Great Contraction

The Great Contraction is Milton Friedman's term for the recession which led to the Great Depression.

The term served as the title for the relevant chapter in Friedman and Schwartz's 1963 work A Monetary History of the United States. The chapter was later published as a stand-alone paperback entitled The Great Contraction, 1929-33 in 1965.

Friedman labeled it thus because he believed that the depression lasted so long due to the Federal Reserve's mismanagement. He argued that the Reserve contracted the monetary supply dramatically, prolonging the Depression, which Friedman claims could have been over by 1931.

Economists such as Paul Krugman refer to the similarly named (and sometimes confused with) Great Compression as a period during which economic equality rose due to the progressive tax policies instituted during the years of WWII and the policies of the Roosevelt Administration.