Murray Rothbard
America's Great Depression
Reviewed by Gary McGath
Copyright 2009 by Gary McGath

The religion of Franklin D. Roosevelt holds that laissez-faire capitalism caused the Great Depression, that Hoover's free-market policies made it deeper, and that Franklin D. Roosevelt got America out of the depression. For the faithful, no facts are necessary to prove this and no facts will convince them otherwise. But a lot of people merely have heard that it's true and only need to learn some accurate history. Rothbard's classic America's Great Depression is a good antidote for the statist myths of the Depression, and a warning about what is happening today.

Much of the technical discussion is beyond me. I don't know what all the financial instruments that Rothbard analyzes are. But the less technical aspects of the history show plainly that the government's economic policies weren't hands-off. The Federal Reserve system, which had been created in 1913, pursued a cheap-money policy in order to expand the economy. This policy encouraged unsound investments.

The resulting collapse in 1929 might have been followed by a relatively quick recovery, except that Hoover responded with an unprecedented degree of government intervention. He pressured businesses into keeping wages high, which meant many people had no wages at all. As things got worse, so did his interventions. Rothbard cites his 1932 program:

  1. Estabish a Reconstruction Finance Corporation...
  2. Broaden the eligibility requirement for discounting at the Fed
  3. Create a Home Loan Bank discount system...
  4. Expand government aid to Fedral Land Banks
  5. Set up a Public Works Administration...
  6. Legalize Hoover's order restricting immigration
  7. Do something to weaken "destructive competition" (i.e., competition) in natural resource use
  8. Grant direct loans of $300 million to States for relief
  9. Reform the bankruptcy laws (i.e., weaken protection for the creditor)

But I can already hear the promoters of the "laissez-faire Hoover" myth saying, "Yes? And besides that what did he do?" You'll have to read the book for the answers to that. In brief, Hoover promoted policies to encourage continued reckless extension credit and to prevent necessary economic adjustments from happening.

Today we see Barack Obama doing the same things. But Obama won't be the scapegoat when his policies have the same effect; Bush's administration has already been set up as the imaginary "laissez-faire" administration, in spite of its massive deficits, low interest rates to stimulate the economy, and expansion of government into every area of life. We're seeing the same Big Lie being set up all over again.

It's probably too late to stop it. But at least we can see clearly what drain we're being washed down, whatever consolation that may be.

This review last revised on March 1, 2009

America's Great Depression is available as a free online document from the Ludwig von Mises Institute.

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