On Economic Downturns

“The fact that the market is not doing what we wish it would do is no reason to automatically assume that the government would do better. There are too many examples of government interventions that made things worse, the Great Depression of the 1930s being the most tragic. Those on the left love to believe that the stock market crash of 1929 showed the failure of the free market and that the New Deal interventions in the 1930s saved the day. But the stock market crash of 1987 was just as big and Ronald Reagan resisted loud calls for him to intervene. The result was not another Great Depression but the beginning of a decades-long period of prosperity. Before Presidents Herbert Hoover and Franklin D. Roosevelt came along, there was no expectation that the federal government would intervene when the stock market crashed or when there was a downturn in the economy. Previous stock market crashes and previous downturns in the economy worked themselves out faster and less painfully than the Great Depression of the 1930s, just as the 1987 crisis did. The track record of government intervention is far less impressive than its rhetoric.”

—Thomas Sowell