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Is the Great Depression coming back?

Unemployed men vying for jobs at the American Legion Employment Bureau in Los Angeles during the Great Depression

TEXT OF STORY

Kai Ryssdal:
I'll be the first to admit that this hasn't been the most feel-good program lately. It's hard to be upbeat when we have to play the sad music all the time. Reporting the economic news and, yes, I know, listening to it during times like these can be down-right depressing. But as you look around, there are plenty of pundits and politicians talking about The Depression.

We asked Nate DiMeo to figure out whether all that talk makes any sense.


Nate DiMeo:
What do we talk about when we talk about the Depression?

During the Great Depression, a man, a good, hardworking, salt of the earth American, we'll call him Tom. Well, once Tom built a railroad. Made it run. Then he got a Wall Street job until the stock market crashed, then he jumped out a window. But then a dust storm whooshed him off to Oklahoma where he wandered around the country with newspapers in his shoes, selling apples while trying to bum dimes off of hobos.

Of course, history never quite matches up with the popular memory.

John Steel Gordon: In 1929, we had a perfectly ordinary recession marked with a stock market crash. The market had been in a bubble for a while.

That's economic historian John Steel Gordon sounding pretty chill about a year and an event that most of us think of as earth-shaking cataclysm. He says people tend to bundle the crash and the Great Depression of the 1930s together as one giant event. But he says the crash year of 1929, is totally different from the height of the Depression a few years later.

Gordon:
This country is nowhere near the condition it was in 1932, 33, which was about as close as a major industrial power can come to a complete breakdown in its economic system.

He's talking about bread lines and bank closures -- 9,000 banks in all. Unemployment spiking past 25 percent. We're at 6 percent now. So, from Gordon's historian's perspective, people should can it with the Depression talk.

Gordon: It makes me somewhat angry at journalists, frankly. They're in the business of selling newspapers and Armageddon sells a lot of newspapers.

But just because we aren't facing Armageddon doesn't mean we can't learn from history.

James Galbraith:
The 1920's were a period of speculative excess, of unregulated exuberance and mayhem, leading to an enormous collapse of confidence.

That's Liberal economist James Galbraith, he says if the root causes of the economic crisis of 1929 seem eerily similar to today, the response hasn't been-- and that's a good thing. John Steele Gordon says that after the crash, the government did just about everything wrong. Instead of flooding the markets with cash like the Fed does now, the government tightened up the money supply. It raised taxes. It started a trade war.

Gordon: The result was the economy, already in serious decline, fell off a cliff.

Jack Beatty:
Here's the difference. . .

Historian Jack Beatty of the Atlantic Monthly says we've learned from those mistakes.

Beatty:
Our political culture has the New Deal in it, Hoover's didn't.

FDR's New Deal, of course, went along way to dig the country out of the Depression. It established market protections and regulations, it invested directly in the productive capacity of Americans, pumping money into big public works projects and all of that. And that New Deal experience has allowed us to skip ahead to some New Deal-inspired solutions. You can think of what the government's done so far as 1933 reactions to 1929 problems.

Beatty:
The mode of intervention taken for the financial crisis--

The Henry Paulson solution.

Beatty:
Was in some ways strikingly similar. The banking bill that Roosevelt passed it extended government assistance to private bankers, it was a bank bill that bankers could have written.

John Steele Gordon says, even as we move to avoid '30s-style catastrophe, there may still be extremely tough times ahead. But they simply can't be as tough on Americans as they were back then. I mean, thanks to the Depression we have Social Security and Depositors Insurance. We have programs that mean so many more people have homes and investments that will hold at least some of their value through the crisis.

Gordon:
Since 1932, the first fiscal priority of the United States government has been to avoid another Great Depression.

It's not the thirties. It's a new era, and a vastly different economy. And historians and economists say that although it's going to take more than a spared dime to make things better, we can stop bringing up the Great Depression all the time.

I'm Nate DiMeo for Marketplace.

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