Is the current recession as bad as the Great Depression?
When economists finally admitted we were in a recession according to standard indicators, the punditry started.
Is it as bad as the Great Depression? What is the same? What’s different?
The stories from the Great Depression are devastating, even for those of us who didn’t live through it. My mother remembers people swimming out in the Hudson River to salvage oranges that had been dumped from a freighter — no one could afford to buy them, so they were trashed rather than given away.
We’ve seen the images of breadlines, and of the shantytowns, the lore of the hobos hopping trains, the devastating photos by James Agee (Patrice’s note: photos were by Walker Evans, not Agee; thanks to Pete in the comments box). With hindsight we can see how wealth accumulation in the Roaring 20s may have led to the crash, and before that the Gay 90s, putting great wealth in the hands of the few.
What’s the same? There’s rampant unemployment; more than 70,000 jobs were lost Monday alone. The stock market has tanked, banks are failing, and credit is frozen. The crisis was caused by a bubble, in this case excessive liquidity that manifested itself in a housing bubble. We had our own Gilded Age in the 1990s with the tech bubble, and then in the early part of the 21st century, the real estate bubble.
What’s different? Probably the big difference is deposit insurance. While there were some bank runs, it was nothing like what occurred in 1929. There’s more of a social compact as well, as government safety nets manage to catch people as they lose their jobs. State unemployment coffers are running dry though, and it’s still early days.
Maybe the biggest difference is this. The Great Depression lasted a decade. By contrast, we expect to see a recovery in a year or so. It won’t be pretty, it won’t be painless, and we’ll come out of it literally poorer for the experience. But at least there won’t be breadlines.
David Brooks recently surmised in a column that this depression will be harder than the last one because the family and other social instutitions are weaker today. In the Depression of the 30s more people could rely on the support of strong extended families, religious affiliations, and other traditional institutions. Today we are more isolated and will have to withstand the challenges of this downturn with less social support.
I think what we saw in wake of the most recent natural and man-made crises (9/11, Katrina, Ike, etc.) was indicative of what we will see, and are already seeing, in this current crisis: the opening of arms, doors and wallets in the support of fellow Americans. The economic struggle will be much more difficult because of its pervasiveness; it is not an isolated, regional incident. But, I believe that those who have been less affected by the decline will lend a hand where and when they can.
As an FYI, those photos were by Walker Evans, not Agee (who wrote the text).
Pete, thanks! I will fix!
So we should be grateful that we were plunged into a one-year depression instead of ten? How about none at all? How about stopping this #$%^ before it happens in the first place?