As documented in Rothbard’s classic book, America’s Great Depression, the similarities of the 1920s and 2000s did not end with the beginnings of each crisis in 1929 and 2008, respectively. It gets much scarier than that. Washington responded in very similar ways to both crises. As we know, Hoover/Roosevelt policies made the recession of 1929 into a depression and prolonged recovery for at least a decade. Only time will tell how bad Bush/Obama policies will make our current economic depression.
So, just what were the policies of the Hoover/Roosevelt administrations that exacerbated the U.S. economy into the 1930s and which resemble the policies of the Bush/Obama administrations today? For one, a blatant misinformation scheme was launched to make Americans believe that the excesses of laissez-faire capitalism were to blame for the economic downturns. In both cases, this was used to deflect any culpability of the U.S. government for the crisis. But, also and more importantly, it was used as the rationale for heavier government intervention in the economy. It is ridiculous that then and now the American public has fallen for this deception. We did not in the 1920s, and we did not earlier in this decade, have a laissez-faire economy in the United States. As Rothbard points out, just prior to the 1920s, America went through the so called Progressive Era. This era introduced enormous regulations on our economy. There was price fixing, a full blown agricultural policy and interstate commerce regulation through the Interstate Commerce Commission and other government agencies. Let’s not forget that the Federal Reserve Bank began operations in 1913 with the express mission of preventing economic downturns through currency regulation.
Of course, many regulations and regulatory agencies founded during the Great Depression are still with us today. Because we are no longer on the gold standard, the Federal Reserve has even more power today than in the 1920s to regulate our money supply. The bottom line is that laissez-faire means no government interference in the economy, but Washington has had its grubby big hands on our financial system for a long time. Therefore, Washington’s attempt to blame laissez-faire for economic troubles in this country, ever, is highly disingenuous.