Lessons from the Great Depression for the Coronavirus Pandemic
There are eerie similarities between America’s response to the coronavirus and the response to the outbreak of the Great Depression in 1929 through 1933.
I think the Great Depression is a better analogy than World War II because of the similarities between the COVID-19 pandemic and the chaos of the 1930s. Moreover, America’s reaction to the Depression could show us how we could respond to the Coronavirus.
The key difference between World War II and coronavirus is that most people saw the Second World War coming and prepared for it. Notably, the United States began war production in mid-1940, a year and a half before Pearl Harbor.
In fact, most of the American industrial production that enabled Allied Victory in World War II began months before Pearl Harbor. Additionally, the government began building up the Army with the draft on 16 December 1940, over a year before Pearl Harbor. Thus, America was prepared for war on 7 December 1941.
In contrast, nobody was prepared for the Great Depression when it began in 1929. Hence, both government and ordinary people were psychologically and physically unprepared for the Depression. Much as we are unprepared for coronavirus today.
Similarities between Coronavirus and the Great Depression include:
First, nobody saw either catastrophe coming or prepared for them. Few people anticipated the Stock Market Crash of 1929, and even fewer individuals understood the crash’s magnitude.
To explain, the Stock Market Crash started with the Hatry Crisis in the City of London on 20 September 1929. Most Americans did not notice the crash for over a month until Black Thursday; October 24, 1929.
Similarity, the Coronavirus pandemic began in Wuhan, China, in late December 2019. Yet most Americans did not notice Coronavirus until early March 2020.
Plus, people in 1929 misunderstood the Crash as we failed to comprehend Coronavirus. Notably investment bankers responded with traditional remedies such as buying large amounts of stock. Yet nothing stopped stocks from sliding. In addition, most people expected the market to recover fast, but it did not.
In 2020, many Americans including President Donald J. Trump (R-Florida) ignored coronavirus until caused a wave of deaths in Italy. Just as Americans ignored the Crash until their stocks fell.
Second, the Stock Market Crash took most people by surprise in 1929. To explain, most people were unprepared for the sudden end to boom and the fast collapse of the economy. Americans, in particular, were unprepared because opinion leaders assured them of a permanent economic boom.
Will Coronavirus cause a Second Great Depression?
Third, the Stock Market Crash triggered a total economic collapse and a depression. Some observers, including Vox’s Ezra Klein, believe coronavirus is triggering a recession that could evolve into a depression.
For example, Goldman Sachs (NYSE: GS) estimates America’s gross domestic product could shrink by 24% because of COVID-19. In addition, U.S. Treasury Secretary Steven Mnuchin (R-New York) is warning us of 20% unemployment.
Frighteningly Federal Reserve Bank of St. Louis President James Bullard predicts a 30% unemployment rate, Bloomberg claims. If Bullard’s prediction comes true, the Coronavirus unemployment rate will exceed the highest depression-era jobless rate of 24.9% in 1933.
Hence America could soon face economic conditions, unseen since 1933. Thus, other events of 1933 could repeat themselves soon.
The Similarities between America’s Response to the Great Depression and Coronavirus include:
Frighteningly, the potential economic devastation is just one of several frightening similarities between the Coronavirus and the Great Depression. Other similarities between the two catastrophes include:
A popular but controversial celebrity President failing to recognize the catastrophe’s magnitude, for example. In addition, that President responded to the crisis with limited and ineffective measures.
In 1929, the celebrity President was Herbert Hoover (R-California). Hoover refused to consider direct government aid to citizens or massive spending as depression remedies. In fact, Hoover refused to deploy the military or federal resources to help starving Americans during the Depression.
Instead of government, Hoover relied on private charities. The result was catastrophic because the charities lacked the money and resources to help the vast numbers of people unemployed by the Depression.
Hoover failed to take bold action because of partisan politics. Hoover was a staunch believer in private enterprise who considered direct government aid socialism and wrong.
In addition, Hoover was frightened of conservative Republicans and Southern Democrats who viewed all government aid as evil. Much as today’s political leaders; such as the U.S. Speaker of the House; Nancy Pelosi (D-California), seem more afraid of primary voters than coronavirus.
The Looming Catastrophe in Washington
Similarly, partisan politics is blocking action today. However, today it is Congress and not the President that appears to be problem.
In 2020, the celebrity President is Donald J. Trump (R-Florida) who, like Hoover, has been slow to recognize the magnitude of the crisis. In recent days, however, Trump, to his credit, is taking dramatic actions against the coronavirus.
Unfortunately, it appears Congress is incapable of backing up the President’s dramatic action. Democrats; in particular, oppose a Republican measure for what I consider shitty partisan reasons.
