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Tale of two depressions

from David Ruccio

Men Waiting Outside Al Capone Soup Kitchen JNS.FoodGiveaway2

One of the courses I’m offering this semester is A Tale of Two Depressions, cotaught with one of my colleagues, Ben Giamo, from American Studies. It’s a comparison of the conditions and consequences of the two major crises of capitalism during the past hundred years, the 1930s and the period after the crash of 2007-08.*

It just so happens the Guardian is also right now revisiting the 1930s. Readers will find lots of interesting material, from some evocative street photography from the period (including bread lines, hunger marches, and various protests) to classics of political theater (from Bertolt Brecht and Federico García Lorca to John Dos Passos and Clifford Odets).

I’ve been writing about the Second Great Depression, in mostly economic terms, since 2010. For the Guardian, the idea is that the situation then, in the 1930s, offers lessons for us today—partly for economic reasons but, increasingly, given the victory of Donald Trump and the growth of other right-wing populist-nationalist movements in Europe, in political terms. 

Larry Elliott focuses on the economics. Unfortunately, he makes the mistake many commit, by starting with the stock-market crash of 1929—which, as it turns out, was the trigger, but not the cause, of the First Great Depression. He does a much better job examining the different responses to the two precipitating crashes (yes, there were lessons were learned, especially in the United States, with the quick bailout of Wall Street), including identifying those who were left out of the post-2009 recovery.

Wage increases have been hard to come by, and the strong desire of governments to reduce budget deficits has resulted in unpopular austerity measures. Not all the lessons of the 1930s have been well learned , and the over-hasty tightening of fiscal policy has slowed growth and caused political alienation among those who feel they are being punished for a crisis they did not create, while the real villains get away scot-free . A familiar refrain in both the referendum on Brexit and the 2016 US presidential election was: there might be a recovery going on, but it’s not happening around here. . .

The winners from the liberal economic system that emerged at the end of the cold war have, like their forebears in the 20s, failed to look out for the losers. A rising tide has not lifted all boats, and those who do not consider themselves the beneficiaries of globalisation have grown weary of hearing how marvellous it is.

The 30s are proof that nothing in economics is inevitable. There was eventually a backlash against the economic orthodoxies and Skidelsky can see why there is another backlash happening today. “Globalisation enables capital to escape national and union control. I am much more sympathetic since the start of the crisis to the Marxist way of analysing things.

And then, of course, there’s the political backlash, the topic of the most recent piece in the series. Jonathan Freedland begins by noting the differences between the two periods: the fact that ultra-nationalist and fascist movements managed to seize power in Germany, Italy, and Spain in the 1930s, which has not (yet) happened in the more recent period. Trump, for example, has criticized the media but has not (yet) closed any sites down. Nor has he suggested Muslims wear identifying symbols.

These are crumbs of comfort; they are not intended to minimise the real danger Trump represents to the fundamental norms that underpin liberal democracy. Rather, the point is that we have not reached the 1930s yet. Those sounding the alarm are suggesting only that we may be travelling in that direction – which is bad enough.

There are other warning signs, which suggest closer parallels between the 1930s and today: the shattering of the faith in globalization’s ability to spread the wealth, the growing hostility to those deemed outsiders, and a growing impatience with the rule of law and with democracy. Then, as now, capitalism faces a profound crisis of legitimacy.

In the end, Freedland takes comfort in our having a memory of the 1930s: “We can learn the period’s lessons and avoid its mistakes.” What he fails to acknowledge, however, is that economic and political elites in the 1930s also had vivid memories—of the great crashes of 1873 and 1893 and, of course, the horrors of the “war to end all wars.” But those events were forgotten amidst more short-run memories, including their joining to put down workers’ actions, including the widespread attacks after the 1926 general strike led by the Trades Union Congress in England and the anti-union “American Plan” during the 1920s on the other side of the Atlantic.

The more or less inevitable result in both countries was growing inequality, as large corporations and a tiny group of wealthy individuals at the top managed to capture a larger and larger share of national income—thus creating a financial bubble that eventually crashed, in 1929 just as in 2007-08.


The memory of the 1929 crash certainly didn’t prevent the most recent one, nor did it create a recovery that has benefited the majority of the population. In fact, it seems the only lesson learned was how it might be possible, in recent years, for those at the top to recovery more quickly than they managed to do after the First Great Depression what they had lost.

