Lines round the street corners, the hungry in ragged clothing wait their turns for a scoop of soup. Once a millionaire, a man with a beaten suit stands selling apples, hoping to earn enough money to feed his family. Hoovervilles engulf New York City, shacks made from a variety of materials become the homes for millions. Farms are dried up by a massive drought, the dust bowl sweeps the Midwest leaving families fleeing and animals dead. World War I Veterans (Bonus Army) embark on the capitol begging for their bonuses, President Hoover commands for them to leave, two infants die from tear gas. Families, millions of families are without heat, electricity, and jobs. The Great Depression lasts over a decade; it reveals the very shattering of an economy.
While the United States economy of today heads into its 17th month of what Federal Reserve economist William Strauss defines as a “recession”, the swirling whispers of a depression protrudes through the media. The Blue Chip Forecast, which successfully predicted the recession, has indicated that it will have a life of 18 to 21 months. With this valuable economic prediction, and several new indications of the bottom being met, the notion of comparing today's economy to that of the Great Depression is invalid.
October 29, 1929—Black Tuesday, the stock market plunges, sending its value $30,000,000 downward within a two day period. It took three days for the stock market of 1929 to drop a little over 30%. 11 well-known Wall St. investors commit suicide.
October 1, 2008, 10 days of stock market decline sends flares into the sky over Wall St. A longer state of decline than 1929, but the results don't a line, the market falls 24%, 6% less than the mere three days it took the market of 1929 to bottom out. More importantly the Republican President George W. Bush has few months remaining in the Oval Office. Three years were had by Republican President Herbert Hoover as he grasped to his failed economic policies; the same policies that would be paraded by Republicans for many years to come. As Mr. and Mrs. Hoover were served seven course meals for dinner, citizens couldn't afford a slice of bread. “...the lesson should be constantly enforced that though the people support the government, the government should not support the people,” said President Hoover (---)
The reasoning for why the market crash of 1929 gave out so easily and produced a domino effect is very simple, the “Roaring Twenties.” In 1924 the market begin its slow march to a boom. “By 1927, the bull market is jumping all the fences. Stocks are doubling and sometimes doubling again” (Part 12, Freedom: A History of US). With the economic experts declaring that the bull market will just go on and on, millions of people begin to purchase stock. 2/3 (600,000) of investors get it for a cheaper cost as they buy on margin, borrowing most of the money and receiving more shares. By the summer of 1929, people are buying stock in anything; the market is one large balloon waiting to pop as stocks sell at 50 times their earnings. And so it does, in the fall of 1929, everyone begins looking to sell their stocks, but no one buys. The market rips apart, and those who bought on margin now owe money to the banks. The majority of citizens not involved in the market lose their savings as banks had been lending money to speculators who can't pay their debt. This collapse proves more penetrating than the crash in 2008.
But the 2008 stock market plummet was still a large blow to the economy, so why not worse than the Great Depression? The United States today has the Great Depression to thank for an economic situation of less trauma. During the Great Depression there were no safety nets for citizens as the economy disintegrated. “That safety net was built by the New Deal and whatever the New Deal's flaws it has helped to prevent another collapse by allowing people to keep spending,” said Temple University professor of history and director of American studies Bryant Simon(---) The New Deal reformed the United States, and insured the future. The stock market becomes regulated, work hours are limited, child labor is shutdown, fair wages secured, bank deposits are insured, unions advance, electricity is introduced to places like Tennessee, farming is reborn, and a pension policy, the Social Security Act is implemented. Several of these initiatives, and many of the programs introduced by President Roosevelt caught the citizens of today from free-falling. The Home Owners' Loan Corporation (HOLC) in 1933 offered re-financing of citizens' home on the brink of being lost to foreclosures. “...one of the reasons cited for some in the House [of Representatives] initially voting against the bailout package last fall,” said Simon (---) These indications of President Roosevelt's rescue plan saving our economy from a complete collapse is just the mere surface of reasoning for why the comparisons made between the two time periods are unsound.
