“The Great Depression was a mass of policy errors that made it worse,” says historian and investment consultant Peter Bernstein, 90. “This time we have our fill of policy errors, but at least they’re not making it worse.”
So, at least so far our bumbling Bush/Obama, Pelosi/Boehner, Geithner, and Bernanke aren’t Hoover, Smoot/Hawley, Mellon, and Young. Comforting!
I also like that Lahart talks to some real old-timers who not only know what they’re talking about regarding the economy and history, but who actually lived through the Depression—including 84-year-old economist Robert Solow, 93-year-old economist Paul Samuelson, and 94-year-old economist Anna Schwartz. It’s a good tack.
The economy now has so-called automatic stabilizers, which not only protect people somewhat from the downturn, but which also help keep the economy moving.
And then there are the social-safety-net programs that emerged after the Great Depression to blunt the blows. “There were no unemployment insurance, no food stamps, none of the automatic things that maintain some income for people who are out of work,” says former Massachusetts Institute of Technology economist Robert Solow, a Nobel laureate.
And a good close:
As a University of Chicago student during the Depression, Mr. Samuelson remembers attending economic lectures that seemed completely out of step with the times, based on laissez-faire principles that stopped making sense after the 1929 crash. “I was perplexed because I could not reconcile the assignments I got from these great economists with what I heard out the windows and I heard from the street,” he says.
Starting in the 1980s, the U.S. saw an extraordinary period of economic quiescence, where growth was steady and policy makers dealt with financial crises handily. Economists began to doubt the possibility of a financial crisis so severe it would upend the economy. And that left them as blindsided as their counterparts when the crisis came 80 years ago.