Edited and written by David Gordon, senior fellow of the Mises Institute and author of four books and thousands of essays.

Austrian Influence

Summer 1998

Paul Johnson
Harper Collins, 1997, pp. 727-46
"Government Credit-Management and the Wall Street Crash"
"Why the Depression Was So Deep and Long-Lasting"
"The Failure of the Great Engineer"

I hope to review Mr. Johnson's massive work in the next issue of The Mises Review; but I cannot resist calling attention at once to the brief and brilliant section on the 1929 Depression.

Johnson, a world-renowned journalist and popular historian, adopts a thoroughly Rothbardian account of the onset of the Depression. Like Rothbard, he finds the source of the collapse in irresponsible credit expansion. "[D]uring the 1920s the United States, in conjunction with British and other leading industrial and financial powers, tried to keep the world prosperous by deliberately inflating the money supply" (p. 727).

The currency management was led by Benjamin Strong of the New York Federal Reserve Bank and Montagu Norman of the Bank of England, under the influence of John Maynard Keynes. "In fact Keynes's Tract [on Monetary Reform], advocating 'managed currency' and a stabilized price-level, both involving constant government interference, coordinated internationally, was part of the problem" (p.729).

The market crash of 1929 "ought to have been welcome.... Business downturns serve essential purposes. They have to be sharp. But they need not be long because they are self-adjusting" (pp.734-35). Unfortunately, Herbert Hoover did not realize this essential truth. Far from being a supporter of laissez-faire, he was an ardent interventionist whose policies impeded recovery. "Hoover was a social engineer. Roosevelt was a social psychologist. But neither understood the Depression, or how to cure it" (p. 736).

Again, the Rothbardian influence is evident. Johnson scrupulously cites Rothbard's works several times (pp. 1033-35).


Image of Mises Coat of Arms Ludwig von Mises Institute
518 West Magnolia Avenue
Auburn, Alabama 36832-4528

334.321.2100 Phone
334.321.2119 Fax
AOL-IM: MainMises

Contact us button
Mises.org Menu