The Next Great Depression
Predicting a future great depression is not too difficult of a task. There are signs in the economy that pointed to the Great Depression of 1929, just as there are signs which predict recessions and the like. Preventing a depression, however, is as easy as preventing a hurricane, impossible. Since World War II, economists assumed they can prevent Great Depressions. They cannot and never could. They can end recessions. Not Great Depressions. A recession reflects economic imbalances, in prices, money supply, trade, etc. A Great Depression signals a swerve in global direction, a massive transformation of the world society and economy. One great system perishes. The Great Depression marked a critical stage in a transformation of the global economy that began around 1900. That?s when the Industrial Economy of the 19th century slowly and fitfully began to morph into the 20th century?s Consumer Economy. To tame the almost naked continent of 1845, the Industrial Economy required immense savings. To save and invest became the 11th Commandment. Imagine. Americans saved up to 40 percent of their income!
By 1900, however, the industrial infrastructure of the nation had reached a high level of completion. Railroads, mines and dense industrial cities were increasingly falling out of favor. ?Overproduction,? as some called it, aroused the specter of massive unemployment. An alluring new vision now beckoned. Consume. Forget your scrimping ways, life is short. Don?t wait. Join unions. Demand higher wages. Stop saving for the future. Borrow. Spend. Create the Consumer Economy of the 20th century. Seek instant gratification.? To develop an entirely new pattern of supply and demand, the Consumer Economy-to-be would begin a great learning curve. And to complete the global transformation, the Industrial Economy would eventually perish.
The Great Depression struck the economy in mid-transformation: when GDP remained stunted by the too-slow demise of old parsimonious attitudes and the too-slow growth of profligacy, when millions remained adamant about blanketing the world with increasingly unloved railroads and industrial cities instead of freeways and suburbs. When too few new consumer products had yet been invented or widely adopted, when retailers were mostly Mom and Pop stores, when consumer advertising was still primitive, when consumer credit was both undeveloped and unwanted. Should we expect a new Great Depression? Another global swerve in direction has been coming on for nearly half a century. To illuminate the new opportunities, challenges and perils?
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