The signs are everywhere: Stock market drops, jobs lost, money and home devaluation, no credit going out, and no end in sight. America has had several economic crises before and we will have them again. But what is it going to take to get through these? If we look at history – there have been several depressions, or panics in our history: most notably – 1837, 1857, 1870-1890s, 1929-1942, and a mild recession in the 1970s and 1980s. What things do they have in common? How were they solved? How could we apply what we learned from each one to help today’s economy?
There are some who say that America was born out of a recession. The British economy and treasury were both reeling from a seven year war with the French fought on two continents. To help pay for the cost of the war, the British passed a series of laws limiting Colonial settlement and trade and the British Parliament began taxing the colonists. The tax in and of itself was minuscule – about a $1 a year. But the colonists, who were free to govern and police themselves since 1607, disagreed. Smugglers, poachers, pirates, and the Sons of Liberty sprang in opposition to the British Laws. Some may say it was on the principle of taxation with representation, but the Americans wanted to be free to make a buck just as anybody else. After the British shut down the colony of Massachusetts, the battle cry was on. From here on you know the rest of the story.
Commonalities of Economic Hard Times in America
1. Banks and credits - Every single depression or panic was caused in part by the over extension of credit. Whether it was home loans, business loans, no regulation, deregulation, too much regulation, or just bad financial management, the economy went in the dumper because of it.
2. Consumerism vs. Manufacturing – Whenever our economy has become reliant on spending rather than manufacturing, we lose. I still recall President Bush asking people to go shop in the days after September 11, 2001. We can not be a consumer society no matter how much we want to be capitalists. How much stuff do we need? Really, that’s what it boils down to in a nutshell. How much crap are you going to bring into your house and why do you need it? At some point, you begin to have everything you could possibly want. My parents, and my wife parents, were all children of the great depression. To walk through their houses today is to walk through a shrine of plastic bags, tin foil, nails, screws, machine parts, and old clothes – nothing was thrown out. The depression could come again. Well, he we are on the verge and my parents saddled my wife and I with the same trait. Our basement is full of junk we thought we would never use. Well, here comes the time. Whenever America’s economy has boomed, it has been a result of manufacturing. We made it, the world bought it. Now, what does America make today that the world buys? Not much. Instead, they make and we buy. We have got it all backwards.
3. Rapid Population Growth – In all three time periods, massive immigration and birth rates ballooned the population beyond what it was ready to handle. When the baby boomers, like myself, began to graduate high school and college in the 70s and 80s, there were too many of us and too few good jobs. The same holds true for the 1870s through the 1890s. We had plenty of space. In fact we were giving land out west, but nobody wanted to live out there and they still don’t, save Las Vegas, California, and Phoenix.
1. Massive Industry – Each depression ended with the buildup of massive industry. Unfortunately, three of the eras of massive industry happened as a result of war both here at home and abroad.
2. Ingenuity – New stuff – New ideas – new markets. Each depression ended and growth was sustained through the three previous things. And in each of these instances, the growth came from the private sector. Each growth period is sprinkled with new ways of doing things.We have to make something which will sustain our economy from years to come, make us more self sufficient, and create markets around the world. But rather than ship those jobs overseas, keep them here.
Americans wanted change in the last election. I don’t know if the ARRP and TARP were what they were looking for, but the reality of the matter is the American people are the ones who are going to have to do the changing if this near depression of 2008-2009 is to end. Government is not the solution, it is only part of the solution, and some of the problem. As we have seen in the past, it has always been the American people who have made the depressions end for the story of America is their story, not some guy in a White House in Washington, but the farmer, the banker, the factory worker, the technician, the carpenter, and yes, even the plumber. History is great for many things, but great things, ideas, and people make history. We are going to have to change how we heat and cool our homes, how we drive our cars, how we build our cars, how we fuel our cars, how we use our vast resources to our own advantage. We will have to change or others will change it all for us.