Is today's economic crisis another Great Depression?
— -- Failed banks. Panicked markets. Rising unemployment. For students of history, or people of a certain age, it all has an all-too-familiar ring. Is this another Great Depression? Not yet.
By any measure, our current economic suffering pales in comparison with what the nation endured from 1929 through 1939. Still, most economists are predicting a long, difficult period ahead. Could it eventually become a depression? It's possible — but not likely.
The Great Depression left a mark on the world that remains today, nearly 80 years after it began. It re-created our banking system, molded our securities laws, and left scars on the nation's psyche that have faded only modestly with the decades. During the Depression, savers watched their money evaporate in bank failures, because deposits weren't insured. Bankers became so unpopular that bank robbers, such as Bonnie and Clyde, became folk heroes.
By the depths of the Depression, 25% of the population was out of work. The Dow Jones industrial average had fallen 89%. The entire banking system was shut for four days by presidential order. Home and farm foreclosures soared. Homeless people created vast shantytowns, called "Hoovervilles," outside most major cities.
The word "depression" became so terrifying that economists stopped using it to describe a business slump. "It was an active choice of words," says Peter Bernstein, the celebrated economist, now 89. The Roosevelt administration judged the word too terrifying for the public to hear, Bernstein says. And for people who lived through the Depression, it was terrifying, indeed. "It was a killer," Bernstein says.
Mitchel Namy, 96, recalls how his family fared. "My father was very successful in the wholesale dry-goods business," Namy recalls. "He lost the business, our home and a valuable 26-acre tract of land in suburban Pittsburgh."
Our economic woes dwindle in comparison. As of the end of June, the latest data available, the nation's gross domestic product was still growing at a respectable 2.8% rate. In the third quarter, it fell at an annual 0.3% rate. Unemployment in September was 6.1%. "We're a long way from the D-word," says David Wyss, chief economist for Standard & Poor's. "It's a recession."
