Like all great events in history, the Great Depression that began with the stock market crash of October, 1929 had many causes. Unlike many events in history, the causes of the Depression are quite difficult to understand, and there is no single consensus, even among economic historians, about what caused it or how to avoid similar crises in the future.
Perhaps this is because of the uniquely complex nature of capitalist economies in a globalized world. Ordinary people, including many historians, avoid the study of economics or economic history because of a feeling that it is beyond the comprehension of non-specialists. Many people seem to believe that elected officials, like the President, have a near-magical power to control things like unemployment levels or the price of gasoline. At the opposite extreme, professional economists often seem attached to ideologies, or to the idea that market forces, which are subject to inherently irrational aspects of human psychology and behavior, can be explained and predicted with scientific precision.
I’m posting the following link to an article from Business Insider, which does a fairly good overview explaining some of the causes and significance of the Great Depression and New Deal, in response to your questions about this topic (among the causes it suggests are over-speculation, overproduction and underconsumption, the Smoot-Hawley tariff, and, yes, mistakes by the Federal Reserve). But I’m also posting it because I’d like you to see that even such a complex web of interconnected and contested historical causes—even when they concern a topic as complex, and sometimes frankly boring, as economics—are not beyond the comprehension of the average educated person.
The article also briefly attempts to assess the effects of the New Deal. In class I asked you to consider how the New Deal Era represented, not only a stark departure from the idea that government should play little or no role in regulating the economy, but as part of an expansion of ideas about democracy, i.e., , that vast inequalities of wealth distort our country’s democracy as well as its economic health, and that people have a right to a certain degree of economic security . Roosevelt outlined the former view in his “Four Freedoms,” which included “freedom from want” as well as more traditional, individual rights like freedom of speech and worship. But in fact these ideas have a much longer lineage, going back to the republican idea of the res publica or “commonwealth,” as well as the Constitution’s assertion that government has a responsibility to “promote the general welfare.”
Recently, Congress passed President Biden’s Infrastructure Investment and Jobs Act, which pledges $550 billion to rebuild bridges, tunnels, and highways, improve the electrical grid and internet access, clean up polluted sites and replace lead pipes, and etc. Observers, including Pres. Biden himself, have compared this bill, along with the not-yet-passed Build Back Better bill, to the investments in infrastructure and public works programs of the New Deal Era. But it is not yet clear whether it will have the same effect—for one thing, the nature of the economy is vastly different from what it was 70 years ago. Pres. Trump also promised to build infrastructure and bring back manufacturing, but, aside from the Border Wall, seemed to be short on specifics.
One of my goals with the class this semester has been to de-mystify the subject of economic history in general, and the history of capitalism in particular. Like many topics this semester, we have not been able to cover this in as much depth or detail as I would have liked. But, perhaps especially as Baruch College students, many of whom will go into business, marketing, or finance, I think it’s important that you try to grapple with the complexities of the economic systems that have shaped our contemporary world. I would also argue that, as citizens in a democratic society, we have a responsibility to try to understand economics and a right to have a say in the economic decisions that affect all of our lives, and not just leave them to the politicians and specialists who claim to know all.