Are We in the Middle of Another Great Depression?


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A common Great Depression sight. Credit: By Unnamed photographer for Bain News Service David Shapinsky

Here’s a question for anyone above the age of 90: in the middle of the Great Depression, did you know you were in the middle of the Great Depression?

It’s an interesting brain teaser, because it borders on the concept of paradoxical logic; to wit, subset A and non-A are both excluded as predicates of X.

Given that an economic depression is, simply put, a very long recession, at what point does one characterization end, and another begin?

Whether or not it was yet labeled a full-blown depression (it wasn’t) by the time the 1932 presidential election rolled around, the U.S. economy was nevertheless in desperate straits, having suffered for three full years after the 1929 stock market crash.

The unemployment rate rocketed past 20%. The Dow Jones had fallen nearly 80% from its pre-crash peak. Schools across the land were closed due to lack of funding.

A New York City Health Department study in 1932 cited 20.5% of children were suffering from malnutrition. Like a lamb to the slaughter, incumbent president Herbert Hoover didn’t stand a snowball’s chance of re-election and was swept out of office in favor of Franklin Delano Roosevelt by a veritable landslide.

And yet, unlike the popular misconception that the Great Depression was a decade of perpetual bread lines and dust bowls, the economy actually moved both up and down, churning in fits and starts throughout the entire period. Gross Domestic Product fell for four years, then rose for four consecutive years, dropping again in the late 1930’s and bumping along until the United States entered World War II in 1941.

What Caused the Great Depression?

Economists have debated the question for over half a century. Business interests allegedly feared governmental regulation and increasing taxes, and subsequently withheld investment. The Hoover administration cited worldwide economic distress spilling over into the United States as the primary culprit. Proponents of the New Deal argued the need for Keynesian stimulus due to flagging consumer confidence. Milton Friedman and Anna Schwartz’ book Monetary History of the United States (1963) blamed the Great Depression on incorrect and inadequate monetary policy. In his book The Great Depression (1987), historian Michael Bernstein advanced the notion that unfortunate timing of an otherwise-cyclical downturn was the root cause.

Regardless of the reasons, one factor increasingly lost on post-World War II generations is this: not only are recessions economic certainties — so are depressions.

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