For Calvin Coolidge, the Great Crash of 1929 and the Great Depression were trials of American civilization. Throughout his career, Coolidge believed firmly in the rule of law as civilization's sine qua non, upheld the Constitution of the United States on that basis, and pursued procivilizational policies in economic and international matters. In short, Coolidge took his political ideas from his understanding of the unchanging principles of humane civilization. Yet for many of his contemporaries, the Depression seemed to demand a more flexible, pragmatic, and experimental approach to government and the interpretation of the Constitution.
Did Coolidge believe that his ideas needed to be modified to keep up with changing circumstances, or did he believe that the actual course of events vindicated his interpretation of civilization and of American civilization in particular? Did these events undermine or even disprove Coolidge's positions on the rule of law, the Constitution, or the wisdom of obeying economic and spiritual laws even when they appear inconvenient? This article explains Coolidge's worldview and takes up the question of the degree of his responsibility for the Great Crash of 1929 and for the Great Depression that later followed.
First, I look at the major interpretations of the Crash and consider what role Coolidge played in bringing it about. Then I turn to his role in causing the Depression. We will see that Coolidge biographers have routinely misinterpreted Coolidge's responsibility in causing the Crash and that he deserves little if any of the blame assigned to him for the Depression.
After establishing Coolidge's general innocence with respect to causing the Crash and Depression, this article examines his thoughts on remedying the economic situation. Coolidge proved an insightful if imperfect student of the primary causes of the Depression and of the secondary factors that exacerbated the situation from 1930 to 1932. This knowledge informed his proposals for addressing the problems of banking crises, unemployment, and poverty. Finally, Coolidge spoke to the meaning of the Depression for his interpretation of American civilization. He never abandoned his view that the United States was highly civilized and was therefore better positioned to weather calamities such as the Depression.
Interpretations of Coolidge Policies
The dominant historical narrative of the Great Depression in the twentieth century was established by the Progressive historians who celebrated President Franklin Roosevelt's New Deal. This narrative established the New Deal policies as the solution to problems caused by the old "laissez-faire" approach of the Republican administrations in the 1920s. These historians--including Eric F. Goldman (1952), Richard Hofstadter (1955), Arthur M. Schlesinger Jr. (1957), William E. Leuchtenberg (1958), and Donald McCoy (1967)--faulted Coolidge and Herbert Hoover for engaging in reckless deregulation, for encouraging excessive speculation, and for doing nothing to help relieve the misery of unemployment as the Depression settled upon the nation.
More recently, this narrative has been both affirmed and expanded. David M. Kennedy, for example, simply draws on Schlesingers analysis to build his case in the Pulitzer Prize-winning book Freedom from Fear (1999). A more thorough analysis of Coolidge's presidency, Robert Ferrell's book Presidency of Calvin Coolidge (1998), argues that Coolidge (a) should have seen the signs of trouble coming, especially the problems of overproduction and underconsumption (the idea that American factories were producing more than American consumers could purchase, leading to market disequilibrium, which was followed by a crash and readjustment period) and the dangerous growth of holding companies, and (b) should have done something to speak out against excessive speculation and reckless business practices. Most scholars follow Ferrell's view, and it remains the standard textbook interpretation of Coolidge and Republican policies of this era (as in Shi 2019).
A recent biography of Coolidge expands Ferrell's interpretation and finds Coolidge guilty of five economic crimes: (1) that Coolidge should have been more active in regulating the stock market, (2) that Coolidge should not have tolerated the loose lending practices of private American banks, (3) that Coolidge should have campaigned publicly against speculative loans (loans taken out to speculate in stocks), (4) that Coolidge's fiscal policy of tax cuts was misguided because it encouraged larger wealth inequalities in America and drove additional stock speculation, and (5) that Coolidge should have pursued an international trade policy more favorable to Europe (Greenberg 2006, 146-50). Another biography reiterates these charges and adds one more. Niall Palmer repeats the overproduction/underconsumption thesis and suggests that Coolidge should have been active in rectifying the situation. In a substantive contribution, he notes that Coolidge was in fact aware of the dangerous stock speculation in 1928 and 1929 but concludes that "even had he been philosophically inclined to intervene, he lacked the confidence to challenge the optimistic forecasts of leading economists, such as Professor Irving Fisher of Yale, of Wall Street bankers, and of the administration's own economic policy advisors." This was Coolidge's own fault, Palmer explains, because he had appointed all of these promarket officials to their government positions. When he found himself disagreeing with their ideas, he also discovered he was unable to contend with them (2013, 173).
