I have heard it said that prior to the great depression, governments tended to let markets self correct and after they have always intervened in order to help them recover.
However, this list of US recessions on wiki seems to suggest that recessions before the great depression were longer, more severe and more frequent. That is, of course, ignoring the great depression itself (where one might argue that interventionists were learning their trade).
If this is the case, how can Austrians argue that governments should refrain from intervening if the historical evidence seems to show that it helps?
Ah, well I think I can answer my own question, at least in part. That wiki article uses nominal measures of economic activity and therefore ignoring the fact that prior to WWI, there was virtually no inflation and several periods of deflation which have the effect of making the recessions look worse, particularly when comparing them to the post war era of inflation.
Because at one point in time under the 1792 coinage act the people themselves had a way to create money. After the bankers were successful at getting rid of the free coinage of metals into money our monetary system competely switched over to a credit money system where by all new money is created as an interest bearing loan.
Here is a great article to read that discusses it. I hope this helps you better understand.
http://www.wealthmoney.org/articles/Our-Forefathers.html
A lot of depressions have been misidentified because economists look back and see - hey there was deflation - and then think it is automatically a depression. You need to look at other metrics like employment or %of income spent on food/shelter.
It would be awesome to see a Mises Daily on this.
The main cause of depressions is the lack of sound money (money backed by gold) which makes unsustainable credit expansions possible. Before the Federal Reserve was created in 1913, the US was full of "wildcat" banks that did basically the same thing the Federal Reserve does - print fiat money in the style of fractional reserve banking. So we had an unstable monetary system and lots of depressions. After the creation of the Fed, we had the ultimate credit expansion during the twenties and the ultimate depression in the thirties. Now the US economy is basically one giant, ongoing credit expansion and the whole thing will probably collapse eventually.
Also, according to GDP numbers, WWII was the most prosperous period in US history and our largerst recession came the year after the war ended when all our best workers came home and the private sector grew enormously. In other words, the numbers don't reveal the truth.
So, if you go back and look at all ye old depressions they're basically caused by a currency crisis from the US government getting off the gold standard for some period of time, usually a war. It wouldn't be so insane to say that the fed is an improvement over this. I mean, the fed is lame, but its methods coulds be more eloquent than what was previously done. I don't know if depressions really got shorter, but if it does, it doesn't bug me. Big whoop. ABCT still applies.
The notion that money and banking were unregulated before the Great Depression is hogwash. While the government may not have been particularly proactive in response to recessions, it heavily regulated money and banking in all manner of ways. The Fed was created to do for the banks something which they used to be able to do by themselves, i.e. adjust the quantity of outstanding liabilities with changes in demand. It was a classic case of creeping interventionism -- each intervention creates unforseen problems which lead to additional intervention and so on.