiskey would be the outlaw. A year later, precisely the reverse was true."

-Lawrence W. Reed, Great Myths of the Great Depression

[Jerry · Rating 4 out of 5]

This is a long pamphlet or a very short book. It’s a product of the Mackinac Center and the Foundation for Economic Freedom, probably because the author used to be president of the former, and is currently president (at least at the time of publication of this pamphlet) of the latter. It’s a summary of the then-nascent and now growing thesis that President Hoover’s and President Roosevelt’s government interventions not only prolonged the Great Depression but made it far worse.

Hoover’s infamous Smoot-Hawley Tariff was his administration’s “crowning folly” but he also used the power of the White House outside of the legislative process to implement wage controls, and provided billions in subsidies to farmers and to businesses. Somewhat insane during a period when his administration claimed that people weren’t buying enough, he even taxed writing checks. Hoover’s follies culminated in the Revenue Act of 1932, which raised taxes on everybody, through income tax increases (the top rate went from 24% to 63%), corporate taxes, estate taxes, gift taxes, gasoline taxes, auto taxes, and even an increase in postal rates.

Roosevelt excoriated Hoover for these ridiculously bad policies.

During the campaign, Roosevelt blasted Hoover for spending and taxing too much, boosting the national debt, choking off trade, and putting millions on the dole. He accused the president of “reckless and extravagant” spending, of thinking “that we ought to center control of everything in Washington as rapidly as possible,” and of presiding over “the greatest spending administration in peacetime in all of history.” Roosevelt’s running mate, John Nance Garner, charged that Hoover was “leading the country down the path of socialism.”

Roosevelt even called for a 25% reduction in government spending, a balanced federal budget, a return to the gold standard, and an end to the various subsidies, including farm subsidies.

Trying the same failed policies but harder even after railing against them is, unfortunately, a common political tactic and certainly appears to have been Roosevelt’s. Everything Hoover did to worsen the depression, Roosevelt did on a grander scale.

In the world of economics and free exchange, the rule is that you get what you pay for. The 1932 election is perhaps the best example of the rule that prevails all too often in the political world: You get what you voted against.

Contrary to his campaign promises, Roosevelt dismantled the gold standard, vastly increased spending, and cemented Hoover’s wage controls, freezing those most hurt by the depression completely out of work. To farm subsidies he also added the destruction of much-needed crops and herds. And organized industries into “government-mandated cartels” under the National Recovery Administration.

Through the whole of the NRA period industrial production did not rise as high as it had been in July 1933, before NRA came in.

And of course he also raised rather than lowered taxes, with some brackets going as high as 90%, and suggested that they ought to go to a hundred.

The candidate who had railed against reliance on “master minds” in government became a president who created “an astonishing rabble of impudent nobodies” (in H.L. Mencken’s words) to run a plethora of alphabet agencies to run every part of American life.

[Wilfredo R. Dotti · Rating 5 out of 5]

This is definitely a must-read, this little book shows the genesis of the Great Depression, emphasizing as central planners fail at monetary policy. It uncovers countless frauds and lies so we can realize how the historical manipulation was made. Very informative.

Final memorable quote:

“Government is the only institution that can take a valuable commodity like paper and make it worthless by applying ink.” - Ludwig von Mises.

[Shane Hawk · Rating 5 out of 5]

An aphoristic essay which repudiates the tiresome myths of the American economy of the 1930s. Serious historians and scholars hold a consensus with the way the events are portrayed here. Reed quotes a number of prominent economists, historians, and journalists of the past and present including: Milton Friedman, Murray Rothbard, Ludwig von Mises, Robert Higgs, H. L. Mencken, John T. Flynn, Thomas DiLorenzo, Jim Powell, et al. While it obviously cannot expound on the entirety of the Great Depression in its laconic presentation, this essay offers plenty of main concepts and factoids to explore further in other works. Reading this will give you a great overview of what went wrong in the early 20th century, how we continue to make similar mistakes, and how we could possibly avoid them.

[Trudy Pomerantz · Rating 5 out of 5]

A must-read for all to hear an alternate view on what happened during the Great Depression and what lessons there may be in the governmental and societal response then for us today. We find ourselves in a similar situation and the majority of voters appear to believe that we, or our government, can spend our way out of it. As Mr Reed quotes at the end of this short piece 'Everyone has heard the sage observation of philosopher George Santayana:"Those who cannot remember the past are condemned to repeat it." It's a warning we should not fail to heed.' All current indications are that enough are failing to heed this warning.

[Kyle · Rating 4 out of 5]

Outstanding book exposing the root causes of the Great Depression and uncovering the wormy frauds and deceptions beneath the stones of lies laid before us in secondary education. The lionization of FDR that has always been presented to us is properly questioned in this short work. Reed effectively makes his case with historical examples and anecdotes, illuminating very effectively the politicians and the legislative bungling that only sped up the long monetary death march. My only complaint is that it was only about 40 pages long. Certainly a wonderful overview and worth the read for anyone interested in the subject.

[Marek Dohojda · Rating 5 out of 5]

Must read, short but to the point

Common knowledge is often wrong, and those who control the mic often form it. It is up to each and every one of us to learn, not what common knowledge tells us but what actually happened. Napoleon wasn’t short, carrots don’t give supper vision, and FDR didn’t help America to get out of the depression.

