The Great Depression was undoubtedly a time of great financial woe. Spanning across the 1930’s, the economic disaster that spurred from the Depression has never been seen again in American history. However, the financial crash of 2008, while certainly not as severe as the Depression, does share many similarities with its predecessor.
The first of many is the fact that while both finical crises’s epicenter was the United States, they both were global catastrophes. For the Great Depression, the Dawes or Young plan caused finical connection between countries across the world and thus when the United State’s economy was harmed, so fell other economies in Europe. In 2008, with greater globalization and greater financial integration, the banking crisis hit close to home and across countries farther than Europe.
In addition, banks played a huge role in both crises. During the Great Depression, the idea of credit became widespread throughout the United States. For this reason, many people started to take out loans from various banks. However, when they were called to pay back these loans, many defaulted, and banks began to drop like flies resulting in huge economic downturn. In 2008, banks — specifically investment banks — began “gambling” consumer money in markets. When these gambles failed, many banks, such as Lehman Brothers, also began to collapse. Both catastrophes were hurt by bank’s miscalculations and the eventual disasters caused by these missteps.
The effects of Thee Great Depression and what many dub “The Great Recession” also are predictably similar. During the Depression, 13 million Americans lost their jobs, while during the Recession 8.8 million felt similar affects. Moreover, during both crises, countless lost their homes, specifically 7 million during the Recession. We see that in addition to both of these hardships, crime in the United States also increased after both crises.
Yet, regardless of the disaster caused by these crises, the United States economy still stands. This can be partially attributed to another similarity between the crises: government intervention. Both Presidents during the time of their respective finical catastrophe, Roosevelt with the Depression and Obama with the Recession, created massive federal funding projects to mitigate the effects of the Depression and Recession. Roosevelt with his Agricultural Adjustment act and Obama with his infrastructure bills helped workers through times. While government spending wasn’t the sole reason why these financial crises halted, they certainly played a major part.
And so, as we reflect on these similarities, the notion that we can learn from history to solve the problems of contemporary times rings loud and clear.
Is there a limit to the manner in which government intervention can impact things, and, if so, where does that stand? It seems to be a major point of contention in today's politics; considering that the most likely result is a compromise, is there a way to measure the limitations of interventionist effectiveness?
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ReplyDeleteBy comparing the factors that link the two together it helps to put the depression into a greater perspective. Since we have all lived through the 2008 recession having the comparison of job loss put the impact into a greater context. My only question is, what was the long lasting impact on the global economy for both? I know that we don't fully know yet for the recession, but I am still curious to know how the world recovered from the depression.
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