Last week I did a bit of review in preparation for a class I joined on the New Deal. In light of recent events, I have to say, I was astounded by the similarities. I know, I know, every commentator that can get your ear has been making the same points, but they don't offer details like this. What really surprised me was in the details. Here's some of what I read (courtesy of one of my favorite historians, Eric Foner) with the addition of my commentary (just what you wanted, I know).
"The stock market crash [or credit crisis] did not, by itself, cause the Depression. Even before 1929 [September 2008], signs of economic trouble had become evident. Southern California [Nevada,] and Florida experienced frenzied real-estate speculation [check] and then spectacular busts, with banks failing, land remaining undeveloped and mortgages foreclosed [check, check, and check]. The highly unequal distribution of income [check] and the prolonged depression in farm regions [ok, no parallel here] reduced American purchasing power. Sales of new autos and household consumer goods stagnated after 1926 [October 2008]. ... A fall in the bloated stock market, driven even higher during the 1920s [early 2000s] by speculators, was inevitable. But it came with such severity that it destroyed many of the investment companies that had been created to buy and sell stock [AIG, Bear Sterns, Lehman Brothers, etc.], wiping out thousands of investors, and it greatly reduced business and consumer confidence. Around 26,000 businesses failed in 1930. Those that survived cut back on further investment and began laying off workers [over a half million just in first six months from September 2008 to February 2009]. The global financial system, which was based on the gold standard [or a market of pure credit], was ill-equipped [had no clue how] to deal with the downturn. ... Millions of families lost their life savings [retirement accounts]."
But wait, there's more: "Between 1929 and 1932, the price of a share of U.S. Steel fell from $262 to $22, and General Motors from $73 to $8. [or a "high" of $13 in September, 2008, to a low of $2.50 today] ... William C. Durant, one of the founders of General Motors, lost all his money and ended up running a bowling alley in Flint, Michigan. [fat chance now - tax-sheltered, off-shore accounts mitigate against such "adversity" for the obscenely wealthy] ... congressional investigations revealed massive irregularities committed by bankers and stockbrokers. [yes, and?]... Richard Whitney, the president of the New York Stock Exchange, was convicted of stealing funds from customers, including from a fund to aid widows and orphans. He ended up in jail. [we should be so lucky, instead they're relabeling their bonus system to make it seem like legitimate pay or maybe this is Madoff...]"*
In the class, we did not discuss such details, but there was significant discussion of the similarities and differences between then and now. Someone complained that we no longer "produce" things in this country, but, I would say, that the consumer economy is our economy and it can crack just like an industrial one can. One thing students noted was that no one has lost all of their savings (thanks, New Deal!) but that everyone's retirement was in jeopardy.** But having retirement savings to worry about is a something that the New Deal helped make standard.
And one last comparison that I have to make myself. After the class, I spent the week reading the Daily Worker which offered very clear criticisms of the markets, employment, wealth disparity, and global economy that created this crisis. Therein lies the biggest difference between now and then. No one is questioning the big picture just the details and these criticism of lending or extravagant spending is aimed at fixing the problems within the framework of a broken system. There doesn't seem to be any thinking beyond it.
*E. Foner, Give Me Liberty: An American History (Norton, 2005), 800-802.
**Maybe, I should note that these were "lifelong learning" students; they were all currently living on their retirement savings.