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Though different in its economic nature, the boom of the 1920s was ended with a stock market crash that helped bring the nation into the Great Depression. Likewise, the late 1990s brought about an economic boom sometimes descibed in terms of the “irrational exuberance” which accompanied frenzied stock speculation and market “gambling”. But did the 1920s teach us anything about how to act? Did the boom-then-bust cycle of that time teach us to avoid the same pitfalls in modern times? Though the boom of the 1990s/2000s did not end with a stock market crash, it did end with a calamity of other sorts – one instigated by foreign terrorists. That ushered in an economic downturn which continues to haunt the U.S. economy. However, what we have experienced since has hardly rivaled the Great Depression. And now, the “mini-depression” seems to be gradually lifting.
So I ask – what was the difference this time around? How did we avoid the pitfalls of the crash of ’29? Or is it an apples-to-oranges comparison to compare the two?
It is apples to oranges. The economy of 1929 was truly an inflated economic bubble that burst once confidence in the banking system eroded to a panic. The economy was not as diverse and could not absorb the loss of speculative revenue provided by financiers. The Dust Bowl and a stagnant foreign market in Europe contributed to the economic spiral. The economic recessions of the early and late 1990’s were attributable to Banking scandals, tax hikes, and instability in the Middle East. 9-11 triggered a recession due to the shake-up to world stability it caused. Bush’s economic stimulus package and our sophisticated and resilient economy weathered the storm and is steadily returning to positive expansion. The Stock Market crash in October 1987 was actually worse, and it was followed by unprecedented growth making the crash seen only as a correction to the torrid speculative pace generated during the Reagan Era. The Asian Meltdown a few years back could have caused America great damage, but again American resilience withstood the shakiness of the Pacific Tigers. In sum, it simply takes a whole lot more to bring the American economy down that it did in 1929.
The common misperception is that the Great Depression was one economic event, when a series of misshaps or maybe an “economic train wreck” is a better way to describe it. There were situations that lead to the stock market cresh, and afterword the banking system did not help matters. Then the monitary policy of the Roosevelt administration was disasterous. We have not experience such an unfortunat chain of events.
I am not optimistic about our economy. There are areas that show great unprecedented resiliency, but so much our economy is now built on debt, it worries me greatly.
Yes I actually think you’re right, it is sort of apples and oranges because of the nature of the 1920s economy (compared with 1990s economy). Today, we are far more diversified in industries, and there is also far more international participation in the U.S. markets – foreign direct investment and traders who participate in U.S. exchanges. The world is far more interconnected today than ever before. The economy of the 1920s was also affected by high tariffs, which are obstacles to free trade and hinder the efficient allocation of resources. We were more of an economic island back during the Great Depression, and it really took a foreign event (WWII) to bring us boldly out of the doldrums.
Wasn't Coolidge pretty much an isolationist? I don't think it could happen again. If it does it would be because of a global depression. Was it global back then or just the United States?
I thought Wilson was the isolationist.
Wilson was anything but an isolationist. He was a globalist and a the League of Nations was his brainchild. Remember his 14 points of light regarding national self-determination? Wilson was our only President with a Phd. He was a product of academia and his political theory reflected it. No, Woodrow Wilson was probably the most globalist minded President we had up until that time. Roosevelt, Truman, Kennedy, Johnson, Nixon, Ford, Carter, Reagan, Bush Sr., Clinton, and Bush Jr. have all followed in Wilson's shadow with globalist agendas of their own…..primarily trying to project American power and influence to as many parts of the world as they could.
