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Are We Reliving The 1930s?

Tyler Durden's picture




 

Submitted by Neil Howe - author of The Fourth Turning, originally posted at Forbes.com,

At the close of last week’s G20 Summit, U.K. Prime Minister David Cameron warned that we’re on the verge of another global recession, citing problems like looming deflation, falling prices, and rising protectionist sentiment. This list evokes a sense of déjà vu: not about the Great Recession, but the Great Depression. That was the last time we ever seriously worried about disinflation, along with every practically other aspect of economic performance raising alarm bells today: low interest rates, weak investment, slow productivity growth, and chronic labor force detachment.

To be sure, this isn’t an easy comparison to swallow. The Great Depression is the ultimate measuring rod of economic catastrophe to which every other downturn is compared. But as time goes by and forecasts of full recovery keep getting deferred like an ever-fading mirage, it’s one worth examining. How does the Great Depression of the 1930s compare with the Great Recession of the 2010s? Let’s look at the GDPs of the U.S., U.K., and continental Western Europe from 1929 on and from 2007 on, using the base year as an index.

Great Depression v. Great Recession, United States GDP

Great Depression v. Great Recession, United States GDP

 

Great Depression v. Great Recession, United Kingdom GDP

Great Depression v. Great Recession, United Kingdom GDP

 

Great Depression v. Great Recession, Europe GDP

Great Depression v. Great Recession, Europe GDP

A few contrasts stand out. First, the Great Depression triggered much deeper drops in GDP and employment rates in the United States than in any major European country. The peak-to-trough drop in the United States from 1929 to 1933 was a stunning 26 percentage points of GDP, versus only 11 points in Europe and 6 points in the U.K. The employment drops were similar. Second, in both Europe and especially the United States, the depth of the Great Depression was much greater than the depth of the Great Recession. Only in the U.K. was the GDP loss roughly the same.

Yet these figures don’t mean that the Depression was definitely worse. Though it was deeper, it was also shorter than the Great Recession in the U.K. and in Europe - and it likely will be shorter than the Great Reces­sion in the United States. The recovery in the ‘30s occurred much faster than it has in recent years. In the U.K., GDP was already back above its 1929 level by 1934, five years after the recession began. Europe met that milestone by 1935, six years after their recession began. Today, Eur­ope is going into its seventh year of recession and still has not regained its 2007 GDP level. In the United States, we remain better off today (relative to before the crash) than during the Great Depression, but that’s due to the severity of the early drop.

What’s more, from 1933 on, U.S. GDP grew at a blistering average rate of over 8% per year for the next eight years. And that includes one recession year: 1938. By 1941, 12 years after the Great Depression began, U.S. GDP was 41% higher than its pre-downturn figure. This is almost certainly a much higher level, relative to 1929, than the United States will see by 2019, relative to 2007.

My point is not to diminish the magnitude of the Great Depression. It was certainly more terrifying, especially in its early years and in the social restlessness and political radicalism it spawned. But we can no longer think of it as longer-lasting: Bad times are shaping the temperament of a new rising generation around the world today just as surely as the original Great Depression did back then.

So perhaps a new nomenclature is in order. Instead of calling this the “Great Recession,” maybe we should call it the “Long Depression.” Paul Krugman, who has often pointed how much worse Europe is doing today than it was in the 1930s, coined the term “Lesser Depression” for our post-2007 experience. Brad DeLong, Krugman’s kindred spirit at UC Berkeley, also adopted this expression—until inventing yet punchier ones, like “The Second Great Depression” and “The Greater Depression.”

For Krugman and DeLong, such dire relabeling has (at least in part) one very specific objective: to shock voters and leaders into supporting the sort of massive fiscal stimulus they have long advocated. But you don’t have to be a militant neo-Keynesian to see the numbers for what they are—and to appreciate that the world has entered an era of grinding economic crisis since 2008 whose social and political consequences have yet to fully unfold.

Seeing the two “depressions” as historically and generationally comparable, makes it easier to recognize other similarities between the 1930s and the 2010s. Many are economic, as we have seen. But others are demographic (falling fertility, migration, and mobility). Still others are social (growing localism, income inequality, and distrust of elites; stronger families; and declines in personal risk-taking). And still others, ominously, are geopolitical (rising isolationism, nationalism, and authoritarianism, and the unraveling of any “world order” consensus).

The confluence of all these trends is not accidental. In general, each trend happens because most of the others are happening at the same time. The era as a whole, therefore, has its own internal logic, which doesn’t allow the component pieces to change much until the whole system changes and transforms into a new era. In my writings on generations and history, I call these sequential eras “seasons” or “turnings.” And right now, America and most of the rest of the world is in the winter season or the “Fourth Turning.”

These parallels between eras are so numerous and striking that they are hard to miss once we look broadly at the direction of events. That’s why connecting the economic challenges of the 1930s with those of the 2010s, and seeing them as comparable in some respects, makes a difference. When we are connected to history, we can comprehend better what else is happening in the 2010s, predict better what is likely to happen next, and to figure out, if necessary, how we can avoid an outcome that we regard as especially dangerous.

