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== Boom or Bust Cycles ==

== Boom or Bust Cycles ==

For most of our history Americans have been resigned to the "boom and bust" school of economics. When the economy got overheated and speculation ran rampant, a crash was unavoidable. Under such circumstances the best government could do was to do nothing that might make a bad thing worse. "Panics" had occurred in the 1830's under President [[Martin Van Buren]], in the 1850s under [[James Buchanan]], during [[Ulysses S. Grant]]'s term in the 1870s and, most notably, under [[Grover Cleveland]] in the 1890s.

For most of our history Americans have been resigned to the "boom and bust" school of economics. When the economy got overheated and speculation ran rampant, a crash was unavoidable. Under such circumstances the best government could do was to do nothing that might make a bad thing worse. "Panics" had occurred in the 1830s under President [[Martin Van Buren]], in the 1850s under [[James Buchanan]], during [[Ulysses S. Grant]]'s term in the 1870s and, most notably, under [[Grover Cleveland]] in the 1890s.

None of these presidents did much to stem the deflation in prices, contraction of investment, and loss of jobs that resulted—for the simple reason that standard economic theory held there was little if anything they could do. Then, in 1921, a post war slump led President [[Warren Harding]] to name Hoover as chairman of a special conference to deal with unemployment. "There is no economic failure so terrible in its import," Hoover declared at the time, "as that of a country possessing a surplus of every necessity of life in which numbers...willing and anxious to work are deprived of dire necessities. It simply cannot be if our moral and economic system is to survive.

None of these presidents did much to stem the deflation in prices, contraction of investment, and loss of jobs that resulted—for the simple reason that standard economic theory held there was little if anything they could do. Then, in 1921, a post war slump led President [[Warren Harding]] to name Hoover as chairman of a special conference to deal with unemployment. "There is no economic failure so terrible in its import," Hoover declared at the time, "as that of a country possessing a surplus of every necessity of life in which numbers...willing and anxious to work are deprived of dire necessities. It simply cannot be if our moral and economic system is to survive.

Economists are still divided about what caused the Great Depression, and what turned a relatively mild downturn into a decade-long nightmare. Hoover himself emphasized the dislocations brought on by World War I, the rickety structure of American banking, excessive stock speculation and Congress' refusal to act on many of his proposals. The president's critics argued that in approving the [[Smoot-Hawley Tariff]] in the spring of 1930, he unintentionally raised barriers around U.S. products, worsened the plight of debtor nations and set off a round of retaliatory measures that crippled global trade.

Economists are still divided about what caused the Great Depression, and what turned a relatively mild downturn into a decade-long nightmare. Hoover himself emphasized the dislocations brought on by World War I, the rickety structure of American banking, excessive stock speculation and Congress' refusal to act on many of his proposals. The president's critics argued that in approving the [[Smoot-Hawley Tariff]] in the spring of 1930, he unintentionally raised barriers around U.S. products, worsened the plight of debtor nations and set off a round of retaliatory measures that crippled global trade.

Neither claim went far enough. In truth Hoover's celebration of technology failed to anticipate the end of a postwar building boom, or a glut of 26,000,000 new cars and other consumer goods flooding the market. [[Agriculture]], mired in depression for much of the 1920's, was deprived of cash it needed to take part in the consumer revolution. At the same time, the average worker's wages of $1,500 a year failed to keep pace with the spectacular gains in productivity achieved since 1920. By 1929 production was outstripping demand.

Neither claim went far enough. In truth Hoover's celebration of technology failed to anticipate the end of a postwar building boom, or a glut of 26,000,000 new cars and other consumer goods flooding the market. [[Agriculture]], mired in depression for much of the 1920s, was deprived of cash it needed to take part in the consumer revolution. At the same time, the average worker's wages of $1,500 a year failed to keep pace with the spectacular gains in productivity achieved since 1920. By 1929 production was outstripping demand.

The United States had too many banks, and too many of them played the stock market with depositors' funds, or speculated in their own stocks. Only a third or so belonged to the Federal Reserve System on which Hoover placed such reliance. In addition, government had yet to devise [[insurance]] for the jobless or income maintenance for the destitute. When unemployment resulted, buying power vanished overnight. Since most people were carrying a heavy debt-load even before the crash, the onset of recession in the spring of 1930 meant that they simply stopped spending.

