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Milton Friedman Explains the Great Depression


Published November 5, 2020

The Great Depression created the perception that the government should continually stabilize the economy. As a result, the power of government has grown enormously. But we now know that government policies extended and intensified the Great Depression.

Discussion Questions

  1. Why did the government grow so rapidly during the depression?
  2. Did the government intervention stabilize the economy?

Additional Resources

  • Watch as Milton Friedman explains the Great Depression. Available here.
View Transcript

The Great Depression persuaded the public that private enterprise was a fundamentally unstable system, 

that the depression represented a failure of free market capitalism, 

that the government had to step in to perform the essential function of stabilizing the economy, of providing security for its citizens. 

The widespread acceptance of these views sparked the enormous growth in the power of government that has occurred in the decades since, and that is till going on. 

We now know that the truth about the depression was very different. 

The depression was made far worse by perverse monetary policies followed by the U. S. authorities. 

Ever since, government has been attempting to fine-tune the economy. 

In practice, just as during the depression, far from promoting stability, the government has itself been the major single source of instability.