Milton Friedman on Great Depression

“The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy.”

“The major lesson of the Great Depression that has affected our lives is the wrong lesson, a misinterpretation of the Great Depression. There is no doubt that the major lesson that was in fact learned from the Great Depression, whether it should have been or not, was the lesson that you could not count on the private enterprise system to maintain prosperity and that you had to rely heavily on government to play a major role. If you take the period before 1929, so far as public opinion in general is considered, government was regarded as a necessary evil. I think there was widspread support for the kind of views that Jefferson had expressed a century and a half erlier on the virtues of a small government and of limiting the role of government. The Great Depression changed that because the lesson that the public at large learned from the Great Depression was that it was the result of a failure of business, a failure of capitalism, that big business had let them down, and that in order to be safe in the future they would have to rely much more heavily on government. That was the lesson that was in fact learned from the Depression. As you know, in my opinion, the lesson that should have been learned, the right lesson, was that government let them down. That it was mismanagement of the monetary system that produced it and not a failure of the market system. But there is no doubt what the actual lesson learned was.”