With a severe recession looming, there is occasional talk about the Great Depression of the 1930's. Gene Smiley has written a short book, Rethinking the Great Depression, that is a good introduction. It's not as good as Murray Rothbard's America's Great Depression, but it's a good start and is somewhat easier to follow for the neophyte to history and economics.
In the preface, Smiley correctly sums up what every American should be taught but unfortunately are not: "Government efforts to control and direct the gold standard for national purposes brought on the depression. Once it began, government actions, particularly in the United States, caused it to be much longer and much more severe. When the contraction finally ended, government interference in U.S. markets made the recovery unbearably slow and in 1937-1938 brought on a 'depression within a depression.' The 1930's economic crisis is tragic testimony to government interference in market economies."
Dead on point. Unfortunately, an overwhelming majority of history, government, and economics professors, most of whom have always been in academia and have never held a job in the private sector, blame the "free market" and teach students that the government saved the day. They then teach that government is something we need more of and that surrendering your property (hard-earned income) is something to be applauded.
Subscribe to:
Post Comments (Atom)
2 comments:
I am a fan of Mark Skousen who has said that Milton Friedman overthrew the Keynesian orthodoxy of what caused the Great Depression with a single, brief sentence.
"Many free-market economists had attempted to answer the first question, including Benjamin M. Anderson and Murray N. Rothbard,[2] but none had the impact equal to Milton Friedman’s empirical studies on money in the early 1960s. His was the first effective effort to destroy the argument that the Great Depression was the handiwork of an inherently unstable capitalistic system. Friedman (and his co-author, Anna J. Schwartz) demonstrated forcefully that it was not free enterprise, but rather government—specifically the Federal Reserve System—that caused the Great Depression. In a single sentence underlined by all who read it, Friedman and Schwartz indicted the Fed: From the cyclical peak in August 1929 to a cyclical trough in March 1933, the stock of money fell by over a third.[3] (This statement was all the more shocking because until Friedman’s work, the Fed didn’t publish money supply figures, such as M1 and M2!)"
source
Perhaps we should study the Long Depression instead of the Great Depression for insight.
It is not clear that completely free enterprise is free of cycles. It is more likely that it isn't.
Capitalism seems to follow a path of discovery, innovation, production, competition with free falling prices until a bottom is reached, where the unfit or under-capitalized are absorbed and consolidation increases prices in proportion to consolidation (Microsoft as an example).
At some point the cost of the product or service is perceived as prohibitive and great undoings disrupt both the economy and the sole source provider/consolidators.
Specifically, follow the paths of financial services, entertainment, communication services and information sequestering services. We are currently undergoing a great information and communication services consolidation.
Eventually, sector wealth and power become consolidated and disrupt the economy. It is at that point that the Fed and regulators attempt a repair to an unbalance system. (Based on the Friedman do-no-harm escape clause.) So far the Fed has been adverse to deep cycles. A wreaked economy is not that efficient, upsets politicians and is inconvenient to the citizens who prefer capitalism with a small "c".
We are in the middle of a Financial unwinding and facing the question of non-intervention, intervention supporting the status quo or restrictive intervention imposing regulations, as well as constraints to leverage, such as increasing margin reserves and questioning the overall value of opaque synthetics vs. shooting craps.
These choices may be perceived as anti-capitalism or pro-capitalism depending on the flavor of capitalism you want to practice.
Post a Comment