Instead of Harding and Congress heavily intervening the the economy via government spending and borrowing, the market was, by and large, allowed to liquidate capital malinvested during the previous decade. Woods draws upon speeches by Harding documenting the economic cogency of Harding in the face of a sharp recession. Along the way, Woods provides one of the best, most concise, explanations of the business cycle according to Misesian economic theory. Woods concludes:
Woods' piece is indeed an excellent tonic for those who presume that an economic contraction requires a state-induced activist solution. All who wish to better understand the economic history of the 1920s and business cycles in general should avail themselves of this outstanding contribution.
Harding’s inchoate understanding of what was happening to the economy and why grandiose interventionist plans would only delay recovery is an extreme rarity among twentieth-century American presidents. That he has been the subject of ceaseless ridicule at the hands of historians, to the point that anyone speaking a word in his favor would be dismissed out of hand, speaks volumes about our historians’ capabilities outside of their own discipline.
The experience of 1920–21 reinforces the contention of genuine free-market economists that government intervention is a hindrance to economic recovery. It is not in spite of the absence of fiscal and monetary stimulus that the economy recovered from the 1920–21 depression. It is because those things were avoided that recovery came. The next time we are solemnly warned to recall the lessons of history lest our economy deteriorate still further, we ought to refer to this episode—and observe how hastily our interrogators try to change the subject.