Today's economic faults are attributed to three specific offenders; the crash of the real estate market (excessive building), Wall St. speculation, and credit defaults. Whereas in the 1930s the deep wound on citizen's confidence within the economy played a leading role in the struggle for a rebound. The 2009 economy has a bruised confidence, but there are signs that show the pain isn't all that deep. For the first time since the crash in 2008, the stock market has risen back over the 8,000 point mark; at one point the market was wandering in the 6,000 point region. While consumers are spending less than they did before the economic downturn, the past two months have shown a 1.2% increase in consumer spending. In the month of March the Consumer Confidence Index rose to 26% after several months of decline. In the housing market, the past three months have shown a 1.2% increase in home sales according to the most recent Existing Home Sales Report. These are dim changes in the economy, but they are reassuring to the confidence and state of the current situation. Debt, securitization, and credit were all highly dependent on the real estate market, and thanks to quick reactions through bailouts, and bank policy these categories were not released to an overwhelming crash. In the bank department, banks have wisely made loans more difficult to get; this prevents someone from receiving a loan, when they have horrible credit. As the economy reemerges, again more and more loans will be dispersed wisely. The refinancing of homes again comes into calculations, because of the many home owners eligible for housing foreclosures. With quick action being taken by many different sectors the confidence being reestablished is evident through the results. “Strauss conceded that the Federal Reserve is exercising authority it hasn't had to use since the Great Depression, but he was optimistic that a crisis like the 1930s will be avoided.” (Link) There remains confidence in the economy and the government, which proves today's economy to be stronger than the economy of the 1930s. “Let me assert my firm belief that the only thing we have to fear is fear itself.” (Hakim) This notification made by President Roosevelt in his inaugural address pinpoints the importance of confidence in the economy being either make or break. Confidence was near nonexistent during the 1930s, but today it stands much more firmly, contributing to the restrengthening of an economy that isn't validly compared to the Great Depression by pundits.
Another important item of the economic agenda is on the global scale, and today's global economy is faced with great hurdles. But the sitting establishment of cooperation between nations indicates the efforts will reform the falling global economy. In the 1930s, the global economy was melting, and the collaborative effort for fixing it was minuscule, and as a result Adolf Hitler rose to power in Germany promising a fix for Germany's economy. Summits like the G20 meeting that took place during the first days of April are affirmative steps in the direction of restoring the global economy. “The World Bank senior economist says a positive outcome of the G20 meeting would be seeing some confidence restored and signs the financial markets are moving up once again.” (CNN) The Gross Domestic Product (GDP) expectation for 2009 is a drop of 1.6%. In 1930, GDP fell by 27% in the United States. This concludes that today even the global economy is in better shape at least in the light of the United States' perspective. While the confidence of the economy in the United States is stationed in higher spirit, on the global scale it lacks. “Basing decisions around fear is not the right way to go. We are going to get through this difficult time,” said President Barack Obama. (---) President Obama's message to the global community is one he hasn't used often in the United States which shows more concern for global confidence. With confidence not being a focal issue in the United States, it provides strategists the opportunity of tackling issues that aren't abstract, and instead solving issues that have more approachable answers in the path to an economic recovery.
Conjunctively, several key figures depict a clear outlook of a current economic crisis that shares no state as detrimental to that of the 1930s. An overwhelming 50% of banks between 1930 and 1933 closed. More importantly, these banks closed with every last penny locked inside. Without accounts insured, every citizen with deposits in the bank had lost what they transacted. This is something that didn't happen in today's economy, because of the FDIC which was established during the Great Depression. Again, today the FDIC was used during an economic crisis as deposits are temporarily insured up to $250,000 until January 1, 2010. However, the banking industry isn't nearly comparative to the 1930s as only .5% of banks have closed, and this can be accredited to the bailouts that took place in order to prevent banks from caving in. Reassuring the stability of the banking system was an obvious lesson learned from the 1930s and hastily protected in today's economic scenario.
Conclusively, the evidence presented of such completely differing time periods and a much more demoralizing economic crisis expresses the fallacious comparison being made by many media sources and pundits. The current economic situation is not to be made out for less than what it is, but it certainly isn't needed to be portrayed for something it is not. The pure struggle of survival in the first severe economic crash of this country's capitalistic system will forever be the deepest cut in history until there is an absolute dissolving of the economic system. The 2008-2009 economy is not the Greater Depression, it is a recession.
“One vivid, gruesome moment of those dark days we shall never forget. We saw a crowd of some fifty men fighting over a barrel of garbage which had been set outside the back door of a restaurant. American citizens fighting for scraps of food like animals” said Louise Armstrong (Hakim)
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Freedom: A History of US by Joy Hakim
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