A HISTORY OF THE AMERICAN PEOPLE
Harper Collins, 1997, pp. 727-46
"Government Credit-Management and the Wall Street Crash"
"Why the Depression Was So Deep and Long-Lasting"
"The Failure of the Great Engineer"
I hope to review Mr. Johnson's massive work in the next issue of The Mises
Review; but I cannot resist
calling attention at once to the brief and brilliant section on the 1929 Depression.
Johnson, a world-renowned journalist and popular historian, adopts a thoroughly
Rothbardian account of
the onset of the Depression. Like Rothbard, he finds the source of the collapse in irresponsible
credit expansion. "[D]uring the 1920s the United States, in conjunction with British and other
industrial and financial powers, tried to keep the world prosperous by deliberately inflating the
money supply" (p. 727).
The currency management was led by Benjamin Strong of the New York Federal Reserve
Bank and Montagu
Norman of the Bank of England, under the influence of John Maynard Keynes. "In fact Keynes's
Monetary Reform], advocating 'managed currency' and a stabilized price-level, both involving
government interference, coordinated internationally, was part of the problem" (p.729).
The market crash of 1929 "ought to have been welcome.... Business downturns serve
They have to be sharp. But they need not be long because they are self-adjusting" (pp.734-35).
Unfortunately, Herbert Hoover did not realize this essential truth. Far from being a supporter of
laissez-faire, he was an ardent interventionist whose policies impeded recovery. "Hoover was a
engineer. Roosevelt was a social psychologist. But neither understood the Depression, or how to
it" (p. 736).
Again, the Rothbardian influence is evident. Johnson scrupulously cites Rothbard's works