We need to understand how the Great Depression was ended as we decide together how to stay out of a 21st century depression. According to recent research and current stock market declines, the probability of a full-on depression is now higher than 30%…and this estimate is climbing. People are talking about the decline of our economy and the pending financial meltdown of national economies around the world. How can we contribute to the deliberative conversation of our neighbors and leaders?
As I’m writing this, I’m also listening to an interview on MSNBC where the ‘expert’ on the show is complaining about the reemergence of ‘big government’ in the administration’s recovery plans. Just a couple days ago, the conversation on the ‘Morning Joe’ program focused on downplaying the severity of the economic crisis, and ridiculing those who want to intervene strongly to reverse our economic downward spiral. At this crucial time in our history and probably the most important time in our lives, it appears that we’re being led mostly by pundits, spin-artists and entertainers. What then should we do?
I’m thinking back on the lectures in my Economic History class at UC Santa Barbara in the early 70s. I took the class because it fulfilled a requirement, but found it to be one of the most eye-opening classes in my undergrad studies in Economics. Our professor had studied the Great Depression extensively, and had come to the conclusion with hard data and statistical analysis that New Deal methods were indeed effective. But here’s the problem…when unemployment was reduced from 25% to 10%, it was assumed that the Great Depression was over, so government spending was greatly reduced. Unfortunately, this caused the economy’s recovery momentum to stall…until the globalization of World War II. Then government spending and national sacrifice increased dramatically for a full-employment, totally-focused war effort. At the end of WWII, our economy emerged with new strength and confidence to bring an era of unprecedented innovation and prosperity.
So, here’s the reason this is important today…the evidence is clear that recovery from the Great Depression was achieved through massive government spending, uncompromising focus, and universal sacrifice. While the policies of the New Deal were unable to move us through recovery, these New Deal methods were mandated as a part of the war effort…and they did work. We’re wasting our time in debating whether the New Deal worked…recovery from the Great Depression came through spending, focus and sacrifice. What if we decided to start our conversations with this assumption, and then asked our neighbors to deliberate on how we spend precious government dollars wisely, how we create a laser-like focus on effective recovery, and how we inspire all Americans to choose sacrifice rather than privilege? I’m hoping we can decide our way out of this crisis rather than fight our way out through another awful war.