Other scholars have established a counternarrative, however. These writers, especially Thomas B. Silver (1982), Robert Sobel (1998), and Gene Smiley (2002), have pushed against most of the claims made by Schlesinger and the rest. Silver wrote most directly to the question of Coolidge and the "underconsumption" problem as well as to the supposed connection between the tax cuts of the 1920s and the Depression. He concluded (a) that underconsumption was not a problem in the 1920s and (b) that the policies and wealth disparities of the 1920s had no causal relationship to the Depression. Robert Sobel, a business historian and leading student of the stock market in the 1920s, has defended Coolidge against claims that his policies led directly to the Crash of 1929 and the Depression. Sobel argues that Coolidge was well aware of the dangers in the market yet was prohibited by law from regulating the stock trading. Finally, Gene Smiley also rejects the underconsumption thesis and the idea that Coolidge's policies caused the Depression. These scholars, collectively with the major studies of the Great Depression written over the past fifty years (for example, Friedman and Schwartz 1963, Eichengreen 1992, and Hall and Ferguson 1998), argue persuasively that Coolidge and the Republican policies of 1923-29 did not cause the Depression. However, the evident confusion on these matters suggests that we ought to take a closer look at the evidence.
Causes of the Stock Market Crash of 1929 and of the Great Depression
To evaluate the claims of Coolidge's guilt or innocence relative to the economic calamities of the late 1920s and 1930s, we must first understand what happened and why. This section presents and analyzes the scholarly interpretations of the Great Crash of 1929. One of the most important questions concerns the relationship between the Crash and the Depression--Indeed, was there a causal link? The enormous number of factors that must be taken into account complicates the narrative, but it is only after we have some grasp of what happened and why that we can begin to estimate the relative impact of Coolidge's ideas on either event.
At the risk of oversimplification, most interpretations of the causes of the Crash of 1929 fall within three main camps. First, there are those who blame some form of "unrestrained capitalism"--a lack of government regulation led to the Crash. Second, there are those who find most fault with government institutions and agencies for creating the conditions for the Crash and then exacerbating it. Third, many scholars hold to the mixed view that seeks to attribute fault for the Crash on various public- and private-sector failings.
The first interpretation finds fault with the laissez-faire, unrestrained capitalism of the 1920s and argues that more government regulation of the market was called for to prevent such problems. Among the earliest to articulate this view were the Marxist and socialist-influenced writers of that era (Barber 1985, 55-58). The intellectual heirs of Karl Marx in the late twentieth and early twenty-first centuries have repeated the claims that government regulation could have prevented the Crash. David Greenberg (2011), for example, maintains that greater federal government oversight of the stock market, especially by the president, could have averted the disaster. A more nuanced version of this view, articulated by Morton Keller (1990), finds fault with the decentralized nature of regulation by the states in a federal republic. According to Keller, the duty to regulate loans and stock speculation belonged to the state governments, which failed due to their lack of knowledge and expertise in economic regulation. In this telling, the Crash was the consequence of clinging to an archaic federal structure: the national government should have assumed more powers of regulatory oversight. Others have resurrected the old socialist objections to American capitalism in the 1920s and have blamed laissez-faire and wealth disparities for the Crash. Norton Garfinkle asserts that the prosperity of the 1920s was not genuine. It was built on consumer credit and increasing debt. Meanwhile, the Republican administrations of the 1920s "saw their mission as one of enabling business to do its job. For government, this meant mainly getting out of...