The United States had too many banks, and too many of them played the stock market with depositors' funds, or speculated in their own stocks. Only a third or so belonged to the Federal Reserve System on which Hoover placed such reliance. In addition, government had yet to devise [[insurance]] for the jobless or income maintenance for the destitute. When unemployment resulted, buying power vanished overnight. Since most people were carrying a heavy debt-load even before the crash, the onset of recession in the spring of 1930 meant that they simply stopped spending.

Nevertheless, a large part of the puzzle remains: roughly half of Depression unemployment was concentrated among long-term unemployed who could not take advantage of subsidized relief-work schemes.

Nevertheless, a large part of the puzzle remains: roughly half of Depression unemployment was concentrated among long-term unemployed who could not take advantage of subsidized relief-work schemes.

This form of unemployment, principally long-term and somewhat of a residual category is, in the eyes of Eichengreen and Hatton and their contributors, the key to the persistence of the Depression. Long-term unemployment was strongly present in those countries that suffered worst from the Depression, including non-European nations like [[Australia]], [[Canada]], and the United States and European nations like [[Britain]], [[Germany]], [[Italy]], and the gold block nations of [[France]] and [[Belgium]]. Of these only Germany achieved a strong recovery from the Depression in the 1930's.

This form of unemployment, principally long-term and somewhat of a residual category is, in the eyes of Eichengreen and Hatton and their contributors, the key to the persistence of the Depression. Long-term unemployment was strongly present in those countries that suffered worst from the Depression, including non-European nations like [[Australia]], [[Canada]], and the United States and European nations like [[Britain]], [[Germany]], [[Italy]], and the gold block nations of [[France]] and [[Belgium]]. Of these only Germany achieved a strong recovery from the Depression in the 1930s.

Long-term unemployment means that the burden of economic dislocation is unequally borne. Since the prices workers must pay often fall faster than wages, the welfare of those who remain employed frequently rises in a depression. Those who become and stay unemployed bear far more than their share of the burden of a depression. Moreover the reintegration of the unemployed into even a smoothly-functioning market economy may prove difficult, for what employer would not prefer a fresh entrant into the labor force to someone out of work for years? The simple fact that an economy has recently undergone a period of mass unemployment may make it difficult to attain levels of employment and boom that a luckier economy attains as a matter of course.Once an economy had fallen deeply into the Great Depression, devalued exchange rates, prudent and moderate government budget deficits (as opposed to the deficits involved in fighting major wars), and the passage of time all appeared equally ineffective ways of dealing with long-term unemployment. Highly centralized and unionized labor markets like Australia's and decentralized and laissez-faire labor markets like that of the United States did equally poorly in dealing with long-term unemployment. [[Fascist]] "solutions" were equally unsuccessful, as the case of Italy shows, unless accompanied by rapid rearmament as in Germany.

Long-term unemployment means that the burden of economic dislocation is unequally borne. Since the prices workers must pay often fall faster than wages, the welfare of those who remain employed frequently rises in a depression. Those who become and stay unemployed bear far more than their share of the burden of a depression. Moreover, the reintegration of the unemployed into even a smoothly-functioning market economy may prove difficult, for what employer would not prefer a fresh entrant into the labor force to someone out of work for years? The simple fact that an economy has recently undergone a period of mass unemployment may make it difficult to attain levels of employment and boom that a luckier economy attains as a matter of course.Once an economy had fallen deeply into the Great Depression, devalued exchange rates, prudent and moderate government budget deficits (as opposed to the deficits involved in fighting major wars), and the passage of time all appeared equally ineffective ways of dealing with long-term unemployment. Highly centralized and unionized labor markets like Australia's and decentralized and laissez-faire labor markets like that of the United States did equally poorly in dealing with long-term unemployment. [[Fascist]] "solutions" were equally unsuccessful, as the case of Italy shows, unless accompanied by rapid rearmament as in Germany.

Even today, economists have no clean answers to the question of why the private sector could not find ways to employ its long-term unemployed. The very extent of persistent unemployment in spite of different labor market structures and national institutions suggests that theories that find one key failure responsible should be taken with a grain of salt.  

