Business Cycles in the Progressive Era and New Deal
The economy of the US has always had business cycles of recession and recovery and they have always been tragedies in terms of human suffering and deprivation. Few of those economic cycles have warranted the designation of catastrophic. The Great Depression does warrant that designation. In the economy the recession began in August 1929 and lasted 43 months before hitting bottom in March 1933. By that time real gross national product (GNP) had fallen by 30 per cent and the unemployment rate reached 25 per cent. Real GNP did not reach its pre-depression level until 1937. In this chapter we are concerned with the early phase of the depression, the economic decline of 1929 to 1933. Our focus is on what our representative groups of business leaders, politicians, pundits and economists had to say in these early years of crisis about what caused the depression and what should be done to turn the economy around. We must point out, however, that even with the advantage of hindsight, economic historians still debate what caused the Great Depression and perhaps the best explanation is that it was a perfect storm of many events. Among the explanations that economic historians have given for the Great Depression, the following have been widely scrutinized: a decline in business investment, turmoil in financial markets, poor policy by the Federal Reserve in contracting the money supply, the passage of the Smoot-Hawley Tariff, stickiness of wages, issues related to the gold standard, problems in banking that caused several waves of runs on banks,
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