Unlikely. One reason the Great Depression was so bad because there was an environmental catastrophe (the Dust Bowl) which made agriculture very hard at a time when agriculture was still a really, really big deal. The virus does not make normal economic activity particularly hard; we are avoiding economic activity for mostly humanitarian reasons, and we can resume economic activity either when everyone gas been infected anyway (yay pandemics), or when testing and treatment is more readily available.
Another reason the Great Depression got worse than a normal depression was that the Hoover administration unwisely decided to make money and credit less available during the crash. Today's policy response is more about throwing money at people (sometimes just at the politically connected, sometimes fairly). One can and should question many specifics (the response is not super coherent) but at least it is the opposite of fiscal and monetary tightening.
Another reason the Great Depression stayed so very bad for so very long was as a consequence the FDR administration's unprecedented intervention into the economy. I don't mean Social Security, either, I mean things like the National Recovery Administration, which explicitly sought to turn the US into a planned economy, with minimum and maximum prices for everything, run by local politically-connected cartels with their own police powers.
When the NRA was declared unconstitutional, its practices were shifted into other places. A few of the more ridiculous practices led by other agencies are still around. For instance, the Supreme Court only killed the USDA's Raisin Board in 2015 when a raisin farmer objected to them seizing 89,000 tons of raisins (30% of his crop) to give away for free in school lunches. (The USDA of that time was also great at encouraging the big agribusiness factory farming and pushing out what small farmers were still able to operate.)
None of this planned-economy stuff is on the table today — not in the US, not with this administration anyway, and not with the current US senate. There's an outside shot of a fully nationalized health system if Bernie Sanders wins and Democrats take the Senate, and that's the most ambitious plan, and even if we assume the taxes to fund it were quite stultifying indeed, it's unlikely to be as harmful. No one is coming for our raisins.
That's ridiculous. The problem going into the Great Depression was the monetary policy, which was tightened when it needed to be loosened. The problem going through the great depression, what made it really great, was the New Deal -- not today's political footballs like social security, but the radical restructuring of the American economy in a borderline Soviet wave of regimentation and anticompetitive cronyism. We don't think about this much today because it was mostly disassembled, but every so often you hear some story where the government wants to take farmers' raisins for a pittance of compensation (and the crop is at risk of spoiling). Or milk-price boards. Those are just the last lingering vestiges of the system at work, a system run with a mindset that they could drag the nation into prosperity again by burning crops in the time of famine (to support prices don't you know).
No I don't have a well-sourced essay for you. Go do some real Depression research. Look up work by multiple economists.
This is no where near the level of severity of the Great Depression. The Great Depression saw over a quarter of the population unemployed and a large destruction of perfectly healthy companies, a quantity of which we have come nowhere near.
EDIT: On top of the Crash of 1929, agricultural conditions in the Midwest of the United States greatly added to the problems.
Yes, but perhaps not in the way that you might think.
There were a number of structural factors that led to the great depression: gold standard currency and restrictive monetary policy at the Fed, overly restrictive tariff laws, simultaneous drought that destroyed a lot of farmland, rampant financial fraud, lack of deposit insurance at banks causing numerous bank runs and failures.
Basically all of the above is different now. The modern Fed is organized around preventing the monetary mistakes made during the depression. We are on purely fiat currency now, not the volatile gold standard. Food security is hugely increased, and restrictive tariffs have not impacted the ag industry of Canada and Mexico, which are key supports of the US's food supply chain. We have the FDIC for deposit insurance and increased post-Great Recession capital controls on systemically important financial institutions (SIFIs).
We have also learned from the Roosevelt interventions of the 1930's that it requires both a strong monetary and fiscal policy to address a systemic shock to the economy. So it might take some time for stimulus to arrive, but it should be incoming.
Finally, we have the internet. Not to oversell it, but it's a significant asset that can ensure a degree of continuity of supplies, services and employment in an event such as this. Yes - it's not perfect and many necessary jobs can not be done over the internet. But it's better than the alternative.
So, my feeling is that we are heading into the most significant non-wartime economic event since the great depression, but if cards are played properly we should be able to mitigate the terrible effects to a much better degree than was possible in the 1930's.
The great depression had numerous additional problems that do not exist right now, including a global tariff war that was far beyond anything that went on with the US and China.
