The Economics of the Great Depression.

• Author: Wallis, John
• Position: Review

Edited by Mark Wheeler.

Kalamazoo, MI: W. E. Upjohn Institute, 1998. Pp. 230. $15.00 (paper).

Five events in American history were so large and encompassing that they affected the lives of every person in the country. The Revolution, the Civil War, World Wars I and II, and the Great Depression. The Great Depression is the only economic event that comes close to making such a list. More than any other economic event in our past, the Great Depression is the property of everybody, not just economists. This collection of essays spans much of the range of economic history. Collectively the papers do an admirable job of summing up the economics of the Great Depression, but inevitably they fall short of doing justice to the scope and magnitude of the event itself. That is not a shortcoming, however.

The Great Depression is remarkable as an economic collapse and for the political reaction that it produced. The New Deal was the response of the American political system to the vicissitudes of 25% unemployment and an apparent collapse of the economic system. Out of the New Deal came Social Security, the minimum wage, maximum hours, the modern welfare system, the Securities and Exchange Commission, the Federal Deposit Insurance Corporation, reform of the banking system, the National Labor Relations Board, farm price supports, and rural electrification, as well as the modern Democratic Party. One can never separate the New Deal from the economics of the Great Depression: One of the enduring questions about the depression is why it lasted so long, and one of the potential answers must be the New Deal. In one way or another, all of the papers in this volume show the integral wedding of economics and politics that the 1930s produced, even though the intent is to focus on the economics of the Great Depression.

Three of the six papers are decidedly macroeconomic. James Fackler attempts to disentangle the contributions of different macroeconomic disturbances to the depth of the depression between 1929 and 1933. David Wheelock examines how experience with the gold standard led to the willingness of the Federal Reserve Board and the government to adopt the Bretton Woods system in the 1940s and then abandon the Bretton Woods system in the 1970s, and the inflationary bias produced by postdepression monetary policy. Steven Cecchetti talks about the larger macroeconomic lessons that we have learned as a result of the depression, how they affect current policy, and...