The Great Recession Looks Like The Great Depression In Many Ways

This article describes a book about the Great Depression in the 1930's. It sounds all too familiar. Hoover trusted that the economy would recover by letting the basic laws of supply and demand do their magic. He made some weak attempts to stimulate the economy, but his heart was not in it. He lost the election to Roosevelt who promised to balance the budget which was driven into deficit by the loss of tax revenue due to high unemployment. When the budget went into a deeper deficit under his presidency he cut government spending and sent the economy back into depression. Large corporations did well in the Depression. They introduced technology to increase productivity and they laid off workers to increase profits. Small businesses, many of which provided goods and services to large corporations, did less well. The New Deal was a mixed bag of programs that were introduced to deal with the problems in the economy that were made manifest by the Depression, but they were vigorously opposed by the Republicans, and some were overturned by the Supreme Court. It took World War ll, and the huge increase in government spending on the military to reduce unemployment. Preparation for military conflict accomplished what the political system was unable to do on its own.

History does repeat itself, but it does so for a reason. There is always a conflict between interest groups that have an interest in maintaining things as they are, and interest groups that might benefit from change. There is also the problem of dealing with the conflicting value systems that separate the various interest groups. Its often the case that the dominant values better serve the interests of the most powerful interest groups in a society. Change never happens easily and without political struggle. In many ways the ebbing economic tide that we are experiencing today has exposed problems in our social order that are the result of a resurgence in the power of the forces that produced the Great Depression. It has taken decades for these interest groups to make progress against the value system that enabled the New Deal and The Great Society. It is not surprising, therefore, that the issues today are similar to those from the past. The struggle is still going on and our political system has not been able to resolve the underlying conflicts of interest. Today government has the opportunity to borrow at very low interest rates and invest in an infrastructure that will benefit the private economy of the future. By doing so, it may also be able to develop technologies and resources that prepare us better for dealing with climate change and the affects of globalization. Hopefully, it will not take a catastrophe to enable the needed response to our current economic and social problems.