The central bank was mostly incapable of doing anything during the great depression. Today the central bank can shove $100 billion into JP Morgan if it's about to tip over and do it in a matter of hours. The Fed can set up a national small business credit line to the tune of $2 trillion and do it in a week or two (in this case the logistics are far more difficult than the money).
The US had no social safety net at all in 1933. The US remarkably saw a decline in homelessness between 2004 and 2011, despite the great recession, due to the very successful housing first programs run by the Bush and Obama Administrations. The existence and expansion of food aid programs during the great recession helped to prevent large bread lines. The great depression had no such national effort, much less one that was rapid and effective.
If we absolutely needed to do it, we can shovel $12,000 into the pocket of every adult in the country over the coming year. $36,000 per family of four. It would have a brutal cost, something along the lines of $3 trillion for a year. We would have to force our borrowing costs lower by using the Fed to manipulate those rates low, so we can afford to deal with the long-term costs of all of this - but we can do it. The US can't afford to spend $20 trillion on this diaster, but it can spend $3 to $5 trillion (and there will be hell to pay after, in the form of interest costs and plausibly tax increases (I won't hold my breath for fiscal responsibility in DC)).
What we can't do, is allow this to happen again anytime soon, and that will require numerous large changes globally, including to international trade.
Yes, the Great Depression, when our foremost leaders reasoned that we could become more prosperous as a nation by destroying crops and making food more expensive to a population facing an unemployment rate of 20% (and devoting a far greater portion of their budget to food than you or I do).
FDR came up with the most toxic economic policy ever experienced in this nation, bar none, and easily added seven years onto the Great Depression. And no, it's wasn't the fault of Social Security: it was the fault of nonsense like this.
They say in high school history classes World War II led the US out of the Great Depression. It's only true because that's what finally convinced the idiots in charge that they needed to get their act together if they actually wanted to muster enough industrial output to fight a war.
If there is a God, Mr. Roosevelt, may he have mercy on your soul.
Things are bad enough without exaggerating the situation. The big problem with the great depression was not the size of the crash but the duration of the recovery. Our view of the money supply seems a bit more effective these days and it seems unlikely that the recession that comes out of this situation will last as long.
No massive unemployment? The Great Depression lasted quite a while! And we only got out of it by after a decade of building up the next job sector of things for people to work in (see three sector model in economics)
Compare pictures of farms before and after automation and count the number of farmhands. Before automation, 20% of American jobs were farm-related!
Read Grapes of Wrath and other books by John Steinbeck… you won’t say there was no unemployment after that.
The Great Depression was largely caused by loss of farm jobs. As the farmhands migrated to the cities it took a decade to build up the manufacturing centers to give them all jobs. In the meantime, one third of the banks failed and the money supply they issued. The Fed didn’t bail them out and we got a depression.
Oh, and the hugely increased productivity led farmers to be engaged in a race to the bottom, trying to make up for falling prices with ever-larger harvests. The land became depleted and this led to the Dust Bowl as it simply blew away in dust storms.
Capitalism does this around the world. TODAY, one third of arable farmland has undergone desertification, likely due to similar economic factors.
> How are the wealthy supposed to get that way and stay that way with no consumers?
The wealthy can get that way without needing to pay much to human PRODUCERS. That’s the point.
If the only way an average person can get money and be a consumer is to sell their labor, then they will get less purchasing power over time. Yes things might get cheaper due to technology, but not everything (eg rent) and also the money supply could be inflated so prices could also rise due to that. The government COULD be giving all that money to people as a UBI but it usually exacerbates inequality by propping up stock markets etc.
Also, if wealthy people control all the resources and infrastructure then they can easily extract rents from all kinds of ecosystems. But even if the people on the ground barely have any money, the wealthy can just pay corporations for their own needs (eg robots doing their work). The owners of the corporations are wealthy and they cover the cost of robots.
We already see this in rising inequality … the wealthy didn’t need the poor to consume their products. Many of them could just have the middle class and wealthy consume them. (Look up Plutocracy.)
Having said that… if the automation could be made accessible to all, then everyone would be increasingly a consumer of products made by robots. Tax the robots, and give the money to the people unconditionally, so they can consume more.
You're confusing the economic effects of inflation and deflation with environments of low and high real interest rates.