It’s that rush to return to business as usual, characterized by obscene levels of inequality, and not the lack of memory of the 1930s, that has created the conditions for the growth and strengthening of populist, right-wing movements in the United States and Europe.


*As is my custom, the syllabus is publicly available on the course web site. Readers might find the large collection of additional materials—music, charts, videos, and so on—of interest. They can be found by following the News link.

  1. March 16, 2017 at 3:47 am

    As I have stated before, on the web, in public gatherings and to individuals: We are in a 1930ies replay right now. The main difference being the ready availability of credit to individuals. So, an elastic rope has been created by means of which people are hanged, rather than a “no-give” one as in the thirties.

    The reaction of the disenfranchised population has been totally predictable and one can only marvel at the stupidity of the so called “elite” in failing to foresee and forestall this development, because it has all happened before, many times.

    Perhaps they think that they can use their old tricks to get rid of surplus youth by sending them off to war, as has been done many times before. Perhaps they should think again, because the “weapons of mass destruction” can easily be directed against the “elites” rather than the poor “proles” in the streets.

    I can only shake my head at the stupidity displayed by so called “progressives” when they complain about the man they put into the White House by their lack of comprehension of the conditions their policies created.

    Yes, it all happened before, in 1933, when the German people, inspired by an orator, turned their back on Democracy and went with the “Fuhrer”. They had also been left in the dirt by their “elites”

    • visitor
      March 16, 2017 at 11:24 am

      “We are in a 1930ies replay right now. ”

      Personally, given the causes of the current crisis (unfettered free trade leading to off-shoring and continuous long-term income degradation for a large fraction of the population, deflationary monetary and fiscal policies, and unbridled speculation), its outbreak (stock crash and widespread bank failures), its length, and its general outlook (initial fast degradation followed by endless degradation, at best stagnation), I contend that we are living more through a replay of the “Long Depression” 1873-1896.

  2. March 18, 2017 at 10:45 am

    The US has been in recession or depression almost continually since its founding. Only during wars or near-wars was there no/limited recession/depression. That should be instructive as to the reasons for recessions/depressions. Simply put, normal times in the US are recession and depression times. I lay this squarely on the form of the US economic arrangements. From its origin, the US has operated economically through speculation and exploitation. Speculation often fails as actual results don’t live up to expectations, to the bets made. Exploitation is also shaky as a basis for economic life, as exploitable opportunities (forests, fields, cattle, native Americans, gold, silver, etc.) are always limited and difficult to hold onto. The early myths of the US (Horatio Alger, Johnny Appleseed, Paul Bunyan) depict a nation of independent, commerce-minded, creators (now fancied up with the French word entrepreneur) who were tough-minded and conservative. This may be the case with the established rich of the Revolutionary era (planters, Boston ship owners, lawyers, etc.) but most others were “take-a-chance” adventurers who wanted a quick buck and no moral or legal problems. Even many so-called conservative farmers would move on immediately at the first sign of better land over the next hill. After the Civil War this adventurism was transferred in part to stock markets and financial trading. And in part to building great industrial empires (e.g., railroads, steel, mining, etc.). All supported by large and aggressive banking empires (e.g., JP Morgan, Vanderbilt, etc.). In the words of Woody Guthrie, “Some will rob you with a six-gun, And some with a fountain pen.” Was there another America outside these realms of industrial and banking empires, as Guthrie suggests? Yes. It was an America of immigrant farmers, miners, ranchers, craftsmen who came to the US poor and remained that way for several generations. An America of Chinese railroad laborers who lived as virtual slaves. An America of laborers and small farmers who founded the AFL and CIO, and the Grange. But in the end, the US remains a nation of speculation and exploitation. One blogger summed it up this way. The US is a psychopathic nation, in terms of its economics.
    1. We’re all psychopathic in our decision-making (cold, rational, exploitative of others);
    2. Utopia exists when we’re all equally clever psychopaths; and
    3. If you’re not a psychopath, or if you’re less clever than the other psychopaths, then that’s your own fault, and that’s why you’re poor.

    Ryan’s American Health Care Act and Trump’s budget are sensible in terms of these basics.

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