The Big Picture Of The Great Depression


Back in 1955 John Kenneth Galbraith called the Great Depression of the 1930s “the most momentous economic occurrence in the history of the United States,” and thirty-odd years later that judgment, recorded in Galbraith’s best seller, The Great Crash , still holds. Since then there have been more recessions, some quite severe, but nothing like what happened in the thirties. As dozens of economists and historians have shown, we now know, in theory, how to deal with violent cyclical downturns. We have learned what we should do to manipulate what Lester V. Chandler of Atlanta University has called “the determinants that influence the behavior of employment, output, and prices.”

Yet fears of another terrible collapse persist, even among the experts. And the higher the stock market soars, the greater the underlying fear. In The Great Crash Galbraith spoke of “fissures” that “might open at…unexpected places,” and Chandler warned of some sort of “political deadlock” that might prevent the government from doing the things that would revive a faltering economy.

These fears are not without foundation. The American economy is complex and influenced by forces beyond the control of economists or politicians. More and more, economists are becoming aware of what historians have always known: that they can do a good job of explaining why the economy is the way it is and how it got to be that way, but that knowing exactly what to do to make it behave in any particular way in the future is another matter entirely.


The Great Depression of the 1930s was a worldwide phenomenon, great not only in the sense of “severe,” but also in the sense of “scope.” While there were differences in its impact and in the way it was dealt with from one country to another, the course of events nearly everywhere ran something like this: By 1925 most countries had recovered from the economic disruptions caused by the Great War of 1914-18. There followed a few years of rapid growth, but in 1929 and 1930 the prosperity ended. Then came a precipitous plunge that lasted until early 1933. This dark period was followed by a gradual, if spotty, recovery. The revival, however, was aborted by the steep recession of 1937-38. It took a still more cataclysmic event, the outbreak of World War II, to end the Great Depression. All this is well known.

The effects of the Great Depression on the economy of the United States, and the attitudes of Americans toward both the Depression and the politics of their government, did not differ in fundamental ways from the situation elsewhere. This, too, scarcely needs saying.

However, there has been a tendency among historians of the Depression, except when dealing with specific international events, such as the London Economic Conference, and with foreign relations generally, to concentrate their attentions on developments in a single country or region. The result has been to make the policies of particular nations and particular interest groups seem both more unique and, for good or ill, more effective than they were.

It is true, to begin with, that neither President Calvin Coolidge nor President Herbert Hoover anticipated the Depression. In campaigning for the Presidency in 1928, Hoover stressed the good times, which, he assured the voters, would continue if he was handling the reins of government. After the election, in his last annual message to Congress, Coolidge remarked that “the country can regard the present with satisfaction and anticipate the future with optimism.” When the bottom fell out of the American economy some months later, statements such as these came back to haunt Hoover and his party, and many historians have chortled over his discomfiture.

The typical French economist of the period was like a “doctor, stuffed with theories, who has never seen a sick person.”

However, the leaders of virtually all the industrial nations were as far off the mark in their prognostications as Hoover and Coolidge were. When the German Social Democrats rode a “wave of prosperity” to power in June 1928, Hermann M’fcller, the new chancellor, assured the Reichstag that the Fatherland was in a “firm and unshakable” condition.

Great Britain had been plagued by high unemployment and lagging economic growth in the late 1920s, but in July 1929 Prime Minister Ramsay MacDonald scoffed at the possibility of a slump. And as late as December 1929, the French Premier, André Tardieu, announced what he described as a “politics of prosperity.” Fewer than a thousand people were out of work in France, and the Treasury was full to overflowing. The government planned to spend five billion francs over the next five years on a “national retooling” of agriculture, industry, commerce, health care, and education. Statesmen of many other nations made similar comments in 1928 and 1929.