The Politically Incorrect Guide to the Great Depression and the New Deal

Great book. Perfectly summarizes the reasons for the Great Depression. Debunks the idea that recessions or depressions are inherent in free market economic systems, instead laying the blame squarely on Central Banking. Shows why the Great Depression started as a bad recession and how it became Great, thanks to the interventionist policies of Hoover and Roosevelt. Robert Murphy makes use of sound economic analysis from an Austrian perspective (meaning the Austrian School of economics) to show and demonstrate how the depression was not caused by laissez faire policies but by the money supply manipulations of the Federal reserve, which was legislated into existence to purportedly reduce the number of recessions or runs of the banks that created the previous recessions. In fact the Federal Reserve merely helped to hasten the big recession that started in 1929. What happened in 1929 is not that different to what happened in 1919-1921 (when the US suffered the OTHER Great Depression nobody hears about today). But instead of having the government reduce spending and lower taxes, to help people recover faster, the Hoover administration tried to bail out farmers, laborers and manufacturers by propping up food prices, wages and imposing a tariff that started a trade war between the US and everybody else. Dr. Murphy debunks many other myths highly touted by historians, leftists and even many so-called conservatives: + That Herbert Hoover let the problem grow by a "do-nothing" approach, regardless of the clamors made by many. In fact, Hoover was a Progressive that believed it was the role of the government to command and control the economy, and like many today, did not let a good crisis go to waste, to impose many of the plans that later became part of the New Deal. + That Roosevelt's New Deal programs were created to kick start the economy after the failed policies of Hoover. In fact the New Deal had its origin in programs already implemented by the Hoover administration. The only difference was in their name and scope. + That the spending of WWII got us out of the Depression (a myth that contradicts the much touted effectiveness of the New Deal.) + That the depression became great because of a tightwad Federal Reserve (Milton Friedman's contention). In fact, the Fed increased the money supply right after the stock market crash to keep credit flowing. Dr Murphy shows how the New Deal was more about protecting special interest groups than about helping every day Americans; how FDR created a quasi-Fascist state, by getting Big Businesses and labor unions into bed with the Government; how the World War did NOT pull the US out of the Great Depression, making the privations for many much WORSE than during the previous years before the war; how the economy recovered astoundingly fast after the war, when the US Government stopped or reduced many of its expenditures, canceled many of its New Deal programs and cut some taxes - something the Keynesian econom

I heard about this book on "Free Markets With Dr. Mike Beitler," a libertarian internet-radio show. I'm looking forward to Dr. Murphy and Dr. Beitler's show on May 21. This book as well as Murphy's "PIG to Capitalism" The Politically Incorrect Guide(tm) to Capitalism (Politically Incorrect Guides)are easy and fun to read, and very informative. Murphy is obviously very knowledgeable, but writes in an easy-to-understand style. I would recommend both of Murphy's PIG books as well as Beitler's Rational Individualism Rational Individualism: A Moral Argument for Limited Government & Capitalism.

One of the problems with economic history is that it is difficult to "test" it properly. With regard to the Great Depression and the New Deal, there is still a very loud contingent of Keynesian economists who insist that had Hoover and Roosevelt just spent even more money than they did, we would not have experienced a prolonged depression. Other economists, notably the Monetarist school founded by Milton Friedman and Anna Schwartz, insist that responsibility must lie with the Federal Reserve for not acting quickly enough to stem deflationary pressures, while still other economists, especially the Austrian school, claim the problem was caused by government intervention into the market place. All these writers can point to some evidence in support their position, though in the case of the Keynesians, that evidence is very narrow and often somewhat contrived, especially when it appears from the pen of popular columnist Paul Krugman. But the problem is that we cannot simply directly test what would have happened had their been no New Deal, or an even greater amount of spending on the New Deal. Similarly, we cannot directly test the effects of monetary policy. What we can do is carefully examine what actually happened before, during, and after the Great Depression using these three models and see which interpretation best accords with the known facts. Such a project requires a great deal more familiarity with economics than most historians possess. Not surprisingly, studies which have done this sort of analysis in the past, most notably Murray N. Rothbard's America's Great Depression have not been very accessible to the public at large. This new book by economist Robert Murphy is at once immanently readable and a good synopsis of present day scholarship. After briefly discussing the three main schools of thought about this crisis in American history, Murphy is quick to dismiss with the Keynesians. The argument that government spending was what saved us from the Great Depression, and that a lack of spending by Hoover caused the problem is fairly easy to disprove. Historians have long known that Hoover was a staunch interventionist in the economy and he rejected the advice of his own Secretary of the Treasury to simply let the bad investments liquidate themselves, a policy that had worked wonders in the earlier contraction of 1921. (Indeed, some historians of a left wing bent have chosen to praise Hoover for his intervention, most notably Joan Hoff Wilson in her classic study Herbert Hoover: Forgotten Progressive.) Of course, we cannot know if the economy absolutely would have recovered in the absence of Hoover's many interventions into the market. All we can say for certain is that he was not a laissez-faire president who did nothing while the economy contracted around him. Those who make this claim, most notably Paul Krugman, are either astoundingly ignorant or fundamentally dishonest. I tend to lean (charitably) towards the former po

