We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
We use cookies to distinguish you from other users and to provide you with a better experience on our websites. Close this message to accept cookies or find out how to manage your cookie settings.
Published online by Cambridge University Press: 26 May 2010
The juxtaposition of the Great Depression and World War II raised expectations dramatically of what government stabilization policies could achieve. In 1932, the unemployment rate rose to 23.6%. In 1939, it was still 17.2%. In 1945, the last year of the war, the unemployment rate was 1.9%. The juxtaposition of massive unemployment in the Depression and full employment during World War II provided apparently incontrovertible evidence that government spending could provide a countercyclical stimulus to the economy. The Employment Act of 1946 gave the government responsibility for full employment. However, there appeared to be no place for monetary policy in the arsenal of government policies.
A changed Intellectual Environment
According to real bills, government could do nothing to arrest the painful economic adjustments that inevitably followed the collapse of a speculative mania. Depression had to run its course to eliminate excessive debt and to correct a maladjusted structure of wages and prices. The memoirs of Herbert Hoover (1952, 30) have forever associated this view with his Treasury Secretary Andrew Mellon, whom Hoover labeled a “leave it alone liquidationist”:
Mr. Mellon had only one formula: “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” He insisted that, when the people get an inflation brainstorm, the only way to get it out of their blood is to let it collapse. He held that even a panic was not altogether a bad thing. He said: “It will purge the rottenness out of the system. High costs of living and high living will come down.[…]
To save this book to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about saving to your Kindle.
Note you can select to save to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be saved to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.
Find out more about the Kindle Personal Document Service.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Dropbox.
To save content items to your account, please confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your account. Find out more about saving content to Google Drive.
