From New Era to New Deal
The four years from 1929 to 1933 were a watershed in the economic history of the United States. The old order that had existed in some sense from the beginning of the republic began to crumble, and a peaceful but real revolution overtook the polity, bringing with it a dramatic change in the role of the state in American life.
The peaceful revolution that led to the New Deal in 1933 was the lasting consequence of the greatest economic downturn the nation ever witnessed. Hence it is essential to examine the Great Depression from the perspective of unemployment and the labor market. We begin by reviewing the decline in economic conditions and the rise in unemployment between 1929 and 1933. In the following chapters, we show that the banking crisis closely associated with the downturn owed its existence to the labor-market disequilibrium that evolved out of inappropriate public policies, and that the same disequilibrium explains why the recovery from the Depression was so long and anemic.
By any meaningful measure, the economic decline from 1929 to 1933 was the greatest in American history, usually by a wide margin. Using annual data and comparing 1929 with 1933, money gross national product fell by an extraordinary 46.4 percent. There is no other four-year period since