Price Fishback is one of the best economic historians of the U.S. in the early 20th century, and he’s written a three-part series of posts on the current comparisons to the Great Depression at Freakonomics.
Part 1, How Does the Current Crisis Compare to the Great Depression?, puts our current unemployment and GDP growth patterns and rates in the context of the much-higher and long-lived unemployment (nine years!) and negative GDP growth of the 1930s.
Part 2, The Financial Meltdown Now and Then, offers a crystal-clear description of the causes of our recent financial crisis and compares it to what happened in 1929-1933. Price’s analysis of the current financial crisis is seriously one of the best and clearest ones I’ve seen, and I strongly recommend it to you.
Part 3, Let’s Avoid Other New Deal Policy Blunders, discusses the current federal policy responses relative to the anti-trade and New Deal policies of the 1930s. His conclusion:
We all want to know whether all of the government action will work to save us from a major downturn. There are questions about whether the spending and tax cuts in the stimulus package will happen soon enough to offset the recession. A significant part of the spending will not begin until 2010 and 2011 when most economists believe we will be into the next recovery. With unemployment rates only between 8 percent and 9 percent, we might expect the deficit and government hiring to make it more difficult for private firms to obtain investment funds and hire workers. Some recent studies of the New Deal relief programs suggest that additional work-relief jobs were associated with partial reductions in private employment. Meanwhile, the Federal Reserve has flooded the banking system with so much liquidity that we may be facing worries about inflation in the near future. The population can rest assured, however, that we have a very long downward path to follow before we get anywhere near the pain associated with the Great Depression.
A slam-dunk must read.