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The Great Depression and History Textbooks - by Thomas F. Cargill and Thomas Mayer

* The authors express their appreciation to two referees and to the Washoe County School District, Nevada, for making the history textbooks available and especially thank Deborah Banks of the District for her assistance. They express appreciation to Elliott Parker and Gary Walton for commenting on an earlier draft, to Leonard Wohletz for research assistance, and to Peter Temin for permission to quote at length from his paper on the Great Depression to be published in the Cambridge History of the United States by Cambridge University Press (anticipated in 1999). All errors and interpretations, however, remain the responsibility of the authors.

The History Teacher Volume 31 Number 4 August 1998

© The Society for History Education

This paper evaluates the treatment of the Great Depression in a sample of twelve history textbooks, and asks whether it is compatible with the findings of current research. We find a large gap between what students are taught through these books and what researchers think about the Great Depression. The sample consists of history books under consideration as high school textbooks in 1997 by the School District of Washoe County, Nevada, the second largest county in Nevada which includes the cities of Reno and Sparks. We believe that on the whole it is representative of the history texts used or being considered throughout the country, even though, at least one of the books (Mason, et al., 1997) is intended mainly for the 8th grade by the publisher.¹ We do not claim that our criticism applies to all the available American history textbooks. The books included in the sample are: Bailey and Kennedy (1994), Boorstin and Kelley (1996), Boyer (1998), Boyer et al. (1996), Boyer and Stuckey (1998), Bragdon et al. (1996), Clayton et al. (1998), Downey et al. (1997), Faragher et al. (1997), Mason et al.(1997), Nash (1997), and Unger (1995).²

There is much that is admirable in their treatment of the Great Depression. Their style is clear and compelling, and they bring to life the feelings and suffering of people at the time. But the discussion of the Great Depression in all the textbooks we reviewed differs at important points from the prevailing views of present day researchers and presents a misleading view of this period. Although such a disregard of recent research is not confined to the Great Depression (e.g., Loewen, 1995, p. 5), it needs to be explored and identified, given the impact the Great Depression has had on public policy in the United States and throughout the world. It played a major role in the shift from the classical, non-activist mode of thinking to the Keynesian, activist mode. Moreover, the depression in the United States resulted in great unemployment in Germany, which in turn contributed to Hitler's assumption of complete control over Germany (Kindleberger, 1995, pp. 176-177 and Shirer, 1960, pp. 135-149).

Our criticism is not that these books present an overly simplified discussion. We realize time limitations in a survey course prevent a thorough treatment of any single topic, and that these books must satisfy the needs of a wide variety of students. But these constraints do not justify attributing the Great Depression to some factors that most specialists in this field no longer take seriously, and giving insufficient emphasis to those facts that modern specialists do take seriously. It should be no more difficult to point to the drastic decline in the money supply than to point to the rising income inequality or the stock market as a cause of the depression.³

Similarly, although we focus on some factors that our sample of books omits or downplay, we recognize that the world is complex, and do not deny that many additional factors also played some role. But we see no reason why these books should treat as major causal factors, factors that are no longer taken seriously be contemporary researchers. There is also a matter of emphasis. Six of the twelve books do cite either bank failures and/or Federal Reserve policy as factors causing or exacerbating the Great Depression, but they do not give them nearly as much emphasis as contemporary research does. Even when they do mention the Federal Reserve they tell the story of the Great Depression mainly in terms of presidential actions and put much too little emphasis on Federal Reserve policy.

We do not mean to paint all the books with the same brush and recognize there are differences among the sampled books. Our purpose, however, is not to evaluate particular books, but to deal with the large gap that appears even in the best of these books between what most experts think and what students are taught. Thus, we focus on the overall story told by these books and not on the differences between the books.

We are not the first to criticize the treatment of the Great Depression in high school history textbooks. Fifteen years ago Miller and Rose (1983) examined a sample of 16 secondary history textbooks with copyright dates ranging from 1977 to 1982 and found that they ignored the contribution of Friedman and Schwartz (1963), who had emphasized policy errors on the part of the Federal Reserve as the cause of the Great Depression, and that they overemphasized the role of the stock market crash.

