Google+
Close
A Mind-Changing Page
The idea that the stock-market crash caused the Great Depression is difficult to reconcile with the data.


Text  


Thomas Sowell

If more government regulation of business is the magic answer that so many seem to think it is, the whole history of the 1930s should have been different. An economic study in 2004 concluded that New Deal policies prolonged the Great Depression. But the same story can be found on one page in Out of Work.

While the market produced a peak unemployment rate of 9 percent — briefly — after the stock-market crash of 1929, unemployment shot up after massive federal interventions in the economy. It rose above 20 percent in 1932 and stayed above 20 percent for 23 consecutive months, beginning in the Hoover administration and continuing during the Roosevelt administration.

Advertisement
As Casey Stengel used to say, “You could look it up.” It is all there on that one page.

Those who are convinced that the government has to “do something” when the economy has a problem almost never bother to find out what actually happens when the government intervenes.

The very fact that we still remember the stock market crash of 1929 is remarkable, since there was a similar stock-market crash in 1987 that most people have long since forgotten.

What was the difference between these two stock-market crashes? The 1929 stock-market crash was followed by the most catastrophic depression in American history, with as many as one-fourth of all American workers being unemployed. The 1987 stock-market crash was followed by two decades of economic growth with low unemployment.

But that was only one difference. The other big difference was that the Reagan administration did not intervene in the economy after the 1987 stock-market crash — despite many outcries in the media that the government should “do something.”

Thomas Sowell is a senior fellow at the Hoover Institution. © 2010 Creators Syndicate, Inc.



Text  


Sign up for free NRO e-mails today:

NRO Polls on LockerDome

Subscribe to National Review