Nothing in Australia is as Americanised as our perception of the 1930s and the Great Depression. The American reality of the 1930s was one of hopeless misery with seemingly no end. Many Australians today assume our 1930s was a parallel experience. It wasn’t.
Australia’s slide into the Great Depression began two years before the world, but after a tough few years, we emerged rapidly and robustly. We beat the Great Depression through sound economic policy.
America attempted to overcome the nightmare via a big activist state and failed with the Great Depression only ending due to the mobilisation required to win the biggest war in history.
From 1932 until the end of that decade, Australian GDP growth was typically 5 per cent with only one year in that period recording negative growth. In 1932 the unemployment rate in America was 24.9 per cent while Australia was the worst in the Western world at 32 per cent. Four years later, Australia’s unemployment was 9 per cent but America’s unemployment at the same time was 20.1 per cent and remained stubbornly high. The Australian share market surpassed its 1929 peak as early as 1935 — America would wait until the 1950s.
Australia and America in the 1930s were policy polar opposites. It’s a powerful lesson in virtue of free market economics. …
Debt fuelled a mid-1920s boom. The ANZACs had demonstrated courage and skill on the battlefield and this enhanced Australia’s reputation among London bankers. Australia was seen as a young nation growing rapidly while Britain had sluggish growth. Governments borrowed to build infrastructure projects such as a bridge over Sydney Harbour, a city named Canberra, dams, highway networks, and urban train systems. Veterans were given blocks of rural land and the government invested in infrastructure to make rural life more attractive. [Prime Minister] Bruce borrowed to fund migration schemes to populate the interior. …
The debt repayments were easy as Australia’s wheat and wool exports were booming, but mid-decade prices began to decline. European farms were now back in full production after the war and this surplus hurt prices paid to Aussies. The 1927 federal budget ominously recorded a deficit and Australia went into recession. Commodity prices kept falling. …
Australia was stuck with a tonne of debt and our exports were no longer delivering rivers of gold. Debt repayments were alarmingly high — around half our export income. London began to nervously question, ‘How the hell is all this going to be repaid?’ State and federal governments had borrowed close to a quarter of a billion pounds from London. Business had borrowed around half that. And all the grand nation-building schemes were failing to deliver the anticipated short-term returns. The number of migrants was less than half predicted and rather than live in rural areas migrants preferred to settle in our cities.
In early 1929 it got worse as Australian commodity prices fell by a third. The GDP shrunk by 10 per cent. Australia was officially in a depression well before the world met the Great Depression. On top of this, trade unions were fermenting industrial turmoil on multiple fronts. …
The United States:
America’s 1920s was very different. Republican Warren Harding won the 1920 election by the largest margin in US history – 60.4 per cent to 34.1 per cent. Harding inherited a sharp post-war recession but he dithered between cutting or raising taxes. When Harding died in office in 1923 he was succeeded by his Vice President, Calvin Coolidge.
When it comes to economics ‘Silent Cal’ was America’s finest President of the 20th century. He was an evangelist for individualism and small government and famous for aphorisms like, ‘the business of America is business’ and ‘there is no substitute for a militant freedom. The only alternative is submission and slavery’. He lacked Ronald Reagan’s Hollywood charm but unlike Reagan, Coolidge enjoyed congressional majorities. Government debt was repaid, regulations scrapped and tax rates cut sharply and then cut again.
America boomed. The Roaring Twenties saw American ingenuity give us the modern world of mass-produced cars, telephones, radio, cinema, aeroplanes, and household appliances. When Coolidge stood for re-election in 1924 he opted for a ‘porch light’ campaign which meant he figuratively sat on his porch and said, ‘I think I’ve done a good job but I don’t want to twist your arm to vote for me.’ Coolidge won by almost as large a margin as Harding.
Coolidge chose not to recontest in 1928. It was his only bad decision. His successor was Republican Herbert Hoover who had a sharply different economic outlook to his predecessor. Prior to becoming president Hoover had written:
‘Individualism cannot be maintained as the foundation of a society if it looks to only legalistic justice based upon contracts, property, and political equality. In our individualism, we have long since abandoned the laissez faire of the 18th Century.’
Nine months after Hoover’s inauguration, Wall Street crashed. …
Hoover had always been a man of action — there was panic and he set out to use the power of the state to end it. He regulated business, sharply increased taxes, splurged on public works spending, hiked tariffs and the government lent struggling business money. It was all counter-productive but Hoover doubled down and America unnecessarily converted a recession into a depression.
In late 1932 Democrat Franklin Roosevelt was elected in a landslide. Roosevelt was from the left of his party and he hit the turbo button on Hooverism plus introduced a tonne of social welfare programs. …
US breadline, 1937
Roosevelt hiked taxes on gifts, estates, stock profits, ‘excess profits’ and raised the highest tax rate on individuals to 75 per cent. Roosevelt won a huge re-election in 1936 but nothing worked and in 1937 America went into the ‘recession within the depression’ with unemployment climbing again to near 20 per cent.
The western world had largely recovered from the Great Depression by 1933. Only the US was stuck in it, mostly by government interference in the marketplace that kept real wages too high, which discouraged hiring and business growth.
But the left control history through academia, so hardly anyone knows about that today.