While Miller and Rose were probably reporting the developing consensus view correctly in 1983, it was not yet possible to document conclusively on the basis of the published literature that it was indeed the consensus view. Thus the authors of the books they criticized might perhaps have replied (though wrongly, we believe) that they, and not Miller and Rose, were reporting the consensus correctly. Moreover, they could have claimed (though somewhat questionably) that the Friedman-Schwartz interpretation of the Great Depression was still too new and untested to be included in high school history textbooks.

Neither of these responses is applicable to our paper. We have available and have used two canonical statements of the current consensus. And of the textbooks we examined ten have copyright dates ranging from 1996 to 1998 and the other two copyright dates of 1994 and 1995. By now a claim that the modern view of the Great Depression is too new and untested to form the basis of textbook discussion can no longer be sustained.

Two issues need to be settled before turning to our sample of books. First, how does one define "current research"; and second, how do we define the Great Depression period? There is no single canonical source that can be labeled "current research on the Great Depression", but two useful sources are Whaples' (1995) survey of the opinions of American economic historians and economists, and a survey article on the Great Depression prepared for the Cambridge Economic History of the United States by Peter Temin (1994), the leading Keynesian authority on this event.

We define the period of the Great Depression as the following sequence of events: A sharp economic downturn that economists date as starting in August 1929 (that is before the stock market crash which occurred October 1929) and ending in March 1933, followed by a recovery until May 1937 that, since it began from such a low level, left the economy still operating well below capacity, when in May, 1937 it was succeeded by another recession that lasted until June 1938.

The remainder of the paper consists of six sections. In section I we discuss several significant omissions in the treatment of the Great Depression in the textbooks. Sections 2 and 3 present modern accounts of the stock market crash and of the causes of the Great Depression, respectively. In Section 4 we then contrast these modern accounts with the accounts presented in the textbooks. Section 5 offers two possible explanations for the gap between the presentation of the Great Depression in these books and modern accounts. A short concluding section ends the paper.

1. Omissions

Textbooks must inevitably omit much material. Nonetheless, room should be found for important characteristics of the Great Depression that are ignored by all or many of the textbooks. There are three significant omissions, in terms of declining importance: First, most ignore the work of Friedman and Schwartz (1963) and others, who have identified policy errors by the Federal Reserve as a major cause of the length and depth of the decline from 1929 to 1933 and the subsequent sharp economic decline from May 1937 to June 1938. Because of its importance this is discussed separately in Section 3. Second, while some of the textbooks discuss the international aspects of the Great Depression, they do so in a limited and misleading context. Third, the textbooks ignore the significant effects that declining prices had on debt burdens of both businesses and households, as well as adverse effects that the National Recovery Act (NRA) had when it attempted to raise prices.

Although recent scholarship has stressed the international aspect of the Great Depression (e.g., Eichengreen, 1992), many of the texts discuss this aspect primarily in connection with tariffs. But all students should learn that the "global economy" is not new, that the Depression spread outward from the United States to virtually all countries. The depression in other countries then, in turn, weakened the United States economy.

The gold standard tied currencies together. Unless a country left the gold standard, restricted foreign trade or capital flows, or depreciated its currency, it would have lost gold if it had raised income by expansionary monetary or fiscal policies, because imports would have risen along with income. There are valuable lessons here, both about interdependence and about the need to have abandoned outmoded policies such as the gold standard.

Some of the texts discuss the eviction of farmers and homeowners who could no longer service their mortgages and other debts. But they fail to explain that much of the debtors' distress was due to the rising real value of those debts as the price and wage levels fell. Many businesses failed for the same reason. And with debtors failing, their creditors, such as banks, too, suffered losses.

