The Great Depression demonstrated the indispensable role of government, says Stanford scholar
Just as the Great Depression revealed the precarity of life for many individuals and the massive risk underpinning many economic sectors and institutions, the current coronavirus crisis is drawing attention to the downsides of living in a hyper-globalized world, says Stanford historian David M. Kennedy.
Here, Kennedy reflects on these two catastrophic events and how transformative the Great Depression was in American history, demonstrating the invaluable role of government in managing and mitigating disaster. As the world reckons with an economic crisis that the International Monetary Fund anticipates to be the worst recession since the Great Depression, what can be learned from history? How are these two events similar, and how are they different? Kennedy answers these questions and more.
Kennedy is the Donald J. McLachlan Professor of History, Emeritus, in the School of Humanities and Sciences and the founder and former director of the Bill Lane Center for the American West. In 2000, he received the Pulitzer Prize for History for his book Freedom from Fear: The American People in Depression and War, 1929-1945.
What makes a depression different than a recession?
There is no consensual definition of either event, and no sharply defined distinction between the two. A rough-and-ready definition of recession is two consecutive quarters of contracting GDP. A depression is customarily understood as a really bad recession.
What were some of the key characteristics of the Great Depression?
That Great Depression constituted one of the three great watershed moments in American history, comparable in its scope and lasting effects to the two other great transformations in American life: the American Revolution and the Civil War. In all three cases, people’s lives before and after were radically different.
The impact of the Great Depression on the United States was especially severe, though it was a truly global calamity. Gross Domestic Product (GDP) fell by 50 percent between 1929 and 1933. Some 5,000 banks – nearly one in five – failed. Thirteen million workers, or 25 percent of the workforce, lost their jobs over those same four years. Stocks shed nearly 90 percent of their value. They didn’t recover to 1929 levels for more than two decades. That last observation is especially important. Probably the single most notable and painful feature of the Great Depression was not its depth, but its duration. It blighted the land for more than a decade. It measurably lowered the rate of marriages and child-births. To some degree, the fabled “baby-boom” of the post-WWII era was compensatory for the “birth-dearth” of the 1930s. And of course, it left a lasting scar on countless Depression-era survivors, including my parents, who were ever-after vigilantly wary about the future and almost obsessively preoccupied with financial security.