Even more than 70 years later, the Great Depression looms large in our cultural mythology. Here are three myths about the Great Depression, busted
As we struggle through the harsh economic downturn we know as the Great Recession, myths about the Great Depression – the event that almost killed the American economy from 1929-1939 – are popping up all over.
Often, they’re presented as cautionary tales by those hoping to ease the recession… and more often, by those hoping to advance their own political agendas at the expense of historical reality.
While we can’t forget the lessons of the past, it behooves us to accept them with a grain of salt, and to take a close look at those presenting them. Not all the stories in our collective cultural mythology are true… and we can’t let ourselves forget that. Let’s look at three of the less politically-sensitive Depression myths.
Myth #1. The Wall Street Crash of 1929 Caused the Great Depression.
Not really; the crash was more a symptom than a cause. It was apparently triggered by a speculative fever caused, according to many economists, by an excess of easy credit and too much margin trading. Sound familiar?
While the situation was extremely complex and remains difficult to unravel even today, it seems that government intervention intended to ameliorate the problem, as well as protectionist efforts already in the legislative pipeline, just damaged the economy further.
Critics of then-President Herbert Hoover point toward the Smoot-Hawley tariff, which got final approval in March 1930, as the real trigger. Smoot-Hawley doubled the tariff on many imported products, setting the stage for a spiral of reactionary international tariffs that shredded the already fragile U.S. economy.
In addition to the inappropriate government response and the credit bubble, other factors like bank failures, deflation, and a reckless adherence to the gold standard apparently helped trigger (and sustain) the depression.
Myth #2: The Great Depression Was Limited to the United States.
Actually, the Great Depression was only a worldwide event. All highly industrialized areas of the Western world were hard hit because, by then, it was impossible for America (or any other industrialized nation) to truly cut itself off from the rest of the world.
To be fair, the Depression did start here, before spreading to the rest of the world as first the U.S., and then other nations, established damaging tariffs and quotas against foreign goods that ultimately backfired, stressing their economies even further.
Myth #3: Domestic Production Slumped During the Entire Depression.
Untrue. By March 1933, production was on the rise, and continued to rise steadily, exceeding pre-1929 levels in 1937 before dipping briefly, then recovering in 1938 and rising further.
Meanwhile, double-digit unemployment – a more accurate marker of depression – continued until 1941. No, assuming lack of production across the entire decade is one of the greatest myths about the Great Depression.