 

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Sun, 12/07/2014 - 21:03 | 5527023 Playtime's Over
Playtime's Over's picture

I'm not on the red team or blue team anymore. I'm on the WHITE team.  Obama has been such a healer. "sarc"

Sun, 12/07/2014 - 21:06 | 5527027 p00k1e
p00k1e's picture

We're in a pickle, that's for sure. 

Sun, 12/07/2014 - 22:34 | 5527063 himaroid
himaroid's picture

Possum should taste better this time around with all the culinary arts majors lying around.

Mon, 12/08/2014 - 08:05 | 5527976 taggaroonie
taggaroonie's picture

Funnily enough I was about to pack my traps and go possuming this week but I picked up a job

Fur prices are holding up at $100 a kilo

Sun, 12/07/2014 - 21:22 | 5527064 Atticus Finch
Atticus Finch's picture
Are We Reliving The 1930s?

Yes, except now the US is playing the role of Nazi Germany with the goal of world domination, even if it means that all of us will be incinerated in a nuclear holocaust.

Sun, 12/07/2014 - 21:33 | 5527101 One Eyed Jack
One Eyed Jack's picture

YES! and Russia is playing the part of the USA. Long jack boots!

Y'all start goose stepping bitchez

Sun, 12/07/2014 - 21:44 | 5527136 bid the soldier...
bid the soldiers shoot's picture

A compssionate comparison, Neil, and not at all odious.

The real comparison of the 1930's and the 2010's would have been the blitz-like materialization of a police state in Germany and it's doppelgaenger today in America.

Sun, 12/07/2014 - 22:23 | 5527234 bid the soldier...
bid the soldiers shoot's picture

Might I suggest a chart which overlays the low of the Dow after October 1929 and the low of the Dow after either December 2007 or December 2008 depending on when you think the Great Triple Dip Recession began.

And show us how long it took for the Dow to double its low in the first instance and how long to double it in the second.

Over those two graphs you could overlay the accrued Quantitive Easing that can still be heard sloshing around Wall and Broad after a pint or two..

Sun, 12/07/2014 - 23:18 | 5527383 TulsaTime
TulsaTime's picture

We are just getting ready to walk into the 2nd great depression. or perhaps the great deflation might be a better turn of phrase.  Nothing was destroyed in the last 'adjustment' except for a large slice of the middle class, and a few pitiful remains of the ex-democratic process. Amerika has been treading water since'08, trying to pretend it was climbing out of a hole. Descent into the REAL hell is just around the corner, with the implosion of a financial system that should have shattered last time around. If we are lucky we can stir in a nuclear exchange with the Russkies on top of the financial meltdown.

Mon, 12/08/2014 - 00:18 | 5527528 Tyrion
Tyrion's picture

So, should we expect another world war to be the vehicle that leads to the reseting of the world's economy, in large part by laying waste to it?

Mon, 12/08/2014 - 00:42 | 5527591 Enough Already
Enough Already's picture

GDP includes Goverment spendiing. But the Government has no $ to spend. They either tax it or they print it. 

 

Either way, not a measure of economic growth. 

Mon, 12/08/2014 - 00:52 | 5527621 the grateful un...
the grateful unemployed's picture

the difficulty is defining economic activity? in a service economy anyone performing a service is part of that economy. people who provide services and which arent compensated need to have their efforts recognized. on other hand the CEO of a bank who has no idea how the people in his organization make money for that organization, still demands excessive payment? and excessive profit? honestly some of us (not me) thought  obama would bring economic justice. the resume of the people who might have righted the economy is shrinking, but they all take their pensions and move to the islands. its sad, and we should hunt them down for some other kind of justice, for just not doing the right thing.

Mon, 12/08/2014 - 01:01 | 5527642 dolbiere
dolbiere's picture

no, no, no, we are re living  the dark ages. 

Mon, 12/08/2014 - 07:58 | 5527968 yellowlight4570
yellowlight4570's picture

but the Green Shoots were spotted ages ago they must be popping up any second now!

Mon, 12/08/2014 - 03:38 | 5527798 Sirius Wonderblast
Sirius Wonderblast's picture

Well, US is ahead of where it was in '08 per the graph (it may not feel that way, and so is the UK (definitely doesn't feel that way) while Eurozone is setting up to tank again without even regaining it's '08 level.

Mon, 12/08/2014 - 04:49 | 5527836 Debugas
Debugas's picture

it is because of money printing US did and germany refused to do

Mon, 12/08/2014 - 04:03 | 5527810 Fuku Ben
Fuku Ben's picture

You mean nobody here realizes we're living in a predestination paradox. It's been the same stories over and over again since the beginning of time but just in a different context.

For example who brought down the two pillars in the temple during ancient times and killed 3000 Philistines?

And who did it on September 11, 2001?

Same shit different century

or was it Last Decade Dead Century?

Mon, 12/08/2014 - 04:28 | 5527828 Panic Mode
Panic Mode's picture

1930 has a lot more integrity and values than now.

Mon, 12/08/2014 - 04:48 | 5527835 Debugas
Debugas's picture

many things are different now but the key common feature is the lack of payable demand

Mon, 12/08/2014 - 09:21 | 5528096 Sandmann
Sandmann's picture

Europe has Adolf Hitler and Benito Mussolini boosting their economies behind tariff walls. The British had an empire and Exhange Equalisation Account which the US insisted be disbanded in 1946

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