“This body can’t get its act together, and the only reason it can’t get its act together is right over here on the other side of the aisle,” U.S. Senate Majority Leader Mitch McConnell (R-Kentucky) griped on 23 March 2020.
Politics Trumps Crisis Response
In particular, Democrats appeared to block legislation to distribute two $1,000 or $1,200 stimulus payments to every American for ideological reasons. Compromise talks over the bill collapsed on Sunday 22 March 2020. Democrats oppose the stimulus plan out of fear it could take funds from the unemployment insurance system.
I think Democrats fear direct federal stimulus individuals could lessen the power and influence of social services bureaucrats. Notably, social services, bureaucrats; and their unions, are an important constituency for the Democratic Party.
One reason Hoover opposed direct federal aid during the Great Depression was to protect and preserve the power and influence of Big Business. In 1929, as in 2020, Big Business was the Republican Party’s most important constituency.
Political Paradigm Shifts
Hoover’s inaction wrecked the Republican Party during the Great Depression. To explain, in 1929, Republicans controlled both houses of Congress and the White House. By 1933, just four years later, Democrats controlled the White House and both houses of Congress.
Notably Americans did not elect Republican president again for 20 years. Until Dwight D. Eisenhower (R-Kansas) in 1952. Moreover, the Grand Old Party (GOP) only recaptured the White House in 1952 by running America’s most popular war hero, Ike, for President.
Hence, Democrats could set themselves up for catastrophe in November 2020 by refusing to act on stimulus. However, voters could blame Trump for Coronavirus and elect a Democrat president.
How Voters could Punish Trump and Congress for Coronavirus
To explain, in 1930 voters punished Congressional Republicans for failing to respond to the Depression. In particular, voters added 49 Democrats to the House of Representatives in November 1930. Moreover, Democrats made big gains in state elections.
In comparison, Hoover received 444 Electoral College votes in the 1928 presidential election. Meanwhile, Hoover’s opponent, Alfred E. Smith (D-New York) received 87 Electoral College Votes
In 1932, however, Hoover only received 59 Electoral College Votes. Meanwhile, Franklin D. Roosevelt (D-New York) received 472 Electoral College votes. Given that history, voters could punish both Trump and Congressional Democrats.
One intriguing possibility is that voters could punish both Trump and Congressional Democrats in November. Hence, we could Have Joe Biden (D-Delaware) or U.S. Senator Bernie Sanders (I-Vermont) as president with a Republican Congress. I think that combination is a prescription for intractable gridlock.
Radical Disruptive Policies
As President, Roosevelt, or FDR, oversaw the creation and implementation of a set of radical policies known as the New Deal.
Highlights of the New Deal included: Social Security, massive public works programs, farm subsidies, an end to gold-backed currency, regulation of investments and finance, the minimum wage, the right to unionization, and more. The New Deal represented a complete break with America’s traditional laissez-faire economic policies.
Before the Depression, Congress had refused to consider such measures as Social Security, banking regulation, unionization, and a minimum wage. During the Depression, those radical measures became the law of the land.
Will Coronavrius lead to a Second New Deal?
Similarly, members of Congress and the Trump administration are proposing a wide variety of radical policies.
Notably, U.S. Senator Mitt Romney (R-Utah), or Mr. Republican, wants the government to make two $1,000 cash payments to all Americans. Moreover, President Trump backs Romney’s proposal, The Salt Lake Tribune reports. Just a few weeks ago Trump was mocking Bernie Sanders for giving away “free shit.”
Presidential candidate U.S. Senator Bernie Sanders (I-Vermont) wants to do Trump one better. Sanders wants the federal government to give all Americans $2,000 a month until the end of the Coronavrius crisis, Business Insider reports.
Dramatically, Congresswoman Alexandria Ocasio-Cortez (D-New York) demands the government implement a basic income for all Americas as a Coronavirus relief measure. Business Insider also demands single-payer healthcare or an expansion of health insurance to all Americans.
The Second New Deal
Notably, the Republican dominated U.S. Senate passed a $2 trillion radical stimulus plan on 26 March 2020. Vox reports the plan contains: $500 billion in emergency loans for business, “unemployment insurance on steroids,” and send a $1,200 check to all adults who make less than $75,000 a year.
Finally, former Vice President Joe Biden’s (D-Delaware) website proposes a response to Coronavirus, I consider a blueprint for a centralized federal single payer healthcare system. Ironically, most observers consider Biden, the presumed Democratic presidential frontrunner, a “moderate” and a single-payer opponent.
Thus, I think Coronavirus will lead to both a political paradigm shift in America and a Second New Deal. My impression is that the Second New Deal has begun and could soon get far more radical. Therefore, Coronavirus could mark the greatest transformation in American government since the Great Depression.