Worse than the 1930s: America’s Great Recession and not so great recovery

Policymakers like to say that they kept the financial crisis from causing the type of economic damage that the Great Depression did, and they’re right — but maybe only for another year.

That, at least, is the sobering conclusion of a recent paper by former International Monetary Fund Chief Economist Olivier Blanchard and former Treasury Secretary Lawrence Summers. They point out, as you can see above, that while the economy never experienced the type of complete collapse in 2008 that it did in 1929, the recovery has been so much slower this time around that it won’t be long until our total growth since the start of the crisis will be worse than it was at this point of the Great Depression. In other words, the economy has grown less in the 2010s than it did in the 1930s. That’s even accounting for the fact that you’d expect growth to be a little more sluggish today now that so many baby boomers are hitting retirement. They’re not comparing gross domestic product, you see, but gross domestic product per working-age adult. That strips out how much of the economy’s growth is solely due to the population’s growth, and gives you an idea of the underlying strength — or weakness — of things.

Which one was supposed to be the Great Depression again?

Of course, a couple of caveats are in order. The safety net, the stimulus, the bailouts, and the Federal Reserve’s unconventional efforts to prop up the economy have all kept the human cost of the 2008 crisis from ever approximating anything like what happened after 1929. Unemployment didn’t get up to 25 percent, shantytowns didn’t become a regular part of the urban landscape, and bread lines weren’t people’s primary source of nutrition. This, though, is the lowest of low bars. Double-digit unemployment, millions of foreclosures, and many more on food stamps were all more than bad enough. For all the progress we’ve made the last seven or eight years, there are still too many people being left behind — and, in the process, succumbing to drugs and despair.

– The Washington Post

Read the full article here.