Not alikey

[auth. Feb 22]

The new economic depression is not anything like the Great Depression on so many levels.

Yes, the devastating statistics point out that this depression is just as severe. Beyond numbers, the other major likeness to the Great Depression lies with the overall cause. That economic downturn was caused by corrupt, arrogant, greedy financiers, bankers and investors. In short, every depression is caused by some sort of greed. Greed causes the economic system to function, but like any drug addict avarice causes journeys beyond the safe limits and total hangovers.

Another similarity is that both economic struggles featured Conservatives in control of governments in the USA and Canada. And uniquely in Canada's case, both Prime Ministers were seated from Alberta. Both RB. Bennett and Stephen Harper are MP's from that province. The latter though is a skilled economist and more attune to the economic moves.

Experts in the later twentieth century stated that a severe depression would never happen again. Regulations placed upon business and finance before 1980, put checks on greed. With the re-emergence of right wing factions in North America, those checks were slowly removed. The advocates of deregulation put forward that government regulations impaired profits. Right wing politicians laden with campaign funds from this lobbying, removed those checks and audits. Naturally, this allowed conditions for severe depression to crawl back as a threat.

The economic structure of the late 1920's was fundamentally different than now, the turn of the millenia. In this period, in Canada the economic structure is based on high level technology, people services and raw resources. Comparing this economy and the financial structure ninety years ago, the outstanding fact indicates that the base economy of economy was agrarian and rural.

Today Canada urban society structures dominate. This provides us with a very different economic base. The urban family consumer unit provides the foundation of the older economy. The mixed family farm dominated rural society and provided the foundation of economy of the early Great Depression period.

What most impacts the 1930's economic tsunami lies in the timing. Coincident with the severe economic decline, a major prolonged period of drought occurred on the North American great plains. Had the drought occurred a decade earlier or later, there would have been a strong depressing influence on economic activity but societies could have coped. Most of today's experts forget to take this drought into account.

To the investor, that period was called “the Great Depression”. To the farmer, that period was known as “the Dirty Thirties.” Farmers considered the drought more devastating than the low point in the economic cycle. Bankers couldn't loan money they didn't have. Bankers loan money on the base of repayment.

The farmers went to the bank to obtain the loans to provide the spring seed planting to happen. Bankers knew that the productivity of the land on a fair to good year was more than sufficient to cover the costs of borrowing and provide the bank customer, the farmer with an adequate income. One or even two bad years of drought or climactic adversity the farmers could recover those losses. However during the 1930s the severe drought, which extended at least four years, deepened the effect of the economic low cycle.

This essay however is a discussion of generalities. Discussion on agriculture economics. We move on into government policy. Today governments are far more interventionist than they were in the 1930's.

President Herbert Hoover, in the USA and Prime Minister RB Bennett in Canada didn't intervene. Indeed the financial reporting of the period was absolutely slow and unreliable. Bad performance of an economic sector wouldn't be known or understood for years.

Today, poor economic performance and the depth of analytics are extremely detailed and almost instant. Late last year, the financial sector knew they were in trouble within days or hours of the economic crash. Examining the historic recession/depressions the cycle time between occurrence, recognition, and social response has been shortening.

For instance, in the Great Depression the cycle times was on average twelve months or more. In this case the government and social response to economic depression was years. The trigger stock market crash occurred in 1929. RB Bennett's government didn't begin to respond until two years later.

In 1974, which is a recession/depression with many similarities to today's depression than any other economic downturn, the government response took about a fiscal quarter, or three plus months. This is because the companies reported by quarters.

By 1992 after a brief depression in the early 1980s, this reporting and solutions were on a monthly cycle. Computers and accounting practice vastly improved in both quickness and quality. Reporting was still in quarters and monthly but business performance could be determined by a single company on a daily basis.

By 2009, though the advent of the computer, and the gigantic strides of computing enabled companies to know their economic position almost instantly. Indeed the stream of data into the stock exchanges have not only enabled investors, financiers and governments to understand the state of the economy in real time but these numbers are so accurate that any group can build an economic model to accurately predict or forecast the economic environment as much as a quarter or three months ahead of the present moment.

Any event to response cycle, now shifts to the later. The problem of dated accurate financial performance has been eliminated. The shift of time moves heavily into the response. With the problems quickly identified there is incredible pressure to reach a quick decision, and a quick response. There appears little time to sit back and think about the situation.

Still it is extremely advantageous for any company or government to see the crisis in a real time basis. At this point, one can use the fire station model or the emergency response model. The earlier one gets to an emergency event such as a fire or heart attack the better. Survival rates are dramatically improved for any victims. In this comparison the economy is very similar. The quicker a response to an economic crisis the better.

Provided there is enough regulatory power in place, an economic response by a company or government is far more effective and successful when dealing with economic problems swiftly. Here is where government intervention appears different than the 1930s. In that time past, government intervention in economy was frowned upon. Even Liberal leaning politicians were loathe to sponsor programs for which no tax moneys existed. Today is different.

What struck me, or shocked me, was that in the US Congress was not arguing whether or not to intervene in this economy. The question didn't even break down on party lines. In this matter, the Congress was arguing how to intervene. Republicans were leaning to support government tax reductions, while the Democrats were arguing for stronger rescue packages by handing more money into the troubled sectors. Unlike the 1930s, few politicians, if any, were advocating a non-interventionist position.

There is bipartisan agreement in the US and Canada for government deficits. One of the greatest challenges to the economic challenge of the Dirty Thirties was the lack of government intervention. Even with implementation of Roosevelt's New Deal there were gaping holes, and mistakes. It is because the reaction was late in coming and the advent of a deep prolonged period of drought. Many of the New Deal programs were successful and many were not.

Another huge difference is that the economic depression of the 1930s appeared severe in North America. The depression was not universal for the simple fact that global economic interdependence wasn't as prevalent. Today's economic downturn is definitely world wide.

In the 1930s, very few government programs existed. Few pension plans existed. No government funded welfare existed. No universal medical care existed. No unemployment insurance plans existed. No public housing existed. No worker's compensation plans existed. No government deficit fundings existed.

Businesses, and governments could and did lay off people without cause, without notice, without reference, without pension, and without severance. Vacation pay and sick days did not exist. Those are the obvious factors that are different in comparisons.

Government workers lacked secure jobs. When tax revenues dried up governments simply stopped funding. People were laid off summarily with little or no warning from companies and governments. All these facets we rather take for granted today. But all of these factors exist today. All these socialist liberal ideas manage to cushion the advent of economic downturns.

Another large difference is in the actual social structure beyond the family farm of the past. In that world, a single income on the farm or in the city could pay for family food, housing, needs, and school. Women contributed to economy by homework. Working at home was far more difficult than today. Clothes washing was largely by hand. Vacuum cleaners did not really exist. Electrical power did not go into every home. In short, it was a totally different world on the individual level.

Today the highlight of the modern family is the dual income. Indeed, in today's world two incomes are a necessity to maintain the modern lifestyle. Women are a major part of the workforce. Layoffs while debilitating for incomes, does not mean instant disaster. Often one spouse is not laid off. While job loss is debilitating, it is not the complete long term disaster than it once was.

The trick to social support is to provide adequate bridge funding and transition training while the economy restabilizes and work or career opportunities re-open. This never existed in the 1930s. And most of these programs exist everywhere globally in the developed world and to some degree in the emerging economies.

As discussed the tools exist today to cope with economic downturns. The culture of today versus the culture a century ago, there lies a large gaping difference. Unless there is a global drought, a successful economic recuperation remains likely without the great social damage as seen in the 1930s.