These damaging effects of deflation provide a rationalization for the National Recovery Administration's (NRA's) attempts to raise prices. However, by raising prices the NRA had an undesirable effect on the economy. With the nominal supply of money falling substantially after 1930, raising prices (or restricting the decline in prices) reduced the real value of the money supply even further, and this in turn reduced real expenditures. Although the textbooks discuss the undesirable effects of the NRA's bias in favor of big business, none mention this contractive effect on real expenditures, and hence on employment. Yet it is likely that at least many, probably most, economists consider this contractive effect more important than the aid and comfort the NRA gave to big business.

The falling price level from 1930 to 1934 also had another important effect. Since wages fell less than prices, hourly real wages rose, so that on average those workers who kept their jobs and did not have their hours cut, enjoyed higher real incomes. In 1934, average hourly earnings were almost twenty percent higher than in 1929 (Temin, 1976, p. 139), a point missed by some texts (e.g. Boyer and Stuckey, 1998 p. 33 1) which inform students that those workers who kept their jobs suffered wage cuts. What is important is the real wage rate and not the nominal wage rate.⁴

2. The Stock Market

Most of the textbooks attribute great importance to the stock market, depicting in sensational language the rapid rise of stock prices in the 1920s, sometimes describing it as a "mania." (e.g., Boorstin and Kelley, 1996, p. 601.) Although they do not say so explicitly, most give the impression that the subsequent crash was the inevitable (and just?) punishment for a speculative frenzy, and also a major cause of the Great Depression. Modern research is much less confident that the stock market boom was so bizarre. Earnings and dividends were rising rapidly in the 1920s, as new technology and modern management techniques were widely applied. Projecting these advances into the future would seem to justify a great rise in stock prices.

It may well be that even these fundamentals did not warrant the market's extraordinary rise from 1927 to October 1929. Several economists who investigated whether the rise in stock prices was justified by fundamentals or was just a speculative bubble have reached different results, and Temin (1994 p. 5) concludes that "the jury is still out." One can make a reasonable case that perhaps in September 1929 the market was significantly overvalued, but not to an extent that - given the inevitable uncertainty about the fundamental values of stocks - was entirely unreasonable. Nor was the rapid rise in stock prices all that much out of line with recent experience. Stock prices (as measured by the Standard and Poor 500 Index) rose seventy-two percent from September 1927 to their monthly peak in September 1929, while from December 1994 to December 1996 they rose by sixty-three percent and have risen substantially since then.⁵ Since the Index is not adjusted for inflation, and prices were gently falling in 1928 and 1929, while rising by six percent between December 1994 and December 1996, the real difference between the rise in stock prices in the two periods is about seven percent greater than the above-cited difference. But even so, the difference is not overwhelming.

Moreover, while nobody would claim that the stock market crash had a favorable effect on business conditions, most economists now see it as a far from dominating factor (e.g., Green, 197 1). As Temin (I 994, pp. 6-8) reports:

time has not been kind to the school of thought that blames the Depression on the stock market crash. The stock market has gone up and down many times since then without producing a similar movement in income.... If the crash of 1929 was an important independent shock to the economy, then the crash of 1987 should have been equally disastrous.... Stocks retained the major part of their values after each crash.... The stock market crash in 1929 helped communicate the Fed's tight monetary policy throughout the economy. But it was not a strong or independent force of its own.... That is not to say that the crash of 1929 had no effect. As part of the propagation mechanism the stock market crash had several effects. It reduced private wealth by about 10 percent. It increased consumers' leverage, that is the ratio of their debts to their assets. And it no doubt increased consumers' uncertainty about what the future would bring. Each of these effects tended to depress consumer expenditures.... The American economy experienced a fall in consumption in 1930 that was too large to be explained easily.

This is not a unanimous view. Christina Romer (1990) gives the stock market crash a much larger role. She argues that the 1929 crash (unlike the 1987 crash) created great uncertainty. Greater uncertainty then made households reluctant to purchase durables, and thus use up savings they might need for living expenses if they became unemployed, or to take on additional debt. All the same, it is highly doubtful that nowadays many economists ascribe to the stock market crash as important a role as many of the texts imply.