Robert P. Murphy's new book makes the reader question one's own education about the U.S. Surely Social Security, abandoning the gold standard, the FDIC, are all good things! And didn't the New Deal get us out of our worst economic mess in history? Weren't we all taught that in school, indeed, perhaps by our own parents? Much like his previous work (PIG - Capitalism), Murphy's new book takes dead aim at many of the myths and outright falsehoods of that time. And he instructs us in an easy, straight-forward style. He reminds us (perhaps we never knew) of the outrages of the New Deal: the thug-like tactics of the National Recovery Administration, bank "holidays", government destruction of food, and so on. And Murphy's likening of Hoover/Roosevelt to Bush/Obama is superb. But alas, nothing is perfect. Murphy's book is troubling in two respects: 1. the reader wants/needs more - I literally could not put the book down... I wanted to keep going - his style makes for such easy and interesting reading! 2. his analysis of the current US state of affairs vis a vis 70-80 years ago is downright scary! He certainly does not exude confidence in our current "leaders."

Economic history is a difficult subject to enjoy. Rarely is an entry easily readable to a lay audience and even rarer does it show its applicability to current events. This book succeeds at both. Released in an exceptionally timely manner and well styled, the reader will have trouble telling the book from a newspaper. Similar to his earlier The Politically Incorrect Guide(tm) to Capitalism (Politically Incorrect Guides) (Paperback), the author covers a large amount of history and theory together, never losing the reader's attention or confusing us with tedious theoretical minutia. Instead you'll find the simplest of graphs that make the most profound of conclusions by themselves. Quick reviews of familiar topics are followed by shocking details few have heard before. Always radical, but never dry or confusing, the subjects fall into each other smoothly. The history itself is right-on, with some of the latest research seamless with the more conventional subject matters. The book starts with the Hoover administration, covers the crash, Hoover's response, and then details the whole Roosevelt administration, providing important points on earlier and later history throughout. Coverage is quick but exhaustive--every major political and economic development is mentioned. Some of the PIG series tend to be trite with their arguments, but not this entry. Discussion of the classical gold metal standards' value and the working mechanisms of floating currency exchange under it were new, even to a well-read history hobbyist. The analysis of the sudden end of the New Deal is fresh and leads one to want to look further into this profound yet neglected development of our history. Any short work has its drawbacks, however. Major discussion points are left open and wanting for more detail. The author's redundant quoting of Coolidge reminds the reader of a kitten discovering a new toy. Worse, the critically needed demonstration of how this history may be repeating itself today--the cause célèbre of the work--is given only short attention. Anyone familiar with the contemporary research on the Great Depression knows that the history we were all taught in middle-school is almost complete myth. Anyone also familiar with the news today knows that few understand this. Educated laymen would do well to dispel these myths and grant themselves a chance to look at contemporary events without a false view of the past blurring their vision. As Einstein wrote, "No problem can be solved from the same consciousness that created it. We must learn to see the world anew." For anyone interested, this book would be an excellent opportunity to do so.