Nowadays, many references are being made to the thirties, regarding our economic dilemma. Can they be justified ? Will they be justified ?
There is similarities from the 90’s and the first years of this century with that of the 20’s. Economic similarities and more political similarities. The early events of 2007 and 2008 do look somewhat like those of the early 30’s. but there is also stark differences.
In considering the Great Depression thee is two demographic phenomenons ; one that pre-staged the crash of 1929 and the other at the end which contributed to the conclusion of the Great Depression. The first occured in roughly 1925 when masses of people moved from the countryside to the villages, which eventually became towns. That migration was due to an agrarian depression that arrived before there was a general depression. Farm values dropped up to 40%. The second demographic phenomenon was at the time of America’s entry into World War II. Beginning in 1941 and 1942, the women of America left their homes and joined the work force to contribute to the war effort. Incidentally, the women never returned to the home!
- The 1920’s was a time of high living and risk-taking for the financial elite, same as our 90’s and 2000’s with 230k per year limo drivers and the like.
- In the 20’s there was gross income and wealth inequities, same as the 90’s. In 1920 1% of the population owned 40% of the nations wealth. The bottom 93% experienced a drop in real disposal income. Today, the richest 15% own 85% of all wealth. The bottom 25% are seeing a decline in their net worth. These trends tend to develop as a result of anti-middle class political policies.
- Organized labor declined in the 20’s; same in 90’s.
- The 20’s was a time of business and industrial consolidation, with 1200 mergers, leaving only 200 corporations to control over half of American industry. Same with 90’s. Mergers rose from 1,529 in 1991 to 3702 in 1997, a 142% jump.
- Individual worker productivity rises 43% from 1919 to 1929. Somewhat less for the 90’s, but good. Some high tech at double digits per year during 90’s and 2000’s. Productivity was Greenspans arguing point for the status quo.
- High level of financial corruption in the Harding-Coolidge administrations. Likewise, extraordinary corruption is Clinton-Bush era.
- The stock market had a spectacular rise, starting in 1924, till the crash in Oct. of 1929. Just before the crash prices rose 40% from May of 28 to Sept. of 29. Likewise, the DOW increased right at 5-fold from 1990 to Oct. of 2007 with a record 14,000.
- Automobile sales decline by 1/3 in the 9 months before the crash of 1929. Auto sales dropped 40%-50% in 2008.
- Construction down and business inventories grow in 1929. Same for today.
- There was a recession before the crash of 1929. The current recession started in the 4th quarter of 2007 or earlier as some would contend.
- Early in 1930 the Federal Reserve cut the prime interest rate. Same, at this time with little effect.
- For a time in the 30’s protectionism (Smoot-Hawley) was seen as an answer, but without good results. Now, across the globe, Europe especially, seem to be lured to experimenting with protectionism.
- In the 30’s there was hardly no government safety net in place for those most severely effected by the ravages of the depression. No FDIC, no unemployment insurance, no Social Security, no Medicare, no Food Stamps, Etc. Relief was the church, family, friends, or nothing at that time. As I write this not only are these vast social relief nets in place, the Congress is debating an unthinkable amount of money, some of which would attempt to spare even the inconveniences of an economic contraction.
- By 1932, 10,000 banks had failed. Now, outside of Lehman Brothers, it looks like we are trying to save the rest. This will compound the problem and deny the necessary experience from bad banking.
- In 1933 the unemployment rate reached 24.9. This week we learned the current rate is 7.6. So, we have a way to go.
The New Deal focused on long range solutions as well as short term relief. In addition to Social Security and FDIC we had the creation of agencies such as FCC, SEC, TVA, and many others. Some, of course, had legal problems. But, the effort was extraordinary. That is why as a boy growing up I saw a smiling picture of FDR hanging on a wall in houses. A Bible on a table and Rosevelt’s picture was standard identity of Southern homes.
At the present time, I see little developing for the long range, in terms of public protection from thieves. The big spending proposals are suspect for wide spread pollitical pollution, and the sustaining of a Washington culture of lying, stealing, and “get-relectedism”.
A lot of learned people now suspect the efforts to reverse the road to depression will crash the currency. If that happens the reviving of the currency will be a more desperateproblem than stimulating the economy. A severe currency problem will produce real hardships and more. In the 20’s and 30’s Americans were a hardy, rural-based population that was younger. Today, we are older, fatter, and lazy. Does this generation of Americans have the moral strength to withstand a harvest of sacrifice? That’s the question!