3. What Caused the Great Depression?

Two separate questions, which may have quite different answers, should be distinguished here: first, why did the economy turn down in August 1929; and second, what made this downturn so severe and prolonged? Nonmonetary factors, such as falling demand for housing and low prices for farm products, may have been responsible for the initial downturn, but what turned it into the Great Depression was inept monetary policy. It is important to draw a sharp distinction between the explanation of the initial downturn and the explanation of its length and severity. The United States economy has experienced many downturns, several of them severe, but only once the catastrophic decline in economic activity that took place in the 1930s.

One need also keep in mind that more than one answer may be appropriate to the question, what is the "cause"; for example, someone might call the structural weakness of the banking system the "cause" of the Depression, and yet agree that if the Federal Reserve had done what it should have, it would have salvaged the banking system, and there would not have been a Great Depression. Someone else, who attributes the Depression to the same two factors, might call the Federal Reserve's failure to do its job "the cause".

Most modern discussions of the causes of the Great Depressions fall into four groups. Many scholars have, more or less, accepted the Friedman-Schwartz (1963) interpretation that in its wish to curb the stock market boom the Federal Reserve generated the August 1929 downturn. (e.g., Hamilton, 1987.) And although Friedman and Schwartz were not the first to attribute the Depression's length and severity to a restrictive monetary policy which generated bank failures and a drastic fall in the money supply, it is their work that proved persuasive, rather than Clark Warburton's earlier efforts.⁶

Friedman and Schwartz blame the Federal Reserve, not just for initiating the restrictive policy that resulted in the 1929 downturn, but even more for maintaining a restrictive policy far into the Great Depression. As they point out, the Federal Reserve did not undertake expansionary open market operations until 1932, and even then these were small-scale and short-lived. Nor did it aggressively use the discount window to make loans to banks. With the Federal Reserve not maintaining bank reserves as a frightened public drew currency (and thus reserves) out of banks, three massive waves of bank failures (1930, 1931 and 1933) occurred. As a result, the (broadly defined) money supply (currency and all bank deposits) fell by one-third.⁷

Then, in 1936-1937 the Federal Reserve doubled reserve requirements in the belief that since banks had by then accumulated substantial excess reserves, this would have no effect on the money supply. But, argue Friedman and Schwartz, since the banks wanted to hold large excess reserves as protection against runs, they responded by reducing their deposits by making fewer loans, so that the money supply fell, and a sharp recession occurred in 1937.

Prior to the passage of the Federal Reserve Act, when runs by depositors threatened the banking system, banks collectively agreed not to pay out currency, while still allowing depositors to transfer funds by check. This avoided widespread bank failures that would have reduced deposits and hence the money supply. But the Federal Reserve Act prohibited such a suspension of currency redemption because the Federal Reserve was now supposed to prevent massive bank failures by injecting needed reserves. Since the Federal Reserve did not do so, Friedman and Schwartz see the Great Depression primarily as the fault of the Federal Reserve, that is as the fault of the public sector, not of the private sector. They attribute the Federal Reserve's failure to its faulty perception of monetary theory and policy, as well as to personality clashes within the Federal Reserve. Cargill (1992) provides evidence of these elements in a historically significant letter written by Irving Fisher to Clark Warburton in 1946.

Some economists, such as Temin (1976), have challenged Friedman and Schwartz's analysis, and argue that a more expansionary Federal Reserve policy in the early 1930s could not have prevented the collapse of the banking system because banks had been weakened in the 1920s by the agricultural recession caused by the low prices of farm products as well as by major instances of fraud. But in light of the clear policy errors made by the Federal Reserve in the 1930s, combined with the accumulated theory and practice of central banking over the past two hundred years, it is difficult to push this argument far enough to claim that the Great Depression was primarily a manifestation of private market failure.

