Because most philosophies that frown on reproduction don't survive.

Wednesday, October 22, 2008

The Worst Since the Great Depression How?

As the Dow continues on its 8000 to 9500 oscillation/roller coaster, we continue to see more news articles solemnly observing that this is "already worst economic disaster since the Great Depression."

I'm certainly not enjoying the looks of the stock market, and I fear that unemployment and poverty numbers will get worse before they get better. (If you asked me to take a guess -- I'd predict that unemployment will climb, slowly, for about six months before leveling off and going down.) However, the levels of unemployment are unlikely to go much beyond that of 92-93, must less 82-83 when unemployment hit a high of 10%.

The Great Depression comparisons are made because of the large percentage and absolute point drop in the stock market (the high for the Dow Jones Industrial Average was over 14000 in October of last year and it's dipped down into the mid 8000s -- a 40% drop) and the dangers of bank failure.

However, while one doesn't want to sugarcoat our current situation, historical parallels out of context can get irresponsible. The US of the 1930s had an economy far more primitive than our current one. A much larger percentage of the population was involved in small scale farming, and when the sale price of farm produce plummeted, the "dust bowl" hit making it harder to grow food in many parts of the Midwest, and farmers who had been taking out mortgages against their farms in order to meet bills in bad years found themselves unable to meet their payments -- the sudden transition from small scale to large scale farming pushed large numbers of low skilled unemployed workers into cities at exactly the time that unemployment was at a high anyway. Because our country is simply so much richer, and so much more productive, and thus able to produce basic goods and services much more easily, we would not see a human catastrophe on the level of the Great Depression in our modern country without a total governmental and social collapse.

So while it's true that in terms of the percentage decline in the major stock market indices we're seeing the largest financial decline since the great depression, in terms of real social chaos and human suffering we will in no way approach the level of what went on in the 30s.

I suppose it may seem like a pedantic point to those who find themselves struggling to pay the bills right now, but I'm always in favor of keeping a sense of historical perspective.


Karie, the Regular Guy's Extraordinary Wife said...

I agree, it really doesn't feel like a depression, at least not until you (or your spouse) is out of a job. Then it can feel really depressing. I am more concerned with how our government is handling this "crisis" rather than how our economy is handling it.

skeetor said...

in my close family there are 4 people (wife, sister, mom, and myself) who have received a promotion and or raise int he past two months.... it doesn't feel like a recession at our house, let alone a depression.

Darwin said...

In addition to lack of historical perspective, there's also often a bit too much "if this goes on" thinking. One of my co-workers (who is forty) was bemoaning today that this might mean he'd never be able to retire. "How can you say that?" he demanded. "My 401k is down 30% this year."

Well, even now the Dow is up 3x from where it was fifteen years ago. For someone slated to retire 25 years from not -- it's not a big worry.

And I hear you, skeetor. I was watching (between shouting at the TV) Obama's convention speech and at one point he demanded, "Are you better off than eight years ago?" To which I responded: Yep. I make 4x what I made eight years ago.

Anonymous said...

Jim Manzi did a post several weeks ago showing the growth in GDP per person over the last several hundred years. It helped to highlight the dramatic increase in wealth that has occurred over the last seventy to eighty years. I believe, US per capita GDP has increased five fold since then.

Anonymous said...

After eating brunch at a nice restaurant downtown, I decided to check your blog on my new iPhone. And I must say, are you blind? How can you not see that this is as bad as the Depression? Seriously!

[end sarcasm]

Yes, seriously. We are either a nation of overreactors or idiots, or both. We complain about the economy, but we still buy iphones, eat at posh restaurants, drive our cars and take cabs rather than walking and public transit, etc. I'm not rich, but I'm not dirt poor either. I know things could be better, but we're still doing quite well, and from where I'm sitting, so are a lot of people complaining about the current situation.

Anonymous said...

perhaps i'm off base, but i would wager that most people in the blogosphere have at least bachelor's degrees if not advanced degrees. so while things may be going well for those of us who are well educated and have marketable job skills, my guess is that it isn't the same for those with only high school diplomas and less marketable skills (that don't have time for blogging because they are working two jobs that don't pay a living wage, and can barely afford to pay for groceries, let alone internet). that the economy is more troubling for the have nots than the haves, but that's usually the case.

i think sometimes people in the blogosphere (this comment is not aimed at you, just a general feeling i get from blog hopping) assume that because things are going relatively well for us that they are going relatively well for everyone, and i think the blogosphere lends itself to attracting a fairly narrow segment of society.

i suppose your historical perspective is right on target, and definitely hope that your prognosis is correct. i am by no means an expert on history or the economy, so forgive any ignorance i may be showing.

Anonymous said...

I think people are saying "worst since" not "as bad as."