David Kennedy: A Historian on the Lessons of the Depression
[Kennedy is a professor of history at Stanford University and author of the Pulitzer Prize-winning Freedom from Fear: The American People in Depression and War, 1929-1945.]
Are we witnessing the birth pangs of another Great Depression? Karl Marx once observed that history repeats itself, "first as tragedy, second as farce." But the record of the past emphatically suggests that we are not suffering through a play-by-play recapitulation of the catastrophe of the 1930s. To be sure, we may be brewing our very own 21st century economic calamity. But if so, it will be altogether different in its sources, scale, severity and duration from the last century's ghastly, decade-long, globe-girdling ordeal. It is only the consequences that may be similar....
The Great Depression may have been triggered by a financial crisis, but its lasting story is written in the miseries of massive unemployment. Some 25% of the labor force stood idle in 1933--a rate that never went below 14% for the remainder of the decade. No unemployment insurance backstopped laid-off workers or kept communities going when paychecks disappeared. Given the demography of a workforce in which scarcely any married women toiled for wages, a 25% unemployment rate effectively meant that nearly 1 in 4 households had no income in 1933.
A similar unemployment rate today, when a majority of women, both married and single, are in the workforce, is fearful to contemplate. But it would be unlikely to translate into equivalent hardship for individual families. And thanks to Social Security, a solid floor of support exists for elderly Americans--which guarantees a minimum level of consuming power for the economy as a whole.
These material and structural differences between the Depression era and the crisis we face today are significant. But the most important and consequential differences lie in the realms of ideas and attitudes, especially regarding the role of government. Consider what might be called "the tale of two Secretaries." Treasury Secretary Hank Paulson (along with Federal Reserve Chairman Ben Bernanke, who presides over an immeasurably more potent Federal Reserve system than existed in 1929) has acted with vigor to bring the full powers of the Federal Government to bear in the current crisis. In dramatic contrast, when Herbert Hoover asked his Secretary of the Treasury, Andrew Mellon, for advice on how to cope with the financial implosion of 1929, Mellon replied, "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system." Echoes of that old-time sentiment can still be heard today, but they are mere vestiges of the stifling tyranny of laissez-faire thinking that paralyzed so many governments in an earlier era.
Franklin Roosevelt wondered frequently during the 1932 electoral campaign at what he saw as the surprising docility of the American people in the face of the Depression. "Repeatedly he spoke of this," his aide Rexford Tugwell recalled, "saying that it was enormously puzzling to him that the ordeal of the past three years had been endured so peaceably." That odd passivity has intrigued historians, who have noted that it forced Roosevelt to simultaneously invent the tools to combat the Depression and establish their very legitimacy in the eyes of the people.
Today the debate about the legitimacy of government's role is largely ended. What argument remains focuses on the efficacy and fairness of various policy choices, not on the idea of intervention itself. Public opinion is far from unanimous about what should be done, but it is virtually unanimous that something must be done. That represents a seismic shift in popular attitudes....
Read entire article at Time Mag.
Are we witnessing the birth pangs of another Great Depression? Karl Marx once observed that history repeats itself, "first as tragedy, second as farce." But the record of the past emphatically suggests that we are not suffering through a play-by-play recapitulation of the catastrophe of the 1930s. To be sure, we may be brewing our very own 21st century economic calamity. But if so, it will be altogether different in its sources, scale, severity and duration from the last century's ghastly, decade-long, globe-girdling ordeal. It is only the consequences that may be similar....
The Great Depression may have been triggered by a financial crisis, but its lasting story is written in the miseries of massive unemployment. Some 25% of the labor force stood idle in 1933--a rate that never went below 14% for the remainder of the decade. No unemployment insurance backstopped laid-off workers or kept communities going when paychecks disappeared. Given the demography of a workforce in which scarcely any married women toiled for wages, a 25% unemployment rate effectively meant that nearly 1 in 4 households had no income in 1933.
A similar unemployment rate today, when a majority of women, both married and single, are in the workforce, is fearful to contemplate. But it would be unlikely to translate into equivalent hardship for individual families. And thanks to Social Security, a solid floor of support exists for elderly Americans--which guarantees a minimum level of consuming power for the economy as a whole.
These material and structural differences between the Depression era and the crisis we face today are significant. But the most important and consequential differences lie in the realms of ideas and attitudes, especially regarding the role of government. Consider what might be called "the tale of two Secretaries." Treasury Secretary Hank Paulson (along with Federal Reserve Chairman Ben Bernanke, who presides over an immeasurably more potent Federal Reserve system than existed in 1929) has acted with vigor to bring the full powers of the Federal Government to bear in the current crisis. In dramatic contrast, when Herbert Hoover asked his Secretary of the Treasury, Andrew Mellon, for advice on how to cope with the financial implosion of 1929, Mellon replied, "Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system." Echoes of that old-time sentiment can still be heard today, but they are mere vestiges of the stifling tyranny of laissez-faire thinking that paralyzed so many governments in an earlier era.
Franklin Roosevelt wondered frequently during the 1932 electoral campaign at what he saw as the surprising docility of the American people in the face of the Depression. "Repeatedly he spoke of this," his aide Rexford Tugwell recalled, "saying that it was enormously puzzling to him that the ordeal of the past three years had been endured so peaceably." That odd passivity has intrigued historians, who have noted that it forced Roosevelt to simultaneously invent the tools to combat the Depression and establish their very legitimacy in the eyes of the people.
Today the debate about the legitimacy of government's role is largely ended. What argument remains focuses on the efficacy and fairness of various policy choices, not on the idea of intervention itself. Public opinion is far from unanimous about what should be done, but it is virtually unanimous that something must be done. That represents a seismic shift in popular attitudes....