Friedman and Schwartz's criticism of the Federal Reserve's role in the Great Depression has found many supporters. For example, in a best selling book on the Federal Reserve, Secrets of the Temple, William Greider (1987, pp. 301-303), who disagrees with Friedman and Schwartz on many other issues, also criticizes the Federal Reserve for following a restrictive policy. In a recent study Charles Calomiris and David Wheelock (1997, pp. 3-4) write: "By almost any measure, the monetary policy of 1930 to 1933 was a disaster.... [M]ost economists and economic historians blame the Fed's policy on misguided policy rules, as well, as on petty jealousies that limited the Fed's ability to respond decisively to rapidly changing conditions."

The Whaples survey asked a sample of economic historians and economists whether they agreed with the following statement:

Throughout the contractionary period of the Great Depression, the Federal Reserve had ample powers to cut short the process of monetary deflation and banking collapse. Proper action would have eased the severity of the contraction and very likely would have brought it to an end at a much earlier date. (Whaples, 1995, p. 143)

Thirty-one percent of the historians and thirty-two percent of the economists agreed, while another forty-seven percent of the historians and forty-three percent of the economists agreed with provisos, so that only twenty-two percent of the historians and twenty-five percent of the economists unconditionally disagreed. The large proportion of economists and economic historians who ascribe such a critical role to policy errors by the Federal Reserve stands, as we shall see, in sharp contrast to the treatment of the role of the Federal Reserve in the sample textbooks.

A more recent interpretation of the Great Depression is similar to Friedman and Schwartz's in that it gives bank failures a central role, and does not deny that the resulting fall in the money supply had an important effect on the economy. But it stresses another channel by which bank failures depressed spending. This is through the credit side of banks' balance sheets. Only a small proportion of firms can obtain funds by selling securities on the open market. Small firms, and even many medium-sized firms, as well as some larger firms with weak balance sheets, have to borrow instead from banks or rely on other even more expensive forms of credit where these are available. Banks lend to small and relatively weak firms because they have an ongoing relationship with these firms that makes it worthwhile for them to monitor changes in the financial position of these firms. When a bank fails and is closed, the firms that borrowed from it now have to reestablish a borrower relationship with another bank. Even if they can find a willing bank eventually, in the meantime they are short of funds and may have to reduce employment. Many firms may fail because they cannot obtain timely bank financing.

A third explanation, or rather set of explanations, is a mixed bag that includes the previously discussed monetary explanation as only one of several factors (e.g., Eichengreen, 1992), and stresses international developments. World War I had destroyed the old order. The gold standard that had been painfully reestablished in the 1920s could not function as smoothly as had the old gold standard, in part, because the changed role of the United States from a debtor to the predominant creditor had not been accompanied by a sufficient readiness by the United States to allow the needs of the international gold standard to take precedence over domestic policy needs. More generally, the gold exchange standard which some countries had adopted in the 1920s was inherently unstable. Furthermore, in many countries left-wing parties had gained a greater say, and they were less willing to sacrifice employment to maintain the gold standard. In addition, the wartime expansion of American agriculture had led to large surpluses once European agriculture recovered, and the resulting fall in the prices of agricultural products and farm land seriously weakened rural banks. And rising tariffs and other trade barriers choked off international trade. Some economists, but not others (e.g. Temin, 1994) think that the Smoot-Hawley tariff seriously weakened the American economy.

Finally, there is a set of explanations referred to as the spending hypothesis, that focuses on specific types of spending. Thus Temin (1976) argues that in 1930 there was an autonomous and inexplicable drop in consumption. Other economists have attributed at least some of the severity of the Great Depression to a decline in residential construction induced by demographic changes (e.g., Anderson and Butkiewicz, 1980). These nonmonetary views, which -were very prominent in the 1930s, do not necessarily reject policy effors on the part of the Federal Reserve as an important factor, but place more emphasis on other factors that caused spending to decline.

