American economics history class reading memo - Book Report/Review Example

Susan Lopez, Chief Economist, Joint Economic Committee Xiaotian Xu, Staff Economist April 7th, Why the Great Depression Lasted So Long and Why Prosperity Resumed after the WarThis article analyzes various research and theories developed to explain why the Great Depression took longer than anticipated. In addition, the article gives the reasons why prosperity resumed immediately after the war. The New Deal is usually blamed for the prolonged Great Depression. The New Deal brought about a lot of political realignment and introduction of a series of domestic programs and enactment of legislations.

These programs introduced a lot of regime uncertainties that scared away local and foreign investors. In this case, investors lacked confidence and hence no new businesses were started during the time. Lack of confidence in investment provoked the Great Depression and therefore, many people suffered due to unemployment and little money in the circulation.Though economists are currently conducting research on this question of prolonged economic downturn, the main focus should be on labor markets dynamics.

This is not only because there was diminutive recovery in hours worked, but also due to wages in the commercial sectors of the economy being20% above trend in the year 1930s.The slow rate of labor recovery also contributed to the low rate of economy recovery.It is notable that the economy recovered tremendously after the War. This was mainly as a result of Roosevelt’s death, according to Higgs. Roosevelt’s death brought about a regime change that forced the New Deal to retreat. Most of the wartime controls faded out making investors to come out in force.

This article is significant as it revives the debate on the government’s actions and inactions that almost paralyzed America for over one decade. The article has identified the two most applicable schools of thoughts that deliberate on the possible causes of the prolonged Great Regression.