Don’t Compare This With the Great Depression

Over at one of Time’s blog sites there’s a series of graphs which should convince anybody but the most determined that comparisons between the job situation during the current recession and the Great Depression of the 1930’s are ridiculous:

It is true that a larger share of the workforce was still on the farm in the 1930s, so nonfarm employment wasn’t quite the all-important indicator then that it is now. Still, it’s clear that the employment downturn we’ve been dealing with, while probably the worst since the Great Depression, is much, much closer in severity to the recessions of the mid 1970s and early 1980s than to the utter disaster of the 1930s. That’s no guarantee that it won’t get worse, of course. But it is useful to know.

Matthew Yglesias, hardly a Republican shill, chimes in:

The data’s not directly comparable because farm employment was a bigger deal back then, but this is about as close to an apples-to-apples comparison as you can find and the apples of the 1930s were much, much, much worse than our apples.

There’s another important way in which this is different from the Great Depression: unemployment insurance, food stamps, and other forms of assistance that weren’t available 70 years ago make the circumstances of those who are unemployed today significantly less desperate than those who were unemployed in, say, 1932. If you want to see what life was like without this safety net, consider the demonstrations, protests, and occasional riots that take place among the unemployed in China. China has very little in the way of government programs that prevent the unemployed from becoming desperate.

Over the last few months I’ve occasionally been taken to task for complaining that President Obama, for example, by drawing a connection between the current recession and the Great Depression is just flat out wrong. Perhaps the chart above, from the linked article, will explicate my thinking.

For those who sincerely believe that he should be discouraging people by “talking down” the economy, a practice that both he and Lawrence Summers have been making rather tepid attempts to remedy lately, I have a question. How does it materially help the situation?

9 comments… add one
  • Tom Strong Link

    He shouldn’t, obviously. And I hope he and his advisers continue to remedy that particular choice.

    That said, the phrase I have seen most often is that it is the “most severe _financial_ crisis since the Great Depression,” which is true. That the economic recession is not nearly as severe is likely due to the governmental intervention, however distasteful it may often seem to be. Given that many Americans don’t draw a strong line between “financial” and “economic,” I have some sympathies for the difficulty of his position.

  • Being senator and being president are different. Senators can afford to shoot their mouths off, philosophize, and speak loosely. Presidents not so much.

  • Drew Link

    Sing with me now: (to the tune of Its Beginning to Look a Lot Like Christmas)

    “It’s beginning to look a lot like 1981, everywhere you go…….”

    But propagandists – (did I really just call Obama a propagandist? Yes, I did! ) needed air cover for their spending agenda. Hence, “catastrophe.”

    What do you call people like that? Trading on peoples fears, and perhaps creating needless unemployment to get a political agenda through? I call them scum of the earth mother fucking liars. (Sorry, Dave, for the salty language. The steel mill, you know.)

    Speaking of steel mills. How do we explain to steelworkers they are unemployed because Obama talked down the economy with fears of “catastrophe” to further his political agenda. Ghoulish.

    Any of you have a more charitable explanation?

  • Well I for one think that this recession is far from a sequel to the Great Depression… It’s okay to compare the two to show how good we still have it, but it’s kinda either scaring people or just ticking them off. People have to get a grip, after all. It’s not that bad…yet.

  • Drew Link

    Since prognostication is always more exciting than description……

    I am one who has consistently said this recession was going to be one – within reasonable tolerance – more like 1975 or 1981 than like 91 or 01. So naturally I think Obama’s public stance has been extremely irresponsible. That said, the real questions today are: 1) what could cause this recession to get much worse (That is, depression-like), 2) could the recovery be very tepid, and Japanese-like.

    The two most prominent issues that could cause a deeper recession seem to me to be protectionist measures, and failure to get the banks rectified. The news on protectionist sentiments is worrisome, although recent public statements and market response indicate that many believe the banks are in relatively good shape. That’s a mixed bag, with the potential for ugly policy errors. I would be interested in others views.

    The generally accepted view of Japan’s extended problems was its failure to let its banks and corporations correct, by propping them up with a series of supports. Further, I believe the mahjority view is that Japan’s stimulus packages only “worked” because they came in waves.

    So, to the crystal ball. If the Obama Administration continues on the current policy path, I’m thinking an awfully sluggish recovery beginning in 2010 and on into 2012 is in the works. Somewhat Japanese-like.

    It didn’t have to be this way. 1981 was ugly, but relatively short lived.

  • My prediction is recovery beginning in 2010 but the recovery will be hard to distinguish from the recession. No to slow growth for the foreseeable future. Basically, the Japanese model.

    My prescription is that, rather than bailing out the behemoths, the federal government should be acting as the agent of creative destruction, as corporate raider. We should buy out Citibank, certainly, and Bank of America, probably, at their current full market capitalization which is a pittance compared to what we’ve been paying and sell them off slowly, in digestible pieces. Don’t sell the commercial banking business intact. Sell it city by city.

    I’d like to see that coupled with reforms for reducing the sizes of companies, labor unions, and government, too. None of that will ever happen.

  • Kelly Link

    I have thought about that, too, and begun wondering- in my unschooled way- if ‘smaller and nimbler’ might be a better business model in the future. Back when the issue of the day was saving the Big 3 I argued to my husband that if one or more of them should drown, it could create an opportunity for smaller, nimbler carmakers to appear- makers that might fill ‘niche’ markets for particular types of vehicles and that way remain profitable, but responsive to market flux and flow.

  • ... Link

    Two things to note. First, the stats on the Great Depression aren’t really that good.

    Second, the Great Recession my well beat the Great Depression in terms of time it takes to regain lost jobs as a percentage of population, unless one accepts the fiction of the decline in labor participation.

    Oh well, it doesn’t really matter though. The cheerleaders of destruction will keep telling us that this is the best things could possibly be. Unless someone from the other party gets into the Oval Office, that is.

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