The whole economic downturn is Groundhog Day December 21, 2011
My mom passed away this year and in March, I went back to Providence to clean out her house.
I shipped back some boxes of stuff including a paper I wrote on the Great Depression. I wrote this paper when I was in 8th grade. I wrote this paper when I was 14 years old. I wrote this paper in 1978... 34 years ago. I wrote this paper just 2 years before I started actively supporting Ronald Reagan in his Presidential bid. This paper was not a work of greatness, but simply a regurgitation of settled doctrine written by a Libertarian-leaning conservative teenager.
A couple of process notes. I wrote the report on a manual typewriter. It was written on onion skin paper. It was my graduation thesis from middle school. I did the front cover artwork myself... and quite frankly that artwork could be stamped with #OWS and it would nearly perfectly describe the national and world situation today.
Reading the report gave me the chills. We are experiencing the very same economic and social issues today that we, the United States and the world, did back in 1930s. We are hearing the very same arguments about what to do as we did in the 1930s. I'll go over the few differences that I can identify in the 2007 vs. 1929:
- The government stepped in in 2007 and kept the Lehman collapse from totally destroying the economy. Struggling with 15% effective unemployment does not create as much political will as does dealing with 25% effective unemployment, especially when there are social programs to mitigate some of the issues. Because far fewer people are dying of starvation, it's harder of overcome the reluctance to do the simple and correct thing: massive government spending on infrastructure.
- Obama came into office earlier in the pain cycle than did FDR and Obama has significantly less spine than FDR. So, Obama has much less strength and much less political will do make things happen the right way.
- There was not a farm price collapse during the latest cycle.
Things that are the same:
- Increasing income disparity that led to lack of money to consume and ultimately a consumption-led collapse.
- Real estate speculation including speculation in Florida.
- Demonstrations with 30,000+ people in New York that were broken up by police in riot gear.
- The impending European Economic Union collapse.
- Quotes like: "We can't squander ourselves into prosperity."
So, in the 1930s, we had never faced an economic problem like the Great Depression. We solved the Great Depression with massive government spending and a post World War II commitment to the middle class which created a huge pile of job creators called well educated consumers.
I had the pleasure of meeting Elizabeth Warren a few weeks ago. Somebody in the audience asked her why the banks, folks with underwater mortgages, and the government couldn't work together to find a solution that was not the current "lose-lose" situation of foreclosures which cost the banks lots of money and drive down real estate values and take away people's homes. Her answer was, "It's like when there's a fumble in football. Everybody piles on the ball and the referee has to pull people off the pile and determine who has the ball. While nobody likes being in the pile, finding out that your team lost the ball is worse, so people stay on the pile for as long as they can."
I think the current economic situation generally fits the same paradigm. Everybody is afraid of making it worse by making the major social and economic changes that will create jobs in the near term, protect and grow the middle class of consumer/job creators, restore a strong infrastructure to the United States which will make every business in the US more competitive, and restore faith in dealing with financial institutions and the government. It's a big mess. It's a nasty scrum. We know how to fix it, but there's so much entrenched fear that the changes will cause short term pain to certain groups (the 1%), that there's not enough political will to make the changes.
So, please read my 34 year old report. Please ask yourself, "did a 14 year old David Pollak presage our current economic situation or are we doing the Groundhog Day thing?" And then take the appropriate action that will set us on the same path that FDR set us on in 1933.