Government Policy and Recovery

Abstract

MANY contemporaries welcomed the depression, at first, as an instrument which would sweep away the unsound businesses which had grown up in the preceding period of easy credit, and, therefore, enable economies to grow from a sounder base once recovery began [Robbins]. This extreme position is also taken by Rothbard, who believes that depressions should be permitted to run their natural course, as any governmental action merely postpones the inevitable crisis. Few would accept that thesis, and as the depression worsened there was considerable pressure on governments to take action to alleviate the misery. The only country to increase its output steadily through these years was the USSR; all capitalist nations succumbed, and in this chapter we shall examine, briefly, the economic policies pursued during the depression, and see that they acted as a strong deflationary force.