The Politically Incorrect Guide to The Great Depression and The New Deal by Robert P. Murphy, Ph.D.
April 15, 2010 by Bob Livingston
Chances are what you learned in school about the causes of the Great Depression and the effects of the New Deal and Word War II on the American economy are all wrong. If you were taught to believe the free market caused the Great Depression and the New Deal and World War II got us out of it, reading The Politically Incorrect Guide to The Great Depression and The New Deal will set you straight.
Murphy earned his Ph.D. in economics at New York University and served as a professor at Hillsdale College. He is now an adjunct scholar with the Ludwig von Mises Institute, a senior fellow in business and economic studies at the Pacific Research Institute and economist with both the Mackinac Center for Public Policy and Institute for Energy Research. In The Politically Incorrect Guide, Murphy provides irrefutable evidence that the not only did government interference with the market cause the Great Depression, but the big government policies of Herbert Hoover and Franklin Delano Roosevelt made it last longer and become more severe than necessary.
Murphy deals with the three main explanations of the Great Depression: 1) The wildcat free market caused the Great Depression and the New Deal pulled us out of it; 2) A Market economy goes through natural ups and downs, but the Federal Reserve let the money supply collapse in the early 1930s, turning a normal downturn in the Great Depression; and 3) The Federal Reserve fueled the stock market boom of the 1920 with its easy money policies. After the crash, the Fed did the wrong thing by cutting rates and propping up unsound institutions. Hoover’s and FDR’s interventions in the economy only made things worse.
He dissects each argument and provides evidence that the third explanation is the most plausible.
Austrian school economists believe FDR’s New Deal was terrible for small business in America, with its wage and price control policies, restrictions and higher taxes hindering innovation and expansion. It also resulted in long-term high unemployment. And Murphy makes a strong case that this is so. He also shows how FDR’s banking holiday and the ensuing “safeguards” placed on the banking industry created many more problems than they solved.
Finally, Murphy makes the case that today’s recession is much like the Great Depression in cause and effect, and that because President Obama’s economic policies mirror FDR’s in so many ways, the result will be a recession that is deeper and lasts longer than is necessary.
The Politically Incorrect Guide to The Great Depression and The New Deal is an easy and quick read that is written in such a way as to give a good history lesson—without being too technical—for those seeking a better understanding of that dark period in America’s history. It also provides the reader with a better understanding of how our country got into its current financial mess.