4. The Causes of the Great Depression
as Presented by the Textbooks

The Appendix summarizes most of the causes discussed by our sample of textbooks.⁸ They tell a very different story from the one just summarized. Most give the stock market crash pride of place. Not only is it the first factor they discuss, but they do so at length, and often in a sensational manner that surely fixes the crash in the students' mind more than the other causes they discuss. It is true that some of them warn against seeing the crash as the only or the dominant cause of the Depression. For example, Nash (1997, p. 421) writes: "It is tempting to see a landmark event like the stock market crash as the cause of the Great Depression. In reality, however, trends, decisions, technology and foreign relations all contributed." But such warnings do not erase the overall impression that the crash was the most important cause. Unger (1995, p. 720) tells his readers: "The collapse of the stock market when business was already weakened by declining consumer demand and a shaky international economy brought the entire economy down with a resounding crash."

The books are unanimous in claiming that income inequality prevented workers from buying enough of what industry could produce, thus accepting what is referred to as an "underconsumption" theory of the business cycle.⁹ Such theories were popular during the 1930s, but are no longer taken seriously or even discussed by most economists. A rare discussion appears in Temin's (1994, p. 5) survey article, who dismisses it as follows:

This evidence is not persuasive. Profits rose as a share of National Income in the 1920s. The rise was about 5 percent of National Income. If the propensity to consume was ten percent lower among capitalists than among workers, then the decline in consumption caused by the shift of income was only .5 percent of National Income. This is far too small a decline to have been a potent factor in the Depression; consumption fell by 10 percent in 1930 alone. Housing construction also frequently moves to its own rhythm, and the rapid fall in automobile sales is consistent with almost any story of the Depression.
"Underconsumption," and its converse "overproduction" are not useful concepts in the investigation of the Great Depression.

Another cause, cited by all but one of the textbooks, is overproduction, or excess capacity in certain industries, such as automobiles.¹⁰ Although the idea that general overproduction is the cause of business recessions has long historical roots, it is not taken seriously in modem economics. However, the idea that certain industries such as automobiles and construction had overexpanded by the late 1920s is part of the previously discussed spending hypothesis. Yet probably only a few economists would consider it a major "cause" of the Great Depressions, but more would consider it an exacerbating factor.

Only half of the books mention a set of factors that many students of the Great Depression put into first place, Federal Reserve policy, bank failures, and the fall in the money supply. None of the books discuss the limited availability of bank credit to small firms that resulted and none present a discussion of these influences even close to what researchers have learned about the monetary side of the Great Depression in the past three decades. The National Standards for United States History (1996) are also deficient in these respects.¹¹ The readers of these textbooks would surely be surprised to learn that many economists blame the Federal Reserve for much of the severity and length of the Great Depression. By their silence about Federal Reserve policy most implicitly blame the private sector for the Great Depression. It would be more in line with current research to blame the private sector for the weakness of the banking system, and the public sector (the Federal Reserve) for not fulfilling its designated role as the lender of last resort.

To illustrate the gap between the views of researchers and the way the textbooks treat the Federal Reserve's role in the Great Depression consider Boorstin and Kelley' treatment of the Federal Reserve's responsibility for the waves of bank failures from 1930 to 1933. As already demonstrated, many economists and historians believe that the Federal Reserve had "ample power" to keep the money supply from failing and to prevent extensive bank failures, but Boorstin and Kelley (1996, p. 605) tell students that:

In the Federal Reserve Act of 1913 Congress had tried to reduce public fears over bank failures.... If a run did start, the banks could get prompt help from their district's Federal Reserve banks. But this system could not stand up under the severe strains that came with the stock market crash.

The textbooks generally treat the Great Depression as a single unit, and do not mention the substantial expansion that started in March 1933, and the subsequent recession in 1937. Those that do discuss the 1937 recession usually attribute it to restrictive fiscal policy. Only one of them blames monetary policy. It is unlikely that many economists would entirely absolve monetary policy, with its doubling of reserve requirements, from much of the blame for this recession.

Most of the books cite international factors and agricultural distress as both a cause and an effect of the Great Depression, and the emphasis given to them is, more or less, in line with current professional views. However, the books do not explain the strains created by the gold standard, perhaps because that would take considerable explanation.

