Despite the current grim economic news, most forecasters predict the U.S. economy will rebound quickly once the immediate public health crisis caused by the novel coronavirus is brought under control. A leading historian of the Great Depression agrees.
“I’m cautiously optimistic that the economic effects will be severe but not nearly as long-lasting as the Great Depression,” says David Kennedy, a professor of history at Stanford University. “Both the depth and duration are not likely to look like the Great Depression.”
His book, Freedom from Fear: The American People in Depression and War, 1929-1945, won the Pulitzer Prize for history in 2000. "It's a cliche by now but it's worth emphasizing that this is an unprecedented event in many ways," Kennedy says. "The Great Depression was a black swan as an economic event, but a pandemic is something nobody has experienced on this scale, unless they lived through the Spanish flu of 1918, and there aren't many of those people left."
Governing called Kennedy and spoke with him about the lessons from the 1930s that might matter today. An edited transcript of the conversation follows.
You’ve studied the depression and of course lived through the Great Recession. What is there about today’s circumstances that looks different to you and where do you see parallels?
We’re better insulated today than we were in the 1930s. We saw in the headlines on Thursday that there were about 7 million more unemployment insurance applications. In 1931, ’32, ’33 — all the way to 1935 — there was no unemployment insurance. That’s a big difference. We’ve put in a few more circuit-breakers as a society, maybe not enough but a lot more than were in place in the 1930s.
There were 13 million people unemployed in 1933, when Franklin Roosevelt was inaugurated, which was 25 percent of the workforce. The demographics of the workforce were a lot different. At that time, only 9 percent of married women were working outside the house. The unemployment numbers, as bad as they are now, don’t mirror exactly what they looked like in the 1930s, because many, many households have one person still working and bringing in an income.
We’ve seen Congress already pass a series of stimulus measures, while the Federal Reserve is also pumping trillions of dollars into the economy. How does that differ from the initial policy response during the 1930s?
We’re better equipped than we were decades ago in terms of taking up arms against this crisis. We’ve changed the architecture of our institutions to give us better tools for dealing with the economic side of this. That lesson came from the Great Depression and it was reinforced by the Great Recession. The Federal Reserve was not a significant player in the 1930s.
Today, it’s a very vigorous counterpuncher to the economic damage. As early as 1930, Robert Wagner, a senator from New York, introduced legislation to provide widespread aid to individuals. It didn’t go anywhere in part because nobody knew how many people would have to be helped, whether 1 million or 2 million. It ended up being 13 million. It’s a function of the anemia or weakness of political institutions at the time that there was just not any reliable data about what was happening. Herbert Hoover quite understandably thought it was another familiar downturn in the business cycle. Nobody knew, or could get their hands around this thing. We're much more committed to the idea that reliable data is essential to good policy.
We’ve had different states pursuing different strategies, or at least operating on different timetables, rather than a centralized strategy being driven by Washington. Again, how is that different than the 1930s?
The states at that time loomed much larger as political actors than the federal government. As of 1930, if you look at the aggregate of all public budgets, state revenues were roughly three times the size of federal revenues. Calvin Coolidge said that if the federal government went out of business, the average person wouldn’t notice for six months, except for the post office.
Now, the federal government is twice the size of the states all put together. The federal government has the resources to make things happen, if there’s leadership.
Your book is kinder to Herbert Hoover than many historians had been, noting that the depression was global and not his creation. President Trump’s critics say that while he’s not responsible for the virus, he is responsible for the response. What is your take on the president’s approach?
I think the federal response so far has been pathetic. Trump and company just haven’t put their hands on the levers of power that I think they have. The idea that states will act and I’ll back them up, as Trump has said, to me is irresponsible behavior.
If ever there was a time for international cooperation, this is it. Any pandemic by definition is a global issue. Trump hasn’t positioned himself as cooperative and certainly not as a leader internationally. The whole logic of America First is to step away from these engagements.
Your book follows the country from one of the lowest points in our history to the summit of world power. We’re at another low point at the moment. What’s your own level of optimism, looking down the road a few years?
I’m optimistic in the sense that I don’t think this is going to be a long-term depressant of economic vitality. It’s a sharp shock right now. My speculation is that with the exception of some obvious sectors like hospitality and travel, other sectors are going to be poised for a pretty good snap back to economic health.
But we’re likely to have, around the world, several hundreds of thousands of people dead. That’s not a reason to feel good about anything. Maybe people my age shouldn’t be that optimistic about the future. It’s going to be older people that pay the price. We’re the most vulnerable and as a category we’re going to suffer the most.