Once, long ago, we had the Great Depression, which our history books tell us started with the crash of Wall Street in Fall 1929. Many of us either still remember what the 1930’s were like in this country, or grew up hearing about them from parents and grandparents, at times ad nauseum.
Few in our 24/7, fully-connected, 21stC Media, have either been brave, or honest, enough to call what we’ve been living through since late 2007, (first fully impacting in late Summer 2008 and now coming up on it’s second full year since them) with that name starting with the dreaded D-word: "Depression;" yet, as I have said here repeatedly since Fall 2008, that’s what this is in reality.
Pundits (not pundints, as we hear the word mispronounced too often lately) have stuck a toe in the water by calling our own economic agonies this time around, the Great Recession, but not further. Yet.
Economic forecasts show no improvement in unemployment, especially in our populous state, through 2012, and some very scary charts and graphs published recently, project big trouble in our economy all the way through the whole decade (2011-2020, years where, while growing up, I really did hope to see Jetsons-style flying cars, but, alas, would now settle for just a bit of stability!). The housing numbers for June are dreadful and the bravest economists now talk of a Double Dip (think W-shaped) Recession. And, just in time for the mid-term elections this Fall, party-liners on both sides have stocked up on their ammo, calling our national debt, deficit and projections of that ilk some kind of an unnatural disaster.
Returning to our history books now, by the mid-1930’s things in the USA were starting to show some glimmer of economic improvement, those ‘green shoots’ we heard so much about in the second-half of last year. But, just like now, unemployment stubbornly resisted any improvement – what economists call a ‘lagging indicator.’ And, if people don’t work, they don’t shop . . .
Then, efforts to climb out of the Great Depression hit a giant sinkhole in the Fall of 1937, a big dip that last through almost all of 1938, during which, production, profits, and employment all nosedived, and unemployment shot up from 14.3%, in 1937, to a staggering 19% in 1938. What to do, what to do?!?
Now, here’s the déjà vu, all over again, part. Keynesian economists argued that the big Double Dip of 1937-8 was because efforts were then being made to balance the budget and cut back on government spending. Conservatives of the day responded that this horrific situation was, instead, the direct result of unceasing blame on, and attacks against, businesses, whose increasing prosperity (and, to inject a modern anachronism, unfettered ability ‘to do their own thing’) offered the only real way out, and also by (this almost seems quaint now) big labor strikes, instigated by the CIO and the AFL, before their merger into today’s AFL-CIO.
Well, the story from that point on is that FDR decided (against Treasury Secretary Morgenthau’s strenuous advice, mind you) to abandon efforts to balance the budget and, instead, launched a huge spending program in the Spring of 1938, to put money into the hands of consumers who then would spend it. As FDR famously said in a Fireside Chat: government, faced with a Double Dip Depression, had the duty to "create an economic upturn" and make "additions to the purchasing power of the nation."
Does the 1937 Battle between the Keynesians, on the one hand, and Big Business, on the other, over whether to prime the pump and spend our way out of what threatened to be a repeat performance of the Great Depression, or to instead, to cut spending and balance the budget, remind you of today’s news? It should.
Morgenthau, still angry about FDR’s choice, wrote in his diary in May 1939: "We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot."
One scholar observed, in contrast to Morgenthau’s diary entry, that unemployment was cut in half, from 22% in 1932 to 11% in 1939. Others argue that only WWII, and America’s amazing mobilization of its war machine was what finally got us out of the Great Depression.
So, while we watch history re-play itself, let’s all say together, in Morgenthau’s simple words: "I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat." The only question is how we get there from here.