Daniel Gross: Why All Those Great Depression Analogies Are Wrong

Slate:

It's difficult to avoid the comparisons between the current sad state of financial affairs and the Great Depression. "This is not like 1987 or 1998 or 2001," Merrill Lynch CEO John Thain said at a conference on Nov. 11. "We will in fact look back to the 1929 period to see the kind of slowdown we are seeing now." Time depicted President-elect Barack Obama on its cover as Franklin Delano Roosevelt. And in Washington, the buzz is all about what the new team will do in its first 100 days. What's next? Show trials in Moscow?

All this historically inaccurate nostalgia can occasionally make you want to clock somebody with one of the three volumes of Arthur M. Schlesinger Jr.'s history of the New Deal. The credit debacle of 2008 and the Great Depression may have similar origins: Both got going when financial crisis led to a reduction in consumer demand. But the two phenomena differ substantially. Instead of workers with 5 o'clock shadows asking, "Brother, can you spare a dime?" we have clean-shaven financial-services executives asking congressmen if they can spare $100 billion. More substantively, the economic trauma the nation suffered in the 1930s makes today's woes look like a flesh wound.

Read the whole story: Slate

Comments

[JadedAggie]

I'm very disappointed in Gross. He is correct that it is a false analogy, but he makes a very vapid argument that involves making false analogies of his own. Anybody with even an AA in economics should know that you cannot compare current unemployment figures to depression era unemployment figures because the way that the information is correlated, categorized, and calculated have all been altered several times.

[Chicago48]

The writer is correct except for one thing: It is a depression for certain segments and areas, mainly the Black ghetto. I work on the south side of Chicago and the young black guys there are hopeless, honestly. They have no skills, no education, no money, and they turn to crime easily. Regardless of what happens to this economy, if it goes up or stays the same, there will be whole segments of young black males left behind. Their only hope is the military, not college because they can't read and have no skills, no wherewithall at all.

The alternative is prison and a life of crime. They are angry, undisciplined, fatherless, and all other things, and in my mind they have their mothers to blame. Their mothers are the same: uneducated and low-wage low-skill. And they are bringing kids in the world who they cannot afford to have and have no time for. So these young guys end up aimless and directionless.

I believe O is going to work hard to bring us around, but there will always be that one hopeless segment.
In some regards the same can be said about Latinos, but their family structure is a bit different.

[SonofLiberty1]

And I always have to ask this question:

Where are the Pro Choicers when you need them?
Sure, let's give women the right to choose not to think about what they
are getting themselves into.. sure, let's keep telling them they have all the
right in the world....

But when they end up pregnant, and the guy flees, where are the pro choicers?

They never stay to provide the help needed!

[metropixie]

The patient is "Capitalism" and its recovery is not expected any time soon. It's all too clear now that pure, unadulterated greed lies at the core of a system that sprouted out of the industrial revolution and has turned the globe into a mine field of interdependent economies and a landfill for the results of glutinous consumerism where in the end just promises of future product availability turned out to provide the force that held up the house of cards. While painful, Capitalism, which believes in itself, should be left to its own devices to better itself. All the money now thrown at it will be wasted if it's only used to keep the machine running without looking at what it exactly produces. But, the people now protesting, the taxpayers, should also realize that they have been feeding the private jet uppercrust by indiscriminately buying their spit & shine crap, useless mass-produced trinkets, and stuff that doesn't work, is badly designed, badly engineered, and produced by poor suckers without shoes in dictatorships. So, in the end it's us that are sick and we better understand that real medicine never tastes like sugar water.

[Chicago48]

Sorta agree with this; however, people will suffer while capitalism tries to right itself. People will greatly suffer and you risk a rise in crime. We're already seeing that across the U.S., even white guys in suits are holding up jewelry stores.

[metropixie]

Aye, even white guys in suits turning to crime? Your view of a looming depression surely seems to point to the end of civilization. However, in your biased depiction you seem to forget that it's largely white guys in suits that are holding up the treasury store right now and making way with your money in their corporate jets...

[canucklivinginUSA]

Co-sign

[Photofarm]

To be honest, what Obama and Congress do in 2009 will tell whether anything was learned from the Great Depression. I"m not overly excited that politicians know history enough to prevent it from happening again. In fact, much of Obama's protectionist statements on trade and trade agreements says just the opposite, they will repeat the past mistakes.

[canucklivinginUSA]

Hmmm... I think he abondoned those statements pretty quickly. You cannot function, anymore, in a protectionist world, it is simply not feasible. I think he knows that(or I hope he does)

[darthdarcy]

It's already a depression for 50-60% of our citizens..!

Try and get out a little more often Daniel...not just on the Upper East Side..

[clsmithj]

There was a depression in 2001? I must have zoned out that one.

[Chicago48]

I was part of that depress CL, I was forced to resign a job 12/2001. From 2002 to 2004 I couldn't get an interview anywhere. I was on unemployment and working temp jobs, my salary was $18K average. Yes, there was a depression and there was a great big shift in jobs going overseas to India. A lot of help desk support jobs left, a lot of telemarketing, customer service jobs left. These were jobs held by black people primarily, women and Hispanics secondarily. It was a depression to me and some others.

I did not get a full time job until 2004; got fired; and am now working 3 years stable (I think); but -- here's the kicker -- at 1/3 less money than I made.

The people who are losing their jobs today, won't find those same salaries if a job comes along tomorrow. Their salary loss will be 20-30%. They will have to shift their buying habits. No more high end gadgets, no more big cars....etc.

Yes, CL there was a depression. For a large segment of the population.

[pigsatthetrough]

Hindsight is always 20 20. However looking forward not quite so easy. The immediate term forecasts may hinge on a bailout for the three American Auto makers. Don't do it and see what happens. When one examines the depression, with hindsight you see the cause and effect. When one predicts you can only view the potential domino effect. Three more banks closed this weekend. Let the auto coompanies go down and guess how many more will teeter. The leaders at home and abroad did not prevent the abyss as is so aptly seen today. However who says the actions or inactions today are so insightful that the country will not fall over the edge? Bush is still the leader, how hopeful can one be?

[000Jade000]

Some economists put our unemployment rate at about 15% now. Why? Because Bill Clinton changed the definition of unemployed to include only those who are not working and who are collecting unemployment benefits.

[Chicago48]

I agree OOO -- the unemployment rate is much higher than 7%...closer to 12%....there are folks who have dropped off the unemployment rolls; and what about the people who are part time workers working 2-3 jobs to make ends meet?

[BillZBubb]

Sure, blame it on Clinton. Too bad you are wrong.

[anotherplayaguy]

The biggest ADVANTAGE that the Great Depression had and which we will not have in a few years was cheap oil.

The good times will no longer roll. The economic meltdown is only step one in our march to complete insolvency.

[DaOne]

The comparison is totally apt to those suffering through it and not writing about it for Slate.

[kburlz]

Unless you are over 70 you have nothing to compare it to. People are losing money in the stock market, but not all of their saving accounts. Unemployment is 4 times less now than it was then. The panic is part of the problem. He has a point, the press needs to tone it down.

[DaOne]

On aggregate levels, you are right. Tell it to the individual who has lost their job and house and I don't think they are too interested in the nuances of the comparison.

[Chicago48]

The country is going socialist. Count on it.