The global recession has many times been compared to the Great Depression of the 30s, but just how accurate is that comparison? The truth is, the two aren’t so far off from each other, and this infographic by Payday Loans puts it all into perspective.
There are many marked differences between the two, most notably, what started the collapse begin with? While relatively close timewise, these two eras were practically different worlds with completely different social structures. In the time of speakeasies and vaudeville, most Americans were concerned as to where their next meal would come from, and when. The great Depression hit America like a ton of bricks, and shut everything down through a domino effect. The banks couldn’t pay back their investors, so they went under without returning money to citizens who in turn were left with nothing. The iconic soup kitchen lines stretching for blocks is an accurate representation of the time when families really didn’t have enough to eat because there was simply no money.
We begin on polar opposites, with irresponsible consumers in the 30s, and irresponsible lenders in the 00s. Each led to a collapse that affected millions, but the difference in triggers meant the difference in who was financially hit the hardest. More than half of all banks in the United States had closed by the end of the Great Depression when the money dried up, leaving millions of families with nothing. 25% of the United States was unemployed and even those who still managed to keep a job did not earn a livable wage.
The state’s response to the Great Depression was simply to raise taxes and cut spending with the mindset that it’s going to get worse before it gets better. Eventually America picked itself back up and proceeded more cautiously in financial endeavors. However, now we are taking a different approach to reversing the recession; the federal government is stepping in to help reduce the impact of taxes on the states. This helps to avoid further financial decline within our modern recession.
The economic decline of the Great Depression was -26.5%, markedly steeper than our modern recession’s -3.3% decline which was devastating. The extremity of the 1929 decline was enough to shut down more than half of the countries banks, close thousands of businesses, and leave millions with nothing. The numbers reflect that our Great Recession is nowhere near as catastrophic as the Depression, but this could be our modern Depression and we’ll use our American ingenuity to find a way through it.