The Fed was largely responsible for converting what might have been a garden-variety recession, although perhaps a fairly severe one, into a major catastrophe. Instead of using its powers to offset the depression, it presided over a decline in the quantity of money by one-third from 1929 to 1933 ... Far from the depression being a failure of the free-enterprise system, it was a tragic failure of government.
Interpretation
The quote suggests that government actions, specifically the Federal Reserve's policies, worsened the Great Depression instead of mitigating it.
Milton Friedman argues that the Great Depression was not merely a result of market failure but rather a consequence of poor governmental intervention, particularly by the Federal Reserve. He emphasizes that the Fed's decision to reduce the money supply significantly exacerbated the economic downturn, transforming a possible recession into a catastrophic depression, illustrating how governmental mismanagement can lead to widespread economic suffering.
In practice
In a lecture about economic history, one might quote Friedman to illustrate government impact on market cycles.
The economic miracle that has been the United States was not produced by socialized enterprises, by government-unon-industry cartels or by centralized economic planning. It was produced by private enterprises in a profit-and-loss system. And losses were at least as important in weeding out failures, as profits in fostering successes. Let government succor failures, and we shall be headed for stagnation and decline.
Universities exist to transmit knowledge and understanding of ideas and values to students not to provide entertainment for spectators or employment for athletes.
There is no place for government to prohibit consumers from buying products the effect of which will be to harm themselves.
There is one and only one social responsibility of business - to use it resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.
The great danger to the consumer is the monopoly -whether private or governmental. His most effective protection is free competition at home and free trade throughout the world. The consumer is protected from being exploited by one seller by the existence of another seller from whom he can buy and who is eager to sell to him. Alternative sources of supply protect the consumer far more effectively than all the Ralph Naders of the world.
The strongest argument for free enterprise is that it prevents anybody from having too much power. Whether that person is a government official, a trade union official, or a business executive. If forces them to put up or shut up. They either have to deliver the goods, produce something that people are willing to pay for, are willing to buy, or else they have to go into a different business.
Thousands of important and intelligent men have never been able to grasp the principle of comparative advantage or believe it even after it was explained to them
Prosperity cannot be restored by raids upon the public Treasury.
It's important that we invest in America - literally. The terrorists wanted to destroy our economy, and we can't let our system fall apart. We also have to invest in one another.
Economics is a choice between alternatives all the time. Those are the trade-offs.
Hillary Clinton understands that if someone in America this country works 40 hours a week, that person should not be living in poverty. She understands that we must raise the minimum wage to a living wage.
Competition is the most promising means to achieve and secure prosperity. It alone enables people in their role of consumer to gain from economic progress. It ensures that all advantages which result from higher productivity may eventually be enjoyed.
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