The Great Depression

The Great Depression was a dark time when jobs were scarce and taxes were high. It was a time of uncertainty; no one knew when things would finally turn around. Many have speculated that it was a failure in the free market that caused the Great Depression and that thanks to strong Government interference we made it out. This theory however is wrong.

The Great Depression started during Herbert Hoover’s Presidency. One of the biggest misperceptions is this thought that President Hoover had a laissez-faire economic stance. Hoover however did not have a hands-off economic policy. Hoover passed Smoot-Hawley Tariff in 1930 which greatly raised the tax placed on foreign goods. In turn this new tariff caused all Nations to close their borders to American goods. It started a trade war. This is far from laissez-faire economics. The cause of Hoover’s tariff was that most of the employees working in plants were without jobs. Farmers couldn’t sell their products either. This is one example of how it was not the free market but interference by Government that caused the Depression.

The Second President during the Great Depression was Franklin D. Roosevelt. To further prove the point that it is Government interference in economics that caused and maintained the Great Depression, we can take a look at the effects cause by this second administration. President Roosevelt left off right were Hoover started. He passed massive amounts of legislation which he called the New Deal. Rexford G. Tugwell, a member of Roosevelt’s brain-trust said “practically the whole New Deal was extrapolated from programs that Hoover started”. The New Deal was more Government control on the economy.

What came from this involvement? President Roosevelt called for a “banking holiday”. From March 6 to March 15 banks had to close their doors. After the holiday 5000 banks did not reopen until after the Depression and 2000 of those banks never reopened again. Roosevelt also had unit banking laws passed. Bank failures came only in states where this heavy regulation occurred. In Canada where banks were not being regulated there were no bank failures.

Roosevelt had blanket minimal wages. These minimal wages put thousands of people out of work. The black communities were hit the hardest as unemployment continually went up. The Government started paying farmers not to farm but to burn their crops and slaughter their animals. This was done to try to raise prices that were thrown off due to the devastation left from the Smoot-Hawley Tariff and others like it.

Roosevelt placed heavy taxes on businesses. This made it so jobs could not be created in the private sector. Instead the Federal Government handed out jobs that did not create more jobs or boost the economy. All it did was boost the Federal Government’s debt. The Wagner Act was passed to complete the restrictions on private business owners who could free the economy from its down turn.

  In the end we see that it is the failure of the Federal government and not a free market that caused and prolonged the Great Depression. From the examples given we find that it was the New Deal and the policies of President Hoover that were the predecessors to it, that made it impossible for the economy to rebound from the recession. It was not until after the market was again free that things turned around, proving the true cause of the Great Depression.       

Economic Prosperity

To create a place with economic prosperity certain principles have to be established. Among these principles are property rights, rule of law, markets, free trade, and free press. If we were to create a city in an uninhabited part of the world and were to apply these principles or rules, we would be able to sit back as the economy grew. This is because people will plan their own ways to be successful and it will naturally benefit others. It is through these principles that economic success is found.

Property rights are essential for any economy to grow. In our newly created city protection will be given to property rights. Entrepreneurs are the blood flow to any economy. These are the people who make the risks. They are those who have the vision and the self-interest to create a bigger economic pie for everyone. When a government can take away this property at their leisure no one would be willing to take the risk.

An example of this is Communism or a planned economy. Everything is taken from the individual and given to the government. In this kind of an economic environment little prosperity is produced. No one is comfortable with doing what it takes to create a business. When the government finds that a business is becoming successful they take it from the private owners. It takes property rights to insure entrepreneurs that the fruit of their labor will be theirs. Entrepreneurs left to their own will plan what is best for them by working hard to make a product desirable and beneficial to the public. This concept of everyone benefiting by the self-interest of another is known as the invisible hand.

Rule of law and markets will also be important for our city to be prosperous. The rule of law is the principle that even those who are in the government are not above the law. This is an extra protection of the other rules that we will establish. The rule of law stabilizes the government. It gives protection to the entrepreneurs who can understand all the rights that they have.

A market is an exchange of goods and services. We will need them to remain free if we want our new city to be able to prosper. Free markets encourage new thoughts, resourcefulness, and reason. They also allow for charity which can help to build an economy. Free markets allow us to have competition. It makes it so we use our limited resources wisely. Time is an example of a limited resource. If one is using his time to be a medieval historian, he cannot be a doctor. A free market will force those who want to succeed to put their resources like time into things that all people need.    

Free trade is the next principle that will have to exist in our city. As Leonard E. Read points out not one person knows how to make a pencil. It takes a lot of different people all looking out for their own self-interest to make the pencil. If restrictions are placed on trade, say my city places restrictions on everyone else not of my city, then everyone else will place restrictions the cities goods. This makes less competition and so people waste resources.

The last principle that will need to be in our city to boost economic growth is freedom of press. Press is so important for the advertisement of goods. If there are restrictions on who can advertise or how much one can advertise his goods, then again competition is eliminated. Free press allows for the limited resources going into any good or service to be broadcast to everyone so everyone has a fair opportunity to obtain that good or service. This allows for the market to remain constantly flowing with goods and services for anyone to obtain.

In comparison to a planned economy this new city we created, with all the freedoms which it possesses, will grow immensely. The new city will have the growth that Western Germany had in comparison to Eastern Germany or Hong Kong had in comparison to mainland China. These principles of freedom will ensure the economic growth and prosperity for any city, state, or Nation.