Did government intervention make worse The Great Depression?

Laissez-faire economist Thomas Sowell has for years given "aid and comfort" to anti-government conservatives with his writings. In his latest column, Another Great Depression?, he attempts to lay the blame for the spiraling unemployment of that era squarely on the shoulders of government intervention under Herbert Hoover and especially FDR.

He begins by laying out the proposition that the stock market crash of '29 was not the cause of the "massive unemployment" that later followed. No argument here. However, it is fair to point out - and I would think somewhat superfluous to mention - that that single event was the direct cause of the instantaneous loss of literally billions of dollars of wealth. Clearly this was a warning of rough seas ahead.

Next Sowell mentions "the Smoot-Hawley tariffs" which "were passed, against the advice of economists across the country, who warned of dire consequences." Again true. A large number of leading economists warned Hoover about the danger of not vetoing this bill, but he stubbornly ignored their advice. Five months later, Sowell notes, unemployment hit double digits.

I'm still aboard until he makes this next point:

This was more than a year after the stock market crash. Moreover, the unemployment rate rose to even higher levels under both Presidents Herbert Hoover and Franklin D. Roosevelt, both of whom intervened in the economy on an unprecedented scale.

Here I have to object to the implication and do a bit of clarifying. The suggestion seems to be - at least as it is worded here - that as Hoover and his successor Roosevelt tinkered with the economy, unemployment continued to rise.

In fact, what happened was that unemployment had risen to 23.6% in Hoover's last full year as president, and reached a staggering 24.9% in 1933, FDR's first year as president (but remember that inauguration day back then did not take place until March).

However, by the following year unemployment had fallen to 21.7%, and then inched downward each year until the recession of 1937 & 38, when afterward it then resumed its downward trend. (I obtained these figures by consulting the Bureau of Labor Statistics.)

Therefore, Sowell's claim that

The rise in unemployment after the stock market crash of 1929 was a blip on the screen compared to the soaring unemployment rates reached later, after a series of government interventions

can be dismissed as obfuscation.

He unfairly links government interventions with the "soaring unemployment rates," rather than demonstrating the fact that unemployment began to decline after FDR's New Deal began to take effect. The soaring unemployment was instead the result of a domino effect of related events as the Great Depression took hold and spread across the world.

The truth is, although Sowell keeps mentioning a connection between the government intervention under Hoover and Roosevelt, he never bothers to demonstrate his thesis but is content to assume it throughout his column.

Sowell does correctly point out that "increasing numbers of scholars recognize that FDR's own policies were a further extension of interventions begun under Hoover." However, that Roosevelt went further in involving government directly with the economy than any other president ever had is beyond dispute. Therefore to connect the approaches of the two presidents the way Sowell does while ignoring the improvement that Roosevelt's extended approach made is dishonest.

Now I'm not arguing that FDR's New Deal was perfect. Many mistakes were made along the way because, as Roosevelt himself admitted, it was mostly experimentation. He was in totally uncharted waters. But it is clearly historical revisionism that is attempting to make the case that the New Deal made the Depression worse or prolonged it.

Moreover, if another Great Depression is avoided, it clearly will be in part because of some the government measures initiated by FDR that will guard against it. I'm thinking of such things as the FDIC, unemployment insurance and Social Security, not to mention the way Keynesian pump-priming was demonstrated effective.

For my part, I am eager for a new New Deal under President Obama.