What caused the Great Depression? When I was in high school, I learned it was primarily due to over-speculation in many areas of the economy – especially the stock market. Combine all that over speculation, over-leveraging, and lack of proper banking controls based on the risky profiles of those investments that was common in that era, and you had a house of cards ready to collapse. It was the same reason we got the 2008 housing bubble – over-speculation (based on lending to people who should not have qualified for loans) and lack of managing risk profiles.
Is that what kids today learn though? What if I told you a recent review showed that most college level history texts attribute the Great Depression to a long-debunked New Deal notion of ‘under consumption’? That’s something I never heard before – even in high school. It had been debunked that long ago.
Perhaps this is one reason why college degrees are increasingly not working out for young people – because you’re getting a much more inferior degree these days.
This argument [under consumption] attained popularity in the early 1930s, and was used to justify many of the economic planning and regulatory programs of Franklin Delano Roosevelt’s New Deal. Economists today overwhelmingly reject “under consumption” theory.
The charts shows that US history instruction, including at the college level, is badly out of sync with the scholarly literature on the Great Depression.
The resulting treatment of the Great Depression in US history textbooks does little to educate students about the actual causes of the Great Depression. It does, however, privilege obsolete political arguments from the early 1930s that were used to justify the New Deal.