The forgotten recession of the early 1920s

When real laissez faire was practiced

Although the Keynesians tell us that budget deficits are the price that we have to pay for full employment, that equation did not seem to pan out when followers of Lord Keynes held full sway in the 1930s. As self-proclaimed intellectuals get embarassingly excited over the prospect of a new, New Deal, the rest of us would do well to take every opportunity to examine how the first one turned out. For one thing, it didn't start under Roosevelt.

In The Politically Incorrect Guide To The Great Depression And The New Deal, economist Robert P. Murphy, Ph. D., gives us a very useful comparison of what happened in another recession that occurred in the 1920s when so-called laissez-faire economics was practiced and the more famous economic collapse when it wasn't.

"The annual unemployment rate peaked at 11.7 percent in 1921, but it had fallen to 6.7 percent by the following year, and was down to an incredible 2.4 percent by 1923," Murphy writes. "That is how a market with flexible wages and prices quickly corrects itself after a Fed-induced inflationary boom."

"But because the 'compassionate' Hoover forbade businesses from cutting wages after the 1929 crash, unemployment went up and up and up, hitting the unimaginable peak of 28.33 percent in March 1933." "Compassionate conservatism," then, is not a terribly new deal either.


Posted by John Ray. For a daily critique of Leftist activities, see DISSECTING LEFTISM. To keep up with attacks on free speech see TONGUE-TIED. Also, don't forget your daily roundup of pro-environment but anti-Greenie news and commentary at GREENIE WATCH . Email me (John Ray) here

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