Every economic crisis since the Great Depression has been compared to the Great Depression, just like every American war since Vietnam has been compared to Vietnam. Such comparisons are of course good and necessary, because we need to learn from past mistakes. But there are two major reasons why they can be very misleading:
1. No crisis is the same. No war is the same. And the differences are usually of great importance.
2. Often times ideologies or false memories distort our analysis of past events. In this case, our analysis is a very bad starting point for an interpretation of present events.
The most common and popular view of the Great Depression can be summed up pretty easily: it was caused by an uncontrolled market economy gone wild, and Roosevelt’s New Deal saved America from even greater harm. Even some supporters of the free market see it this way.
I am afraid this myth has caused great harm in the past and may cause even greater harm in the future, because it couldn’t be much further from the truth. In recent years, dozens of studies have shown how bad government interventions have caused the Great Depression and how the New Deal prolonged it.
Watch Amity Shlaes, author of The Forgotten Man: A New History of the Great Depression, talk about how the New Deal had to be forced on many people and how it made things worse:
“Amity Shlaes challenges the received wisdom that the Great Depression occurred because capitalism broke and that it ended because FDR, and government in general, came to the rescue.”
Jim Powell, author of FDR’s Folly: How Roosevelt and His New Deal Prolonged the Great Depression, writes about How FDR’s New Deal Harmed Millions of Poor People.
And Damon W. Root writes about How FDR made life worse for African Americans.