Wednesday, November 12, 2008


Here's something that I probably could start to work out with some research, and maybe I'll do some of that, but I'm growing a tad weary of the tacit assumption (regular readers may notice that I often question tacit assumptions, rarely the non-tacit ones) that we are not going into another Great Depression. It's something you read at the beginning of pretty much every article, op-ed, and blog post concerning the economy, like this from a Robert Reich post of 11/9:
This is not the Great Depression of the 1930s, but nor is it turning out to be merely a bad recession of the kind we've experienced periodically over the last half century. Call it a Mini Depression. The employment report last Friday shows job losses accelerating, along with the number of Americans working part time who'd rather be and need to be working full time. Retail sales have fallen off a cliff. Stock prices continue to drop. General Motors is on the brink of bankruptcy. The rate of home foreclosures is mounting.
Hmm. That sounds kind of bad. But we can be reassured that it isn't the Great Depression, right?

But when did the Great Depression become the Great Depression? It certainly wasn't immediately after the stock market crash of 1929, because the GD (I'm tired of typing it) didn't "officially" start until 1931. At what point did the bloggers of 1931 know that we were in a GD?

I think the assumption is that we understand better how to deal with an economic downturn, though it disturbs me that we still have at least three schools of thought as to why the GD was so great (as expressed by Brad DeLong here). If, however, the lessons we learned were not quite correct, or, what seems more likely, the current situation is far different from that of 1931, then we run the risk of solving the wrong problems.

I certainly hope that the worst case is the so-called Mini Depression, that our policies and structures and intelligence will be enough to avoid anything Great, but I fear that it's way too early to close the books on the possibility of Great-ness. Of course we won't see 25% unemployment again, the experts say, but do they really know?

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