BOOM AND BUST IN THE AMERICAN ECONOMY

The U.S. economy, over the long term, has been a huge success story. Rising productivity has brought economic growth, low unemployment, and rising real wages. But for various reasons- ranging from hiccups in the financial system to the natural swings between optimism and pessimism that John Maynard Keynes referred to as “animal spirits ”- the progression toward increasing prosperity has not always been smooth. The National Bureau of Economic Research chronicles thirty two recessions between 1854 and 2001. Recessions were generally short, lasting less than two years-until the Great Depression. (Business Cycle Expansions and Contractions, 2001) The Depression began with a stock market crash on October 29, 1929 – “Black Tuesday”. It held on for more than ten years, with unemployment never falling below nine percent until the World War II draft began to take twelve million soldiers out of the civilian labor force. But, within the Great Depression itself, there were pronounced variations in economic activity. Why Did the Great Depression Last More than a Decade? The writer recalls a conversation from decades ago between a respecte