Get Ready for the Great Dissembling

By Noah Rothman

Thursday, April 03, 2025

Every several generations or so, we are drafted into a great experiment to show the extent to which Washington can reshape the economic landscape by fiat, even if that involves repealing the laws that govern the dismal science. It takes another generation for those whose hubris consigned their fellow Americans to penury to pass from the political stage, after which point fresh eyes and new political conditions allow critical retrospection on the great experiment. It’s a long and painful cycle we should hope to avoid.

For example, before it was safe and, eventually, fashionable to look askance at the New Deal and the extent to which it deepened and lengthened the Great Depression, Americans were confronted with a variety of competing rationales that purportedly explained why Americans languished in the doldrums of the 1930s.

It was a crisis fueled by the “overproduction” of the 1920s, when manufacturers and farmers were said to have created far more products than consumers could afford. There was a profound “uneven distribution of income,” too. The prosperity that typified that decade was not widely shared, exacerbating the problems of “overproduction.” Then there was all the “speculation” of the 1920s — a phenomenon illustrated by the 1929 stock market crash, which exposed the folly of overextending credit.

But that’s not all. There was also the “maladjustment in gold distribution,” which describes the Federal Reserve’s policy of sequestering and “sterilizing” gold inflows to the country to insulate the country against gold-backed price hikes. By the time John Maynard Keynes published his General Theory of Employment, Interest and Money, some new explanations for the Great Depression had secured a place in the national consciousness. Among them, the claim that the 1920s was defined by “inadequate investment” by public sector entities and “over-saving” among their private counterparts.

This tortured exercise was made possible by virtue of the fact that, as one 1959 documentary observed, “The basic causes of the crisis remained stubbornly obscure even to the business leaders” tasked by Washington with getting their hands around it. And yet, the idea that motivated those who retailed these myriad overlapping explanations for the Depression was clear. As Keynes biographer Robert Skidelsky put it, “The state is wise, and the market is stupid.”

It cannot be that the state lacked what Walter Lippmann assumed the government could command: A “body of knowledge that has been organized for [our] apprehension” assembled with the “highest of scientific virtues” in mind. Few dared acknowledge the imperfect information environment in which public officials languished or the observable fact that public interests are susceptible to capture by special interests. The planners had to be right. What would become of the plan if they were wrong?

This decades-long exercise in butt covering is worth remembering today as we prepare to confront yet another mulish effort by policymakers in Washington to remake the world economy in their own images. There will be many competing explanations for this project’s failure, the value of which will be in their ability to redirect angry voters’ attention away from the true sources of their anguish. We should expect it.