Wikipedia on the Causes of the Great Depression

For those who are interested in comparing and contrasting the current Great Recession with the Great Depression, Wikipedia has several interesting articles on the Great Depression. They are fact-filled; for instance, we were surprised to learn that in 1933 a group of millionaires, led by the Du Pont and J.P. Morgan empires, and alarmed by Roosevelt's plan to redistribute wealth from the rich to the poor, plotted to overthrow the Roosevelt administration by means of a military coup "and install a fascist government modeled after Mussolini's regime in Italy." Fortunately, the general whom they recruited to lead the uprising ratted on them to Congress. Since then, I suppose the would-be fascist businessmen have consoled themselves with fomenting military dictatorships abroad, in Latin America and elsewhere.

Wikipedia has a long, fact-filled and quite theoretical discussion of "The Causes of the Great Depression." It notes that some economists at the time (and later John Kenneth Galbraith), "popularized a theory that had some influence on Franklin D. Roosevelt. It held that the economy produced more goods than consumers could purchase, because the consumers did not have enough income. According to this view, in the 1920s wages had increased at a lower rate than labor productivity. Most of the benefits of the increased productivity went into profits, which went into the stock market bubble rather than into consumer purchases. Thus the unequal distribution of wealth throughout the 1920s caused the Great Depression.

"According to this view, the root cause of the Great Depression was global overinvestment while the level of wages and earnings from independent businesses fell short of creating enough purchasing power. It was argued that government should intervene by an increased taxation of the rich to help make income more equal. With the increased revenue the government could create public works to increase employment and 'kick start' the economy.

"In the USA the economic policies had been quite the opposite until 1932. The Revenue Act of 1932 and public works programs introduced in Hoover's last year as president and taken up by Roosevelt, created some redistribution of purchasing power."

We couldn't have said it much better ourselves, except perhaps to point out that the solution we favor, or at least would put on a par with putting more money into the hands of government to fund public works programs – as well as infrastructure, education, etc. -- is a set of fair wage policies that would put more money into the hands of working Americans.