Even today, economists have no clean answers to the question of why the private sector could not find ways to employ its long-term unemployed. The very extent of persistent unemployment in spite of different labor market structures and national institutions suggests that theories that find one key failure responsible should be taken with a grain of salt.  

* Best, Gary Dean. ''Pride, Prejudice, and Politics: Roosevelt Versus Recovery, 1933-1938'' (1991), conservative critique  

* Best, Gary Dean. ''Pride, Prejudice, and Politics: Roosevelt Versus Recovery, 1933-1938'' (1991), conservative critique  

* Blumberg Barbara. ''The New Deal and the Unemployed: The View from New York City'' (1977).

* Blumberg Barbara. ''The New Deal and the Unemployed: The View from New York City'' (1977).

* Bordo, Michael D., Claudia Goldin, and Eugene N. White , eds., ''The Defining Moment: The Great Depression and the American Economy in the Twentieth Century'' (1998). Advanced economic history.

* Bordo, Michael D., Claudia Goldin, and Eugene N. White, eds., ''The Defining Moment: The Great Depression and the American Economy in the Twentieth Century'' (1998). Advanced economic history.

* Bremer William W. "Along the American Way: The New Deal's Work Relief Programs for the Unemployed." ''Journal of American History'' 62 (December 1975): 636-652 online in JSTOR

* Bremer William W. "Along the American Way: The New Deal's Work Relief Programs for the Unemployed." ''Journal of American History'' 62 (December 1975): 636-652 online in JSTOR

* Chandler, Lester. ''America's Greatest Depression'' (1970). overview by economic historian.

* Chandler, Lester. ''America's Greatest Depression'' (1970). overview by economic historian.

* Mitchell, Broadus. ''Depression Decade: From New Era through New Deal, 1929-1941'' (1964), overview of economic history [http://www.questia.com/PM.qst?a=o&d=98065455 online edition]

* Mitchell, Broadus. ''Depression Decade: From New Era through New Deal, 1929-1941'' (1964), overview of economic history [http://www.questia.com/PM.qst?a=o&d=98065455 online edition]

* Parker, Randall E. ''Reflections on the Great Depression'' (2002) interviews with 11 leading economists

* Parker, Randall E. ''Reflections on the Great Depression'' (2002) interviews with 11 leading economists

* Roose, Kenneth D.  "The Recession of 1937-38" ''Journal of Political Economy'', Vol. 56, No. 3 (Jun., 1948) , pp. 239–248 online [http://links.jstor.org/sici?sici=0022-3808(194806)56%3A3%3C239%3ATRO1%3E2.0.CO%3B2-0 in JSTOR]

* Roose, Kenneth D.  "The Recession of 1937-38" ''Journal of Political Economy'', Vol. 56, No. 3 (Jun., 1948), pp. 239–248 online [http://links.jstor.org/sici?sici=0022-3808(194806)56%3A3%3C239%3ATRO1%3E2.0.CO%3B2-0 in JSTOR]

* Romasco Albert U. "Hoover-Roosevelt and the Great Depression: A Historiographic Inquiry into a Perennial Comparison." In John Braeman, Robert H. Bremner and David Brody, eds. ''The New Deal: The National Level'' (1973) v 1 pp 3–26.

* Romasco Albert U. "Hoover-Roosevelt and the Great Depression: A Historiographic Inquiry into a Perennial Comparison." In John Braeman, Robert H. Bremner and David Brody, eds. ''The New Deal: The National Level'' (1973) v 1 pp 3–26.

* Romer, Christina D. "The Nation in Depression," ''The Journal of Economic Perspectives,'' Vol. 7, No. 2. (Spring, 1993), pp. 19–39. major survey by leading economist, with comparisons to other nations [http://links.jstor.org/sici?sici=0895-3309%28199321%297%3A2%3C19%3ATNID%3E2.0.CO%3B2-7  in JSTOR]

* Romer, Christina D. "The Nation in Depression," ''The Journal of Economic Perspectives,'' Vol. 7, No. 2. (Spring, 1993), pp. 19–39. major survey by leading economist, with comparisons to other nations [http://links.jstor.org/sici?sici=0895-3309%28199321%297%3A2%3C19%3ATNID%3E2.0.CO%3B2-7  in JSTOR]