Charles Morris, a lawyer and former banker, has written a history of the Great Depression (1929–39) in the United States. His analysis in A Rabble of Dead Money locates the origins of that crisis in the rapid, unsustainable economic growth in 1920s Europe and the United States. This is popular history but also tackles tough issues both of economic history and economic theory. Morris does not neglect the human side of the depression, with its massive level of unemployment, hunger marches, bread lines, and mass migration from rural farms to the cities of the North and the West Coast. While some sections of the book will be challenging for the uninitiated, it is an essential account of events vital for us to understand, especially in the wake of our own economic calamities, and is warmly recommended even for those without a deep background in economics.
The debate over the causes of the Great Depression was vigorous from the start and has never been settled. Morris helpfully details many of those arguments. He is concerned primarily with the specific factors and policies that led to this particular economic depression and what made it so deep and so long. As a result the detail can be exhausting in its complexity. In frustration you want to say, “So everything causes everything!” However, at the bottom of all these debates is a fundamental question: Is a free-market economy inherently stable and able to ensure full employment over time, or is it unstable and given to periodic booms with rapid growth and low unemployment and busts when unemployment rises and goods cannot be sold?
Laissez faire was the dominant view of economics in both Great Britain and the United States at the time. This is the belief that there is an inherent stability in a market economy, that supply creates its own demand, and that full employment is the norm. What may appear as the destructive effects of market operations to those who experience them—the loss of jobs or industries, say—are merely transitory by-products of the market’s creativity in constantly forcing increases in efficiency and productivity.
The collapse of the stock market and then the onslaught of the depression in the early 1930s upended this view of the economy. When the U.S. unemployment rate hit 25 percent in 1933, economists and policymakers were ripe for a new vision and a new social philosophy. In the public’s eye the fundamental problem was that after 150 years of economic growth under a free-market economy, two-thirds of the population was still, in President Franklin Roosevelt’s words, “ill housed and ill fed.”
In addition, this failure occurred not just in the United States but throughout the whole market system. Rather than growth and progress being spurred by market-based international institutions, these institutions were a central factor in propagating a world-wide depression.
While the story begins in Europe after World War I, as Morris so vividly demonstrates, the actual collapse begins in October and November of 1929, the months of the stock-market crash and the initial phase of the depression: a three-year period followed when bank failures would become commonplace (9,000 out of the 24,700 banks in existence in 1930 had gone under by the end of 1933); when jobs would dissipate as if into thin air; when debts would become insufferable; and when prices would begin to drop (wholesale prices in the United States dropped 16 percent by the summer of 1930). This price decline particularly was a major obstacle to recovery because the expectations businesses had for profits, which influence orders to manufacturers, were continually lowered since no one could foresee when, and at what level, the fall would come to an end. It also meant that the real value of debts rose, making repayment more difficult. The most frightening aspect of all was that the system could apparently do nothing to help itself.