I'd counter by saying that the strongest decades of median real wage growth and general GDP growth were during the high inflation 1960s and 1970s.
I'd argue that the fact nobody was starving at the beginning of the great depression means that the economic mess didn't cause the starvation is a bit of a straw man. Of course, at the beginning, people don't immediately find themselves in destitution, they draw down savings. The destitution begins when the economic disruption becomes prolonged.
I can't find any primary sources on the government policy of destroying food, but I'd conjecture the reason it was done (if it happened) was to support nominal food prices and therefore the apparent credit-worthiness of farms in a highly deflationary environment. Of course, the real problem was that there was insufficient aggregate demand to support the nominal food price, i.e. deflation combined with wage-price downward stickiness caused the market to fail to clear.
The great depression was made worse because as things recovered, rates stayed the same. Eventually there wasn't interest to lend against and the market seized. And even though The New Deal helped, but it was the massive build up to WWII that allowed recovery to happen.
The fundamental lesson of the Great Depression was that there are no cycles. Being down does not mean a later upswing with certainty. That we haven’t had a GD since 1929 is in large part due to an ability to constantly grow markets with cheap oil energy and new markets. But more importantly the US had a lot of power and regulatory oversight to keep it from happening. All of that is no longer the case, and we’re in danger of having another GD that could be even bigger from some estimates. Normalization “arguments” are bad arguments that disallow the discussion of deeper and more worrisome arguments. That’s why this article shouldn’t be welcomed too warmly.
The 1929 crash coincided with the great Dust Bowl, where many family farms were destroyed by a dust storm.
All those farmers left their broken farms, and went to the city looking for work... Only to find that the great depression wreaked the cities too. Back then, a much larger portion of America was farmers.
My theory is that we're in danger of a global repeat of the Great Depression that hammered North America and, to a lesser extent, Europe in the 1930s.
The last one, in the 1920s, was caused by ill-managed prosperity, I would argue. You had sudden gains in agricultural productivity, which led to crashing commodity prices, which eventually led to rural poverty. One might have "expected" farmers to move into the cities and become the new middle class, and some did, but that doesn't work out so well when thousands or millions of poor, hungry people are doing the same thing. What was just "rural poverty" (of course, half the country was still rural) in 1925 became more widespread by 1927-28 (noticeable slipping demand for consumer products) and finally was recognized as a Great Depression after it tanked the stock market in 1929-32.
We have, in 2015, a lot of ill-managed prosperity. We have a culture in Silicon Valley that glorifies ill-managed prosperity. (What else do you call funding Clinkle?) And the same thing that happened to food prices in 1900-30 (slow at first, accelerating toward the end) is happening to almost all human labor in 1985-2015.
It may not end well. Including the damage brought by the war, I'd argue that most of Europe didn't get out of the Depression (manifest somewhat differently over there, especially in the fascist countries) until the late 1950s.
Another reason the Great Depression got worse than a normal depression was that the Hoover administration unwisely decided to make money and credit less available during the crash. Today's policy response is more about throwing money at people (sometimes just at the politically connected, sometimes fairly). One can and should question many specifics (the response is not super coherent) but at least it is the opposite of fiscal and monetary tightening.
Another reason the Great Depression stayed so very bad for so very long was as a consequence the FDR administration's unprecedented intervention into the economy. I don't mean Social Security, either, I mean things like the National Recovery Administration, which explicitly sought to turn the US into a planned economy, with minimum and maximum prices for everything, run by local politically-connected cartels with their own police powers.
When the NRA was declared unconstitutional, its practices were shifted into other places. A few of the more ridiculous practices led by other agencies are still around. For instance, the Supreme Court only killed the USDA's Raisin Board in 2015 when a raisin farmer objected to them seizing 89,000 tons of raisins (30% of his crop) to give away for free in school lunches. (The USDA of that time was also great at encouraging the big agribusiness factory farming and pushing out what small farmers were still able to operate.)
None of this planned-economy stuff is on the table today — not in the US, not with this administration anyway, and not with the current US senate. There's an outside shot of a fully nationalized health system if Bernie Sanders wins and Democrats take the Senate, and that's the most ambitious plan, and even if we assume the taxes to fund it were quite stultifying indeed, it's unlikely to be as harmful. No one is coming for our raisins.
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