Economic Facts and Fallacies

by Thomas Sowell

As for the 1929 stock market crash, unemployment never reached double digits in any of the 12 months following that event. Unemployment peaked at 9 percent, two months after the stock market crashed, and began drifting generally downward until it reached 6.3 percent in June 1930. That was when the federal government made its first major intervention in the economy, with the Smoot-Hawley tariff. After that intervention, the downward movement in unemployment rates reversed and shot up far beyond the level it had reached in the wake of the stock market crash. Within six months of the first major federal intervention, unemployment reached double digits at 11.6 percent in November 1930. After a series of additional large federal interventions in the economy, unemployment stayed in double digits for the remainder of the decade. An economic analysis published in 2004 concluded that government interventions had prolonged the Great Depression by several years.3