I posted this in another thread but it got no attention.
I was looking into the effects of the Long Depression. After reading the relevant part in Rothbard's History of Money and Banking in the USA I am in doubt as to whether or not there was a depression. The data on the wikipedia page shows positive GNP growth every dacade (in Europe) from 1870 to 1900. The discussion page for the article says:
It seems to me this article has some contradictory information and doesn't really explain clearly any consensus of what the "Long Depression" actually was, whether it was a Depression at all, and what its effects were. Could someone with knowledge of the economies of this time period possibly clarify and clean up this article?
From Rothbard's book, p.154-155
Orthodox economic historians have long complained about the “great depression” that is supposed to have struck the United States in the panic of 1873 and lasted for an unprecedented six years, until 1879. Much of this stagnation is supposed to have been caused by a monetary contraction leading to the resumption of specie payments in 1879. Yet what sort of “depression” is it which saw an extraordinarily large expansion of industry, of railroads, of physical output, of net national product, or real per capita income? As Friedman and Schwartz admit, the decade from 1869 to 1879 saw a 3-percent-perannum increase in money national product, an outstanding real national product growth of 6.8 percent per year in this period, and a phenomenal rise of 4.5 percent per year in real product per capita. Even the alleged “monetary contraction” never took place, the money supply increasing by 2.7 percent per year in this period. From 1873 through 1878, before another spurt of monetary expansion, the total supply of bank money rose from $1.964 billion to $2.221 billion—a rise of 13.1 percent or 2.6 percent per year. In short, a modest but definite rise, and scarcely a contraction. It should be clear, then, that the “great depression” of the 1870s is merely a myth—a myth brought about by misinterpretation of the fact that prices in general fell sharply during the entire period. Indeed they fell from the end of the Civil War until 1879. Friedman and Schwartz estimated that prices in general fell from 1869 to 1879 by 3.8 percent per annum. Unfortunately, most historians and economists are conditioned to believe that steadily and sharply falling prices must result in depression: hence their amazement at the obvious prosperity and economic growth during this era. For they have overlooked the fact that in the natural course of events, when government and the banking system do not increase the money supply very rapidly, freemarket capitalism will result in an increase of production and economic growth so great as to swamp the increase of money supply. Prices will fall, and the consequences will be not depression or stagnation, but prosperity (since costs are falling, too) economic growth, and the spread of the increased living standard to all the consumers.
the “great depression” that is supposed to have struck the
United States in the panic of 1873 and lasted for an unprecedented
six years, until 1879. Much of this stagnation is supposed
to have been caused by a monetary contraction leading to
the resumption of specie payments in 1879. Yet what sort of
“depression” is it which saw an extraordinarily large expansion
of industry, of railroads, of physical output, of net national
product, or real per capita income? As Friedman and Schwartz
admit, the decade from 1869 to 1879 saw a 3-percent-perannum
increase in money national product, an outstanding
real national product growth of 6.8 percent per year in this
period, and a phenomenal rise of 4.5 percent per year in real
product per capita. Even the alleged “monetary contraction”
never took place, the money supply increasing by 2.7 percent
per year in this period. From 1873 through 1878, before
another spurt of monetary expansion, the total supply of bank
money rose from $1.964 billion to $2.221 billion—a rise of 13.1
percent or 2.6 percent per year. In short, a modest but definite
rise, and scarcely a contraction.
It should be clear, then, that the “great depression” of the 1870s
is merely a myth—a myth brought about by misinterpretation of
the fact that prices in general fell sharply during the entire
period. Indeed they fell from the end of the Civil War until 1879.
Friedman and Schwartz estimated that prices in general fell
from 1869 to 1879 by 3.8 percent per annum. Unfortunately,
most historians and economists are conditioned to believe that
steadily and sharply falling prices
must
result in depression:
hence their amazement at the obvious prosperity and economic
growth during this era. For they have overlooked the fact that
in the natural course of events, when government and the banking
system do not increase the money supply very rapidly, freemarket
capitalism will result in an increase of production and
economic growth so great as to swamp the increase of money
supply. Prices will fall, and the consequences will be not depression
or stagnation, but prosperity (since costs are falling, too)
economic growth, and the spread of the increased living standard
to all the consumers.
So was there a depression in the USA or not??
Irish Liberty Forum
uh
no?
Sadly, Keynesian "economic thought" dominates academia so "higher prices = higher prosperity".
Only for the east-coast banking establishment.