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'Blood and treasure': exiting the Great Depression and lessons for today

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  • Kris James Mitchener
  • Joseph Mason
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    Abstract

    Although avoiding the policy mistakes of the 1930s helped define how policy-makers responded to the 2007--8 financial crisis and ensuing recession, policy applications to the recovery phase are less well understood. We draw on the experience of the US in the 1930s to shed light on exit strategies--movements back to institutional conditions associated with steady-state growth, including stable inflation and broadly non-interventionist credit- and capital-market policies. We describe how policy responses to the deflation and banking crises of the 1930s coloured the exit policy debate after the Great Depression. We show that a full exit from the Great Depression, defined as the point at which interventionist credit- and capital-market policies and institutions were wound down did not occur in the 1930s. It took until the 1950s for this to occur and for the Federal Reserve to regain its independence and return unfettered to its longer-run objectives. Copyright 2010, Oxford University Press.

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    File URL: http://hdl.handle.net/10.1093/oxrep/grq025
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    Bibliographic Info

    Article provided by Oxford University Press in its journal Oxford Review of Economic Policy.

    Volume (Year): 26 (2010)
    Issue (Month): 3 (Autumn)
    Pages: 510-539

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    Handle: RePEc:oup:oxford:v:26:y:2010:i:3:p:510-539

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    Web page: http://oxrep.oupjournals.org/

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    Cited by:
    1. Crafts, Nicholas; Fearon, Peter, 2010. "Lessons from the 1930s' Great Depression," CAGE Online Working Paper Series 23, Competitive Advantage in the Global Economy (CAGE).

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