[Rex Jensen · Rating 5 out of 5]

Outstanding overview of the Great Depression, how Hoover made bad decisions, and how FDR made it even worse. Exposes the abusive and illegal actions taken by FDR. Explains why the depression should have lasted only 2 years, but FDR made it last almost 12 years.

[R · Rating 5 out of 5]

Excellent. Could have easily read another 200 pages.

[Patrick Peterson · Rating 5 out of 5]

Excellent short book on the Great Depression. Perfect starting point for anyone interested in this devastating period in American history.

[Geir · Rating 5 out of 5]

A very informative book and a short but condensed must-read for anyone interested in (economic) history.

[Laura Robbins · Rating 5 out of 5]

Great book

Worth the read. Like reading about today which is upsetting and scary.
A real eye opener to the delusional people.

[Tom McCall · Rating 5 out of 5]

For a true evidential description of what policies caused and extended the Great depression.

[Eduardo Garcia-Gaspar · Rating 3 out of 5]

El brevísimo libro revisa y explora a la Gran Depresión, poniendo especial cuidado en sus causas, las que prolongaron la crisis durante poco más de una década. Este resumen provee, además de un esquema comprensible, referencias para profundizar sobre el tema.
Quien quiera no quedarse en la superficialidad usual que lleva a opiniones de escaso mérito, tiene aquí un material de gran valor que reta al pensamiento estándar. Una lectura muy recomendable de inicio sobre el tema.

[Keith · Rating 3 out of 5]

The book is a good, short summary of other good works written on the folly of the Roosevelt administration.

[Jesus Bohorquez]

A great book which demonstrate how is the State and the big government alone the risponsible for the Great Depression and every exisiting crisis.

[André · Rating 4 out of 5]

"Great Myths of the Great Depression" by Lawrence W. Reed is a compelling exploration that dispels common misconceptions surrounding one of the most tumultuous periods in American history. Reed adeptly navigates through the intricate web of myths that have woven themselves into the fabric of popular understanding of the Great Depression.

The author challenges prevailing narratives, shedding light on the complex economic and social factors that contributed to the crisis. Reed's meticulous research and accessible writing style make this book an engaging read for both history enthusiasts and those seeking a deeper understanding of economic events.

By debunking misconceptions such as the belief that free-market capitalism was solely responsible for the Depression, Reed encourages readers to reevaluate historical events through a more nuanced lens. He skillfully dismantles myths, offering a well-balanced perspective on the multifaceted causes of the economic downturn.

"Great Myths of the Great Depression" is an enlightening and alternative examination of a pivotal period in American history, challenging readers to question conventional wisdom and encouraging a more comprehensive understanding of the factors that shaped the era. Reed's work stands as a valuable contribution to the discourse surrounding the Great Depression, urging us to rethink our assumptions about its causes and consequences.

[Jeff Rudisel · Rating 5 out of 5]

TOP-NOTCH ECONOMIC UNDERSTANDING
"The Great Depression finally ended, but it should linger in our minds today as one of the most colossal and tragic failures of government and public policy in American history. The genesis of the Great Depression lay in the irresponsible monetary and fiscal policies of the U.S. government in the late 1920s and early 1930s. These policies included a litany of political missteps: central bank mismanagement, trade-crushing tariffs, incentive-sapping taxes, mind-numbing controls on production and competition, senseless destruction of crops and cattle, and coercive labor laws, to recount just a few. It was not the free-market that produced 12 years of agony; rather, it was political bungling on a grand scale."

[Stephen Harrison · Rating 3 out of 5]

This is more of an essay than a book (36 pages) and it does not hide its point of view. It is decidedly anti-New Deal and anti-Roosevelt. It blames the length of the Great Depression first on the Fed for tightening the money supply and then on FDR's interventionist policies. It isn't particularly convincing, partly because it gets a little ranty and occasionally insulting, but it makes some interesting points anyway. It is short and worth the read, but don't expect a balanced analysis.

[Ryan · Rating 1 out of 5]

I got this as a free resource for classroom use. I will not be using it. It is horribly biased and uses terrible analysis. The stats are skewed and disgustingly misrepresented. Don't waste your time, I will not be using it and I do not recommend anyone else does either.

[Ryan Watkins · Rating 4 out of 5]

Good concise introduction to the causes of the great depression.

[Gloria Fransisca Katharina · Rating 4 out of 5]

This book contain a history of Great Depression that we known as Malaise. Lawrence's argument was good enough even he didn't make it clear enough especially about US government policy.

[Trevor Parker · Rating 3 out of 5]

Interesting. I agree with his points, but feel his arguments are not well presented or backed up enough. I think this book should be rewritten with 100 pages or more instead of 20, taking the time to really explain the ideas and the reasons Reed is stating.

[Conor Fogarty · Rating 4 out of 5]

Yeah. Dis be good

[Greg Foley · Rating 3 out of 5]

Valuable information, but not well presented.

[Brian Arkton · Rating 1 out of 5]

Revisionist nonsense by a typical right-wing libertarian propagandist waging a self-declared crusade against "progressivism" and historical facts under the guise of some kind of objective scholarly view, albeit peppered with pseduoscientific wackery that only sounds like it makes sense than it makes any actual sense.

If you want to actually learn something from this, take the regulations, laws, and actions this book describes and look them up yourself from a primary source. Then you'll find the notions put forth here start to unravel without the libertarian filter history was squeezed through.