A Different Narrative of the Great Depression Develops
The narrative of the Great Depression as it stands today would likely mention
few of the causes that Kiplinger and others enumerated as it was happening.
Instead, people today tend to identify the causes of the Great Depression as fear
and a loss of confidence related to bank failures. Bank failures (and shadow-
bank failures) were key narratives in the “Great Recession” of 2007–9. In his
1930 list, Kiplinger did not even mention bank failures, most of which happened
after 1930.
Some modern theories that seek to explain the extreme length and depth of
the Great Depression without relying directly on any of these narratives seem
plausible. Harold L. Cole and Lee E. Ohanian (2004) argue that the 1933
National Industrial Recovery Act, which imposed “codes of fair competition” in
an effort to combat the Great Depression, actually prolonged the Depression.
(The act was in response to another narrative about inadequate purchasing
power, described in chapter 13, below.) The act made it easier for businesses to
form cartels and more difficult for them to cut wages. Although the Supreme
Court declared the act unconstitutional in 1935, Cole and Ohanian argue that the
Roosevelt administration managed to keep the codes in effect. In addition, the
initial period of high unemployment led to continued high unemployment
because the remaining employed labor became “insiders” while those laid off
became “outsiders.” As Assar Lindbeck and Dennis J. Snower27 have argued, the
insiders tend to band together and ask for higher wages when demand increases,
rather than ask for the laid-off “outsiders” to be rehired.
Other theories have merit too. Economic historians Barry Eichengreen and
Peter Temin have argued that the length and pain of the Great Depression were
related to the unthinking national commitment to the gold standard despite
changes in labor markets that made wages more downwardly rigid. They have
shown that countries that abandoned the gold standard earlier recovered better.28
Milton Friedman and Anna J. Schwartz in their Monetary History of the
United States had blamed the Great Depression on the Federal Reserve and its
control of the money supply. But Eichengreen and Temin argued that declines in
the US money supply were mostly caused by the economy, not the Fed. Declines
in the money supply were triggered in part by the bank runs that were caused by
the same feedback that created the Great Depression. In effect, Friedman and

Schwartz argued that the Fed would have done better if it had offset these
declines. Temin also observed that Friedman and Schwartz indicated no
substantial correspondence between the bank runs and measures of economic
activity.
These economists tell only part of the story of the severity of the Great
Depression. The comedian Groucho Marx offered a more entertaining, popular
account of the Great Depression. According to his autobiography, published in
1959, Groucho was in his early thirties in the late 1920s, making good money as
an actor in popular vaudeville stage shows. He recalls:
Soon a much hotter business than show business attracted my attention and
the attention of the country. It was a little thing called the stock market. I first
became acquainted with it around 1926. It was a pleasant surprise to discover
that I was a pretty shrewd trader. Or at least so it seemed, for everything I
bought went up.… My salary in Cocoanuts was around two thousand a week,
but this was pin money compared to the dough I was theoretically making in
Wall Street. Mind you, I enjoyed doing the show, but I had very little interest
in the salary. I took market tips from everybody. It’s hard to believe it now,
but incidents like the following were commonplace in those days.29
Groucho goes on to describe a number of tips that he and his brothers
overconfidently bet on: a tip from the elevator man, a Wall Streeter, his theatrical
producer, and someone he met on a golf course. He views the whole experience
as a great “folly” and struggles to understand his own participation in it. Ideas
about the craziness of the Roaring Twenties and the Great Depression became
legendary through the persuasive accounts of good storytellers like Groucho
Marx, who had much more public influence than economists.

FIGURE 10.4. Frequency of Appearance of Great Depression in Books, 1900–2008, and News, 1900–2019
The narrative of the Great Depression has been a long-lasting epidemic that outlasted the Depression itself
by many decades. Sources: Google Ngrams, no smoothing, and author’s calculations from ProQuest News
& Newspapers.
In fact, attention to this story has largely kept growing and growing. Figure
10.4 suggests that far more attention was paid to the Great Depression in 2009
than during the Great Depression itself, though we must understand that people
hadn’t named the economic downturn the “Great Depression” as it was
happening. Instead, they called it “hard times.” Other Depression-linked
narratives of the period were associated with words unusual to that period, such
as breadline, whose use grew rapidly from 1929 to 1934 and has decayed fairly
steadily ever since. The interest in the Great Depression in 2009 is confirmed in
Google Trends search counts as well, though not as dramatically as those shown
in Figure 10.4.
Ultimately, how do narratives of the Great Depression affect how we think
about economic downturns today? Consider a narrative-based chronology of the
2007–9 world financial crisis, which taps into stories about nineteenth-century
bank runs that were virtually synonymous with financial crises. After the Great