5. Why Does Such a Large Gap Exist?

What explains the wide disparity between the account of the Great Depression given in these textbooks and modern accounts? Part of the explanation is probably that the textbooks are unduly influenced by the accounts that were popular during the late 1930s.¹² After all, it should not be surprising if historians pay much attention to contemporaneous accounts. When the subject matter is the feelings and suffering experienced at the time, that is certainly appropriate. But when one is trying to explain the causes of the Depression, then contemporary accounts should take a back seat to those that scholars give now. We have learned much about business fluctuations in the last five decades.

Related to this possibility is the lack of training in economics of those who write high school textbooks.¹³ History is a subject that cannot be taught in isolation from economics since economic forces have played a major role in the evolution of societies. Historians at times downplay economics and economic history as merely technical views that are too difficult to introduce in a survey course or have little importance. However, we have demonstrated in this paper that this is not the case with respect to the Great Depression. The causes of the Great Depression and the role of government is an economic issue.

Another possibility is the ideological predisposition to favor government intervention that Loewen (1995, pp. 229-230) discusses. This interpretation gains credibility from the highly laudatory way these textbooks treat a related topic, the evaluation of the New Deal. By contrast when the Whaples' survey asked whether: "Taken as a whole, government policies of the New Deal served to lengthen and deepen the Great Depression,": twenty-seven percent of the economists and six percent of the historians agreed, while another twenty-two percent of the economists and twenty-one percent of the historians agreed with provisos. Thus, only about half of the economists and three quarters of the historians disagreed fully with the statement that the New Deal lengthened and deepened the Great Depression. Not a hint of that shows up in the textbooks, which cite as criticisms only statements from sources like President Hoover, the Liberty League, or business interests, that to modern ears sound highly ideological, naive, or self-serving. Obviously, such statements were made, and their tone probably represents accurately the majority of the contemporaneous criticisms. All the same, one might wish that the texts would also discuss some of the more sophisticated criticisms, or else avoid evaluation altogether because of the complexity of the issue.¹⁴

6. Concluding Comments

Thus, on many important issues the sampled textbooks do not present a balanced summary of the current thinking of experts on the Great Depression. Two "causes" of the Great Depression that they emphasize, income inequality and under-consumption, are no longer taken seriously in the specialized literature. The prominent role they attribute to the stock market crash is at variance with most current research on this issue. The role of the Federal Reserve and of the decline in the supply of money and credit receive much too little attention. The possibility that the severity and length of the Great Depression were due more to the failure of the public sector (the Federal Reserve) than of the private sector is not even mentioned.

Finally to the authors of this paper, coming from the fields of economics and political economy, in which disagreement is freely acknowledged, it seems strange that highly controversial statements are presented with an air of certitude that seems more appropriate to statements such as: "George Washington was the first president."

Notes

1. Letter from Christopher R. Johnson dated January 21, 1998.

2. The following books in our sample were adopted by the Washoe County School District: Mason et al. (1997) for proficiency level high school; Clayton et al. (1998) for regular level high school; and Boyer et al. (1996) for honors/academic program level high school.

3. We do, however, concede that one important aspect of the modern discussion of the Great Depression, the reason why the Federal Reserve followed the policies it did, is too difficult to cover at the high-school level.

4. This illustrates another omission in the textbooks, though not nearly so important as the ones focused on in this paper. Many of the texts cite some specific dollar figures, for example, the $0.40 minimum wage or the $30 per month paid to Civilian Conservation Corps workers. Such figures are likely to mislead students who will tend to think of these values in terms of their present-day purchasing power. It would therefore be useful to state them also in terms of current dollars. Price indexes can easily be used to show the equivalent in 1996 dollars of a dollar in the 1929-40 period; however, one should keep in mind that the Consumer Price Index overstates the inflation rate (e.g., Boskin et al. 1997; Gordon and Griliches, 1997). It might also be useful to warn students that real wages were much lower in the 1920s and 1930s then currently.

5. See Board of Governors, Federal Reserve System (1941 P. 481) and Executive Office of the President (1995, 1996, pp. 3 85, 407).

