“A Chinese translation of Murray Rothbard’s America’s Great Depression very recently has been published in the People’s Republic of China, for which I have written the introduction.
For nearly three-quarters of a century, now, Keynesian Economics, or variations of its “macroeconomic” approach, have dominated ideas and policies about the causes of and cures for the booms and busts of inflation’s and recessions. But about 55 years ago, Murray Rothbard’s America’s Great Depression reminded people there was a better and far more insightful way for understanding these economic ups and downs — the “Austrian” theory of the Business Cycle.
Rothbard applied the monetary and business cycle contributions of Ludwig von Mises and Friedrich A. Hayek to explain that the Great Depression was the result of misguided Federal Reserve policies that attempted to maintain price level stabilization at a time when economic growth and cost efficiencies would have brought about slowly falling prices. The Federal Reserve’s monetary expansion and interest rate manipulation resulted in an unsustainable imbalance between savings and investment that finally “broke” in 1929 and 1930.
The “activist” policies introduced by the Herbert Hoover Administration, Rothbard chronicled, prevented the necessary wage and price adjustments, and resource reallocations that could have brought recovery, rebalancing and sustainable economic growth and full employment in a far shorter period of time. As well as introducing misplaced government fiscal and other interventionist policies that exacerbated the depth and duration of the Great Depression.
Keynesian economics only succeeded in shunting economic theory and policy onto the wrong track. The “aggregate” approach of focusing on superficial and artificial statistical constructions of Aggregate Demand and Aggregate Supply, General Price and Wage Levels, and Total Output and Employment as a Whole, has only hidden from view what really makes a market economy function and the government policies that can throw market relationships systemically off balance.
Rothbard’s America’s Great Depression is a valuable historical guidepost for modern Chinese monetary and fiscal policy, as much as for in the United States.”