Comparing today to the Great Depression
Friday, March 20, 2009
CONTACT: Kim Fischer 215-204-7479
Despite the government’s $700 billion financial bailout of banks and insurers and the recently enacted stimulus package, stocks continue to fluctuate and concern grows regarding a widening global financial crisis. Some are comparing the current state of the economy to the Great Depression and the New Deal. But what exactly are the parallels and how does our current situation differ?
Bryant Simon, professor of history and director of American studies at Temple University, says that there are some obvious similarities between today’s crisis and the earlier one. “Of course, both crises were all-time lows for Wall Street — although the anti-Wall Street language in the 1930s was more pointed and directed,” said Simon.
“And, both were triggered by speculation, unregulated financial markets, and a failure of confidence. FDR closed the banks to restore credit.”
“We are seeing now how unemployment as result of financial missteps and perhaps deeper structural problems deepen the crisis and make the recovery more difficult,” he noted.
But, according to Simon, the Great Depression was much more severe because it hit a nation without a safety net. When people fell there was nothing to catch them.
“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 Simon.
A key difference, said Simon, is that society in the 1930s was better organized, and social groups — such as labor and even small business groups — were better able to push back against Congress.
Perhaps this push against Congress by a tightly-knit social infrastructure led to the New Deal’s bailing out of banks and homeowners at the...