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This is the last in a seven-part series that excerpts the chapter on "Intellectuals and Economics" from Thomas Sowell's newest book, "Intellectuals and Society." Click here to read the entire series. You can also view two previous series on Sowell's works — The Politics of the Housing Boom and The Economics Of Medical Care.
IBD Exclusive Series:Thomas Sowell on Intellectuals and Economics
Nothing established the idea that government intervention in the economy is essential like the Great Depression of the 1930s.
The raw facts tell the story of that historic tragedy: National output fell by one-third between 1929 and 1933, thousands of banks failed, unemployment peaked at 25%, corporations as a whole lost money two years in a row.
Prior to this time, no president had attempted to have the federal government intervene to bring a depression to an end.
Many saw in the Great Depression the failure of free market capitalism as an economic system and a reason for seeking a radically different kind of economy — for some Communism, for some Fascism and for some the New Deal policies of Franklin D. Roosevelt's administration.
Whatever the particular alternative favored by particular individuals, what was widely believed then and later was that the stock market crash of 1929 was a failure of the free market and the cause of the massive unemployment that persisted for years during the 1930s.
Given the two most striking features of that era — the stock market crash and a widespread government intervention in the economy — it is not immediately obvious which was more responsible for the dire economic conditions. But remarkably little effort has been made by most of the intelligentsia to try to sort out the cause or causes. It has been largely a foregone conclusion that the market was the cause and government intervention was the saving grace.
While unemployment went up in the wake of the stock market crash, it never went as high as 10% for any month during the 12 months following that crash in October 1929. But the unemployment rate in the wake of subsequent government interventions in the economy never fell below 20% for any month over a period of 35 consecutive months.
In short, though the stock market crash has been conceived of as the "problem" and government intervention as the "solution," in reality the unemployment rate following the economic problem was less than half of the unemployment rate following the political solution.
One of the many signs of verbal virtuosity among intellectuals is the repackaging of words to mean things that are not only different from, but sometimes the direct opposite of, their original meanings. "Freedom" and "power" are among the most common of these repackaged words. The basic concept of ...
Bipartisanship: The president should be asked a question about accepting the House Republicans' invitation to their upcoming retreat: Does he view it as a learning opportunity or a photo opportunity? During his campaign for president and since entering the White House, Barack Obama has ...
The Obama administration has just proposed a new fee — otherwise known as a tax — on the country's largest financial institutions. The tax aims to recover the difference between the bailout funds provided to these institutions a year and a half ago and the amounts ultimately returned to ...
The organizations, large and small, which produce and distribute most of the goods and services that make up a modern standard of living — businesses — have long been targets of the intelligentsia. Accusations against businesses have been as specific as charging excessively high prices ...
Although most people in the lower income brackets as of a given time do not remain there permanently, some people do. Moreover, particular neighborhoods may remain the homes of poor people for generations, no matter how many people from those neighborhoods move out to a better life as they move up ...
Posted By: acierno(465) on 1/19/2010 | 10:13 PM ET
its interesting that fdr and bo have similar action plans, gov. intervention. so far the results of their actions have been similar with unemployment at high levels and a large national debt.
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