REAL AND IMAGINED CAUSES

The worldwide Depression of the 1930s was an economic event of unprecedented dimensions. There had been no downturn of its magnitude or duration before, and there has been none since. It stands as a unique failure of the industrial economy.

Economic activity in the United States declined from the middle of 1929 through the first few months of 1933. This four-year decline was not smooth, but it was nevertheless an unprecedented and bewildering fall in production. Industrial production declined by 37 percent, prices by 33 percent, and real GNP by 30 percent. Nominal GNP, therefore, fell by over half. Unemployment rose to a peak of 25 percent and stayed above 15 percent for the rest of the 1930s. There were many idle economic resources in America for a full decade. Only with the advent of the Second World War did employment rise enough to absorb the full labor force.

This large event has to be evidence either of a great instability in the economy or of a great shock to it. Traditional scholarship tended to emphasize the former; recent work concentrates on the latter. An older view saw events in the United States in isolation. More recent scholarship insists on the international scope of the Depression and the need to see the United States in an Atlantic if not a world perspective.