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This article originally appeared on Bloomberg View.
The corollary to the “The Great Gatsby” in the literature of economics is another old “great,” “The Great Crash 1929,” by the economist John Kenneth Galbraith. Galbraith’s narrative, like Fitzgerald’s, is subtle, conjuring complex characters. Yet the effect of both books is the same: to display the 1920s as a decade full of false numbers and false people, reckless pilots who caused an economic wreck so catastrophic it necessitated 10 years of Depression.
“President Coolidge neither knew nor cared what was going on,” Galbraith writes. In other words, the 30th president was the one to fall asleep at the wheel of our economic car.
Since Galbraith published “Crash” in 1954, a series of scholarly works have shown this line of reasoning to be about as substantial as a champagne bubble.
Setting the crash aside, can one assign Coolidge any blame for the Great Depression? Some, especially when it came to tariffs, which Coolidge’s Republican Party supported.
But the greater culprits are Coolidge’s successors, Hoover, a more progressive Republican, and Democrat Franklin D. Roosevelt. Hoover raised taxes, signed the Smoot-Hawley Tariff Act and strong-armed businesses into wage increases they could ill afford. In addition, Hoover sent a general signal of government activism, which chilled markets. Roosevelt exacerbated the uncertainty with arbitrary interventions into policy in all areas.
One can argue that the Coolidge story isn’t that of a president causing the Depression. It is the story of a president postponing one. And that story, too, would make a good movie.
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