Governing state, business, and labor's responses to the Great Depression in the United States was a complex bundle of ideas that contained elements that often worked at counterpoint to one another. At various times, different combinations were accepted, appropriated, deployed, and contested by the state, business, and labor, in order both to explain the economic crisis and to construct an institutional solution to it. The first set of ideas, employed variously by the state, business, and academic economists, explained the depression as a result of the failure of the government to adhere to the principles of “sound finance” and fiscal orthodoxy. These ideas dictated that the role of the state was reducible to a policy of maintaining balanced budgets and protecting private property. The academic version of this argument, modern business cycle theory, argued that the Great Depression was not a depression at all – that is, a secular downward shift in the long-run performance of the economy. Rather it was merely a regular, cyclical, and expected dip in performance that was both therapeutic and would soon cure itself.
Following the failure of these ideas either to make sense of the depression or to build a sustainable political coalition around them, a new set of ideas developed by legal reformers and progressive thinkers inside the state came to prominence. These ideas explained the depression as the result of monopolistic practices, particularly those of large corporations and trusts.
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