The Myth of the Failed Roaring Twenties

by Alex Williams 

It is clear that, within the popular imagination, a peculiar curtain appears to separate the 1920s from subsequent history. The principal culprit to which this may be attributed is, of course, the Great Depression. A certain pretense seemed to end with the crash of 1929, as if the world at large had finally accepted the new age which had indeed begun following the First World War. A new arc of history was thereafter permitted to run its course, becoming a compelling twentieth-century mythology with which future generations became well familiar. Its general trajectory traces the 1929 crash to the Great Depression, the Second World War, and the Cold War; 1989 to 1991 finally observed the destruction of the Second World and welcomed Francis Fukuyama’s theorized “end of history.” We who live in the so-called postmodernist world are left to contemplate where history ended and began, and if this beginning lies in 1929 after all.

The 1920s occupy an unenviable position within this narrative as the decade which collapsed upon itself like a house of cards. Its unstoppable slippage into mass unemployment and unrest furnished the impression that its cultural and economic dynamism were little more than extravagant illusions. By 1933, memories of prosperity had faded to discontent, which was in the interest of the tide of new regimes that had established themselves. When one seeks to anoint a new era, it is necessary to convince future generations that there is little value in a return to the previous age with its discredited cultural presumptions and disgraced economic theories.

This caricature was most obviously exploited by the fascist states to justify their methods of control, particularly their domination of private industry. The Soviet Union, immunized by its economic isolation, also exploited the Great Depression as confirmation of the supposed failures of capitalism. The economically interventionist governments that arose within the Western democracies crusaded in this manner, but against laissez-faire methodology. U.S. President Franklin Roosevelt’s twelve years in power were particularly determined to paint the preceding era as a paragon of degenerative and unrestrained capitalism, which is certainly part of the reason why 20 years had elapsed before the American electorate could entrust the presidency to the opposition again. Roaring Twenties cultural liberalism was likewise disparaged as a morally degenerative force, a perception best exemplified by the Motion Picture Production Code that would morally police films in America between 1934 and 1968.

Three blocs of nations were therefore united in their efforts to justify the break between pre-1929 and post-1929 history. Their efforts, successful as they were, nonetheless cannot annul the legacy of the extraordinary progress administered to that era by the free market.

“I want the American people to work less for the government,” declared President Calvin Coolidge outside the White House in 1924, the first such address to be filmed with audio, “and more for themselves.” The spirit of the decade was enunciated thus, and the effects – observed chiefly in America, but throughout Europe as well – encompassed the most extraordinarily widespread creation and distribution of wealth ever yet experienced. The scale and specifics of this boom, and the breadth of its effects, can be detailed no better than by Paul Johnson in his opus Modern Times:

“The prosperity was very widespread and very solid . . . The growth was spectacular. On a 1933-8 index of 100, it was 58 in 1921 and passed 110 in 1929. That involved an increase in national income from $59.4 to $87.2 billion in eight years, with real per capita income rising from $522 to $716 . . . For the first time, many millions of working people acquired insurance (life and industrial insurance passed the 100 million mark in the 1920s), savings, which quadrupled during the decade, and a stake in industry . . . The Twenties was also characterized by the biggest and longest building-boom: as early as 1924 some 11 million families had acquired their own homes . . . At the beginning of 1914, 1,258,062 cars had been registered in the USA, which produced 569,054 during the year. Production rose to 5,621,715 in 1929, by which time cars registered in the USA totalled 26,501,443, five-sixths of the world production and one car for every five people in the country.”

The material assets that income had accrued did not altogether vanish with the slowing of industry after 1929. Citizenries remained conscious of their prior prosperity, and the resumption of economic growth many years later would further build upon their individual household wealth. The postwar era enjoyed the accompanying benefit of a stable economic landscape, including manufacturing, which helped to guard predominant Keynesian sensibilities until the transatlantic boom ran out of fumes in the 1970s.

As we live today amidst a new industrial revolution, in which the previously stable industries of the 20th century are transformed anew, it is natural that large segments of the population will regard these upheavals as evidence of capitalist dysfunctionality. Every ascendant industrial revolution inevitably cultivates the impression that free markets are clueless and chaotic instruments which cannot complement the interests of the majority. This impression embodies the same central myth as our retrospective perception of the Roaring Twenties – that this decade, gripped by a rabid consumerist spree, laid ruin to its own foundation and necessitated its propping up by the central state in perpetuity. It was this myth of an uncivilized, fruitless decade which provided the origin story for the four-decade New Deal consensus in America, as well as Keynesian dynasties of Western Europe.

The economist knows far more today than in 1929. When commodity prices in the 1920s failed to fall, and it grew difficult for the consumer to sustain the boom, speculation began to increasingly fill whatever yawning gap that the consumer could not with private expenditure. The crash, in exposing this structural unsustainability, revealed the investments of speculators to be valueless. Present-day markets have accordingly adapted to better ensure that the speculated value of a stock remains consistent with its real value. These results have been successfully demonstrated even as the economic landscape utterly transformed. The fact that record periods of uninterrupted economic growth in the United States and elsewhere, following previous such records in the 1990s and 1980s and occurring no less than in the post-Keynesian world, were ended not by a bubble burst, but by a pandemic, only serves to reaffirm the increasing confidence of free market transactions. As recessions grow rarer, the benefits of consumer enrichment grow ever more secure. Accordingly, government constitutes the preeminent force which can delay recovery.

The 1929 emergency no doubt provided the opportunity for various terrors of the 1930s, in addition to a new era of protectionism and autarkic fantasies, but the legacy of the decade itself is fossilized into the amber bedrock of accumulated per capita wealth. If the 1920s, far from a failed decade itself, were to ever offer a warning, it would be directed instead at the failed example of the decade which followed it. They who govern in these present times, if they do not wish to preclude the eventual return to prosperity we all deserve, should cease to invoke the Roaring Twenties as a warning for our times. The only warning it offers is one which reaffirms the only reliable route to prosperity which can be delivered, one which the 1930s in its protracted misery could not realize and which the 1980s did. If we truly inhabit the impartiality of the postmodernist age, if we truly graduated from the ideological mythology which was born after 1929, then surely we recognize that prosperity will only return when the engines of commerce have restarted for themselves.

Alex Williams recently completed his freshman year at Brandeis University. His interests include history, demography, film, and fine arts.


The views expressed on austriancenter.com are not necessarily those of the Austrian Economics Center.

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