Friday, February 20, 2009

Thoughts on "Great Depression 2.0"

When I was in junior high (I think it was 8th grade), my Social Studies teacher (Mr. James) made everyone in the class interview someone who had lived through the Great Depression (that would be "Great Depression 1.0", or "Great Depression 29"). For Generation X, that generally meant interviewing a grandparent.

Mr. James gave us a list of questions to ask in our interview.

So, I took my Radio Shack monoural cassette tape recorder, and interviewed my grandmother, born in 1909 (or maybe it was 1908). The one thing I remember from that interview was one question: "What ended the Great Depression?" I still remember my grandmother's answer: "The wower" That would be "The War" for those who cannot translate a southern accent. "The War" refeedr to World War II. Now, "The War" didn't happen for America until twelve years after the stock market crash, and nine years after the election of FDR.

Wasn't there a New Deal? What about the WPA? The CCC? What, building the Hoover and Grand Coulee Dams didn't pull us out of the depression? Rural Electric Administration and the TVA? Nope.

Now, after we all did our interviews, we had to listen to them. For a week, we all listened to each of the interview tapes. And the one thing I remember is almost every subject answered the "What ended the Great Depression?" question the same way: World War II.

Is there a lesson in this? Perhaps. Perhaps the lesson is spending billions of dollars of taxpayers' money on make-work will not pull you out of depression, but spending billions of dollars of taxpayers' money on trucks, tanks, airplanes, and ammo will. Perhaps the lesson is economic problems are rarely solved quickly from the bottom up (i.e., jobs programs, consumer focused programs, tax cuts to individuals, etc.). Does it mean economic problems can be solved faster at the top (money supply, business lending, business taxes, etc.)? One could say the war spending was a direct subsidy to large American industrial companies, like GM and Boeing, and the jobs were a byproduct, that is, it was top-down. Certainly the decade-long economic downturn of 1973-1984 never adequately responded to the demand side economic efforts of Nixon, Ford, and Carter, and only recovered after Reagan's tight money supply and supply side focused efforts.

One thing I can say is, I can lean on that CCC-built rail at the Grand Canyon. I can use electricity from the TVA. They might not have pulled the U.S. out of depression, but one could argue we got something for the money, and some people were employed for some period of time.

But can we say the same thing about the current stimulus plan?

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