There have been many iterations of the boom and bust cycles inherent in a free market economy; standing out in national memory are the series of recessions and panics/depressions through the 19th and 20th centuries and the early parts of the current century in the US.
What’s the history of those cycles, though, in the context of government intervention? In the 19th and early 20th centuries, there wasn’t any government intervention to speak of. Every one of those bust periods ran their natural course because government had no means of intervening, and that was deliberate. The worst of those cycles, the panics, were, to be sure sharp and deep. But they also generally were short-lived (frequently one or two years, although the Panic of 1837 lasted seven years), as the free market recovered on its own: people saw those periods as opportunities—the creative destruction of which some economists speak. Every time, too, our economy came out of those periods of creative destruction stronger than it was when it entered them.
A couple of the more extreme examples illustrate. The Panic of 1907 was cut short by the intervention of a banker, JP Morgan, who put his own money on the line to rebuild confidence in the banking system of the time. (Imagine that happening today: 100 years ago, wealth was concentrated at the top sufficiently to enable one man to do this. Today, the blatherings of the Liberal political class to the contrary, no one man or small group of men has the concentrated wealth to achieve such a thing.)
The Depression of 1920-1921 (remember that one? I didn’t think so) lasted all of 18 months, and the Federal government’s intervention was limited to an early instance of—small—unemployment insurance payments.
Contrast that with the boom/bust cycles since the early- mid-20th centuries. Franklin Roosevelt had the Federal government intervene massively in the Great Depression, instigating farm price controls, labor price floors, relocation of failed farmers (including onto functioning farms worked by black farmers, but that’s for a different post), and so on. In fact, his most serious intervention, those price controls, occurred just as the economy was beginning to recover on its own, and that intervention snuffed out the recovery.
There’s more. The long recession and stagflation of the Nixon through Carter years was exacerbated by Federally implemented price controls and rationing of key commodities like oil.
The Panic of 2008, although nominally over in 2009, still is having its depressive effects on economic and employment growth as a direct result of Federal government intervention: “stimulus” spending of trillions of dollars, regulation of commodity production (particularly coal, oil, and natural gas), and a vast expansion of the national welfare program.
Government intervention isn’t a neutral failure of no effect; it’s a positive failure: it slows recovery if it doesn’t block it outright. It does have the positive effect, though, of giving elected politicians and their agency bureaucrats an opportunity to claim to be doing something “for the sake of the poor,” and so of garnering votes for the next election.