6. Temin (1976) provides the most sustained criticism of Friedman-Schwartz's treatment of the Great Depression. For brief surveys of the debate see Cargill (1991, Ch. 25) and Mayer, Duesenberry and Aliber (1996, Ch. 27). The work of Warburton, which was acknowledged by Friedman and Schwartz, is extensively reviewed in Bordo and Schwartz (1979) and Cargill (1979, 1980). Many of Warburton's most important papers appear in Warburton (1966).

7. The narrowly defined money supply, currency and checking deposits fell by about one quarter.

8. Some of the entries in this Table are somewhat arbitrary. For example, for the Unger book we have made an entry for bank failures, even though they are not listed under "causes", because, given the way they are discussed, they could well be considered a factor that turned a recession into the Great Depression.

9. Income inequality rose in the 1920s. Some books just refer to income inequality per se, rather than to rising inequality. We have listed them along with those that refer to rising inequality, though it is hard to see how a constant level of inequality can cause a depression.

10. General overproduction is often hard to distinguish from underconsumption. In deciding whether to list it as a separate category in Table 1 we relied on the general impression that the book gives.

11. According to the National Center for History in the Schools (1996, P. 117) for grades 5-12, Standard 1 titled "The causes of the Great Depression and how it affected American society" states: "...the student is able to:

Nowhere do these standards mention bank failures, Federal Reserve policy, or the possibility that public policy failure was at least as responsible as private market failure for the Great Depression.

In general the same criticism expressed in this paper with regard to the sampled books apply equally to the National Standards. There is a significant gap between how the National Standards view the Great Depression and modem accounts of the period.

12. Something that suggests a focus on the then contemporaneous explanations of the Depression is that many books refer to the growth of consumer credit in the 1920s. Consumer credit as a factor exacerbating economic fluctuations was discussed much more in the 1930s than it is now. We have not included consumer credit in Table 1 because, while it is frequently referred to as an unfavorable development during the 1920s, its relation to the Great Depression is usually left too vague.

13. Economists, too, are not always appreciative of the work done in related, but relevant fields (e.g. Hausman and McPherson, 1996).

14. Evaluating the New Deal involves complex issues that "tend beyond the history of the 1930s. The New Deal did not self-destruct at the end of the Great Depression, so that for an overall assessment its long-run effects need to be considered as well. Many of these may be beneficial, but not all. The idea of an ever-normal granary that rationalized the New Deal's agricultural policies turned into our current system of agricultural price supports, with their subsidies for wealthy farmers. The New Deal's enthusiasm for needed flood control projects subsequently provided the basis for excessive dam building resulting in much environment destruction. Its housing policies led to deplorable public housing projects. Deposit insurance, by allowing all but a small percentage of depositors to be unconcerned about the safety of their deposits, reduced the previous pressure on banks to follow conservative policies. That, like the New Deal's fostering of Savings and Loan Associations (S&Ls) and long-term amortized mortgages laid the foundation for the S&L debacle in the 1970s and 1980s. And its emphasis on attaining full employment led to the policies that generated high inflation in the 1960s and 1970s. These long term negative effects do not necessarily mean that on the whole the New Deal was not beneficial, but they illustrate that there are negatives as well as positives that should be presented if an evaluation is undertaken.

Appendix

Some Cited Causes of the Great Depression

Note: Table 1 does not include all cited causes

a. Does not include instances in which banks failures are discussed, but not as a cause of the Depression.

b. States that the stock market crash heralded the Depression, but does not list it under causes.

c. Calls stock market crash "only an overture" to the Depression.

d. Call stock market crash "only a prelude to a catastrophe economic decline".

e. States that "some historians" consider the uneven distribution of income to be the "fundamental cause".

f. Calls the stock market crash "the beginning of a terrible chain reaction", but does not list it under "causes" of the Depression.

g. Calls stock market crash the "beginning of a terrible chain".

h. Discussed as part of a chain reaction, but not listed under "causes".

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