Many TV pundits, ivory tower economists, and clueless Wall Street permabulls keep trying to make the case that, despite the bursting of history's biggest credit and housing bubbles and the chaotic unraveling of unprecedented excesses and global imbalances, the sharp downturn that is already underway won't be anywhere near as calamitous as the one that took place nearly 80 years ago.
Among the reasons: policymakers are more sophisticated than they used to be, and people have wised up quite a bit since the time when the world was poised on a cliff overlooking a dark abyss. More realistic types would argue otherwise. In fact, Jim Rawles, an author, lecturer, former U.S. Army Intelligence officer, and publisher of SurvivalBlog.com, sets out some compelling reasons why the current economic downturn could turn out to be far worse than the Great Depression in "Letter Re: The Depression of the 1930s--Why No Societal Collapse?"
There are some substantial differences between our society in the early 21st Century, and America in the 1930s. With these differences, our society is now much more fragile and vulnerable to collapse. Here are a few that come immediately to mind:
Consider the Attributes of America in the 1930s :
A largely agrarian and self-sufficient society. (Now, just 1% of the population operating farms and ranches feed the other 99%.)
Not heavily dependent on computing and communications, technology, grid power, and petroleum-based fuels.
Shorter chains of supply. Most food was grown within 100 miles of where people lived.
A very small underclass that was dependent on charity or public welfare.
Lower property tax rates and lower (or nonexistent) license fees, vehicle registration fees, et cetera.
The majority of workers lived near their work.
Most displaced workers were willing to accept lower-paying jobs--even doing hard physical labor.
The entire nation was economically self-sufficient and could carry on without many imports.
Far greater self-sufficiency at the household level (domestic water wells, windmills, wood burning stoves, home vegetable gardens, home canning, and so forth)
A much lower level of indebtedness (public and private). At the outset of the Depression most families had cash savings. (We are now a nation of debtors.)
A sound currency, still backed by specie. (Although FDR's administration seized most privately-held gold in 1933, the currency was at least still fully redeemable in silver coinage until 1964.)
Lower percentage of corporate employment--so there were less risk of huge layoffs that would devastate communities.
A significantly more moral society that still had compunctions and a prevalently law-abiding attitude.
A homogeneous population that largely shared common Judeo-Christian values. A much larger portion of society attended church regularly.
A simpler, less extravagant lifestyle, with tastes in cooking and entertainment that did not require large outlays of cash.
Most families owned only one car (with proportionately lower registration and insurance costs), and they lived in smaller homes that were less expensive to heat.
In summary, in the 1930s it cost a lot less to live (as a percentage of income) and people were willing, able, and accustomed to "making do" without. When people lost their jobs, in many cases they didn't lose their homes because they were paid for. Many folks could simply revert to a self-sufficient lifestyle and earn enough with odd jobs to pay their property taxes....
The bottom line: If America were to experience a Second Great Depression, given the high level of debt and systems dependence, there would be enormous rates of dislocation and homelessness. And with modern-day immorality and the prevalent "me first " attitude, I have no doubt that riots and looting would absolutely explode.
Tuesday, October 28, 2008
Between Then and Now
Michael J. Panzner is the Canadian editor of Financial Armageddon. Here, in its entirety, is his latest post: