Is Another Depression Possible?: A Comparison of “The Great Depression” and “The Great Recession”

Read

In 2007, the world became engulfed in the largest economic slump since the Great Depression. The crisis was so damaging it was coined “the Great Recession” and there was much comparison of the recession to the Great Depression of the 1930s in the mainstream media. However, what many failed to do was an in-depth analysis of both the Great Depression and the Great Recession, to compare and contrast to two. Thus, this article will be a comparison of both economic downfalls, ending in an analysis of the current economic situation America finds itself in and asking the question if another Great Depression is possible.

The decade prior to the 1930s, the US was in a time of great economic boom known as “The Roaring Twenties.” Yet while the nation’s income rose about 20% (from $74.3 billion in 1923 to $89 billion in 1929), the majority of this wealth went to the richest as can be seen by the fact that “in 1929 the top 0.1% of Americans had a combined income equal to the bottom 42%” and that the disposable income per capita rose 9% from 1920 to 1929, while the top 1% enjoyed a massive 75% increase in per capita disposable income. This greatly increased wealth disparity and led to a imbalance in the US economy where demand wasn’t equal to supply and thus there was an oversupply of goods as “those [the poor and the middle class] whose needs were not satiated could not afford more, whereas the wealthy were satiated by spending only a small portion of their income,” which caused the US to become reliant on three things to keep the economy afloat: credit sales, luxury spending, and investment by the rich. However, the major flaw of an economy based on credit sales, luxury spending, and investments was that all three of those activities depended upon people’s confidence in the economy. If confidence were to lower, then those activities would come to a halt and with it the US economy.

Advertisements

About Giorgio Bertini

Director at Learning Change Project - Research on society, culture, art, neuroscience, cognition, critical thinking, intelligence, creativity, autopoiesis, self-organization, rhizomes, complexity, systems, networks, leadership, sustainability, thinkers, futures ++
This entry was posted in Crisis, Debt, Depression, Recession and tagged , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s