The Great Depression

 

The Great Depression was not caused by a failure of the free market. Also, the Great Depression was not resolved by government intervention. Government intervention only caused the Depression to linger longer than was necessary. The free market did not cause the Depression. The myth that free markets caused economic failure and government intervention was the cure is completely false. Unfortunately many people believe that the cure of the Depression was World War II and government intervention. These myths are false. If the free market went unhindered, the depression would not have been so devastating.     

          There are many reasons for the Great Depression. During the 20’s the nation was experiencing exponential growth in the economy and GDP. This enormous growth caused wide-spread speculation which helped cause the crash of stocks. Another great cause of the Depression was the emergence of the Federal Reserve (FED) which controls the flow of currency in the US. The FED created increased interest rates which slowed the market resulting in collapse. Banks fell at the beginning of the Great Depression because of heavy regulation on the state level. This heavy regulation and strict laws prevented financial securities in the banking systems. This created the bank crash which is a major part of the Great Depression. Speculation, government control such as the FED, and the natural ebb and flow of the market caused the initial crash of the Market.

          The United States stayed in a state of economic depression because of government intervention. If the president and congress had a laissez-faire role in the economy, the Depression would not have lasted nearly as long as it did. The government took many steps to try to fix the crashed economy. Governmental leaders had strong beliefs of John Maynard Keynes which says that government should help control and guide the economy. These beliefs are wrong and hurt the economy more than provide aid. We see examples of this by firstly, the Smoot Hawley Tariff which was meant to protect American businesses from foreign trading by raising tariffs on goods. This became a great hindrance to not only America, but the whole world. Secondly, Government tried to stimulate the economy by spending large amounts of money on useless programs. An example of this is the New Deal which was instituted by Franklin D. Roosevelt. The New Deal had many new programs and laws which were passed by congress and the President. Some important aspects of the New Deal are;  Works Progress Administration (WPA) which was a giant relief program which employed millions of unskilled workers to do public projects. This program wasted millions of governmental spending which could have been put to much better and necessary use. Also, the Wagner Act which limited employers and basically took away competition and much freedom necessary in the market. Thirdly, the National Industrial Recovery Act (NIRA) regulated industry and opened the door for monopolies in an attempt to aid the economy. The effect got rid of competition in industry. We also see the Agricultural Adjustment Act (AAA) which paid farmers to stop growing crops. It literally paid farmers to destroy their goods. To me, this seems like a large waste in order to jack up prices on food. The Fair Labor Standards Act set the minimum wage and set the maximum hours for workers. This caused many to lose their jobs and businesses to go out of business. Also many other programs of the New Deal greatly hindered the recovery of the economy. Government intervention was a very bad thing. The government should never have so much power over the economy and market.

       Economic down turns and market fluctuations are normal in a healthy economy. Before the Depression, there were crashes and downturns in the economy. However, these downturns ironed themselves out because the free market fixed itself. When the government stepped in, things only got worse and stayed worse. It is a false myth that the economy collapsed because of the free market and that government was the reason it was fixed.