The Forgotten Depression: 1921: The Crash That Cured Itself

In 1920, U.S. industrial production, stocks, and employment plunged. In response, the government balanced the budget and raised interest rates. "By the lights of Keynesian and monetarist doctrine alike, no more primitive or counterproductive policies could be imagined," writes financial journalist Grant (Mr. Market Miscalculates) in this amusing economic history of the Progressive Era. Yet within 18 months the nation had recovered. The lesson, Grant emphasizes, is that government interference never helps the economy, and since the New Deal it has interfered with unimpressive results. The primitive state of business statistics did not prevent leading economists from giving advice that was, in typical pre-1930s fashion, ignored. No one ignored President Woodrow Wilson, whose activism was, in Grant's opinion, ineffective when it wasn't positively harmful. By 1920, Wilson had been immobilized by his 1919 stroke and his successor, Warren Harding, admitted his ignorance of economics and did little. Grant's free-market conservatism places him barely to the left of Glen Beck, sharing his nostalgia for the gold standard and contempt for progressives, especially Woodrow Wilson. However, Grant lacks Beck's dour, apocalyptic approach, which makes for a less painful introduction to laissez-faire economics and an undeservedly obscure historical crisis. Agent: Philippa Brophy, Sterling Lord Literistic. (Nov.)