If the Great Depression Is Any Indication, Things Won’t Just Go Back to ‘Normal’ After the Coronavirus Pandemic Ends
In 1933, when FDR delivered his first inaugural address, U.S. unemployment stood at 25%, and 7,000 banks had folded in the last three years. Even as he cautioned his fellow Americans that “the only thing we have to fear is fear itself,” he also conceded that “only a foolish optimist can deny the dark realities of the moment.” The realities of that moment still appear at this instant to be grimmer than those of the current one. Yet with a staggering 26 million Americans filing for unemployment over the last five weeks, it is difficult to dismiss projections of jobless rates reaching or even eclipsing the Depression-era peak that confronted Franklin Roosevelt on that very first day of his presidency. The desperate, decade-long struggle to keep their families fed, clothed and under the same roof left an indelible imprint on the mindset of many of the adults who survived the Great Depression. If that historic effect is any indication, we may emerge from our own global crisis to find our habits and lifestyles significantly altered as well—a prospect that runs counter to the blithe assumptions of some politicians and presidential advisers that the U.S. economy will quickly return to “normal” once it’s re-opened.
Most Americans continued to trust Franklin Roosevelt even when his New Deal recovery efforts faltered: Even after unemployment climbed back into the vicinity of 20% in 1937-38 and his Democratic Party suffered major losses in the 1938 mid-term elections, F.D.R.’s presidential approval rating still stood at 54%. Still, a great many of his supporters never managed to divest themselves entirely of the fear that he warned could undermine efforts to promote recovery. In fact, for many of them, that fear endured long after the recovery arrived.
A vital part of FDR’s recovery plan was not simply getting Americans back to work but persuading them, insofar as possible, to resume their normal spending patterns. For example, the Civilian Conservation Corps was expected to preserve and beautify the natural landscape, but its guidelines stipulated not only that the young men it employed were to come from families on relief, but that they must send all but $5 of the $30 they earned each month back to those families, who presumably would have no choice but to spend it. The upshot was supposed to be thousands of mini-stimuli injected into a near-comatose consumer economy, raising prices and encouraging businesses to reopen.
As some oral histories reveal, however, in many cases much of the money sent home to parents wound up stuffed in Mason jars or sewn into the corners of their sheets. Unprecedented federal spending was aimed at boosting employment, and thereby, consumer demand; this should have had a net inflationary effect. And yet the years 1930-1940 registered a cumulative 19% decline in the inflation rate—reflecting, at least in some measure, the extreme reluctance of frightened Americans to spend on anything but absolute necessities.