1940 and 2009

A Comparison of Great Depression Recovery Conditions and the Present


A comparison of the great depression recovery utilization of the mid 1900s to what is available to us in 2009 for an economic recovery from October 2008 conditions is a useful tool for understanding the scope of the problem confronting the survival of our civilization. Comparing 1940 with 2008 is a useful analogy as an action plan is developed. Some basic divisions in the economic recovery would include: raw materials availability and price, transportation costs, water availability and sustainability, farming technology, pollution and sanitation, population density, technological innovation rates, research and development funding, education of the workforce, land price and availability, and doubtless many other considerations.

A brief overview of some of these comparison considerations should note the fact that federally financed research and development has fueled trillions in business spinoffs. Investment in specific research aimed at solving our energy needs without a quality of life lessening as energy prices rise. I do believe that the 2008 recession was brought about by increasing energy costs, rather than the stock market obsession with bilking each other with worthless ‘securities’. Bailing out criminals with tax money is an unproven approach.

Innovation level
Information processing could produce technological breakthroughs in energy management: approach for management might include research in efficiency of use, temporary retrofits, downsizing vehicles, increasing rail availability,…

Post WWII: construction boom and expansion into unoccupied territories. Rapid population growth increased need for goods and services. Increasing mechanized farm production and cheap fuel upped agricultural production. Overseas commerce increased, flooding the market with cheap goods. Prosperity through growth and increased consumption of resources. Information technology is a growth industry. Rapid increase in technology postwar due to government and business research programs.

Present: Rapid population growth increases competition for resources that are escalating in value over the long term. Empty land with water is no longer plentiful. Expansionistic construction has created a surplus of housing. Devaluation of bubble value is now occurring and many houses and commercial properties are on the market. Construction will not create a recovery unless a years long wait is tolerated and a lower level of activity is expected. Competition for land will increase. A growing population is not a benefit in times of high unemployment. Population numbers need to stabilize, or material impoverishment will occur as resource per person dwindles.

Thus the recovery mechanisms after the Depression are not available to us now. Space and energy is becoming more expensive. Infinite population growth in a finite space has become nonadaptive cultural behavior that will result in overcrowding, scarce resources and less available wealth per individual. Government programs are complex and unwieldy when conditions change, which was not the case after WW II.

Reducing spending on energy is top priority. In the absence of improved technology, conservation is an immediate remedy for at least some spending on petroleum, which is where such wealth is increasing long term. Short term solutions include fleet conversions, economical individual options for transportation, cheap public transportation, and adequate bicycle and cart thoroughfares. Developing alternative technology is preferable to stripping the nation of petroleum reserves. Developing alternative energy also provides employment in constructing units, installation and retrofits. Expanding public transportation would also provide jobs. Federal grants to universities and businesses to fund research would be money well spent.

Reducing demand for petroleum has been accomplished to some degree and the trend must continue. Encouragement of petroleum conservation can be accomplished through several avenues:
Raise prices through taxation
Tax gas guzzlers
Tax companies that continue to manufacture and market gas guzzlers
Create policy that would make it difficult to finance gas guzzlers
No bailouts or loans to companies that continue to manufacture and market gas guzzlers

Use highway funds for public transportation and repair, rather than for new roads. Public transportation must be improved, added, expanded and all avenues should be considered:
Bus networks and expansion of schedules
Light rail
Regular rail
Shuttles
Streetcars

Public policy must be amended to allow for alternative small vehicles. Existing streets can be designated for bicycles, small motorbikes, golf carts and other small personal vehicles, but public policy must allow for these kinds of changes. Pedestrian only streets should be considered in more cities.

One aspect of the post WWII economy is the difference between the manufacturing/agricultural economy of then and the service economy of now. A service economy is vulnerable to economic slowdown, particularly in the luxury services. A manufacturing and agricultural economy feeds on itself through employment and consumption, which should be balanced if the population size stabilized. From a long term perspective, depending on growth in a finite space with finite materials is ultimately foolish behavior. The present tax structure encourages population growth. Such an incentive is a good example of an old response that has now become counterproductive. Possibly citizens should pay a tax that covers the expense to the system of the new addition to the population, rather than receive a subsidy for breeding, like we still had Manifest Destiny.

In 2008, the economy lost jobs, petroleum rose to $150 a barrel and inflation spiraled upwards as the world’s monetary resources flowed to those who sold oil resources. The discovery of liars and bilking in the stock markets around the world has forced bailouts by the governments of the various banking systems. Apparently value had been found in dealing in defaults, bundles, derivatives and other phenomena that never actually produced anything but an elaborate scam that investors wanted to reap high interest rates from but now wants the government to reimburse them for losses. Smallholders who lost retirement funds will get nothing, however. The social climate was a bit different in 1945 than it is in 2008. Entitlements are a huge issue in 2008, as deficit spending and population growth stall the economy.

The credit card people offered to forgive 40% of credit card debt on certain cardholders, which is generous of them considering the nonproductive tactics used to run up the debt and the interest rate on the debt. A hastened return to a cash economy due to a lack of credit given to people who will not pay it back seems like a bargain. Maybe higher interest rates on savings accounts and certificates of deposit would encourage people to save for down payments on cars, homes and other items. Increased savings rates would benefit the economy by bringing in investors.

Given that the availability of raw materials is being tapped out, it makes sense to look for a new source. Federal investment in research and development produced the space program, which has the potential for spinoffs, including mining on the moon that would give us access to a variety of minerals and metals like titanium. This is one area of expansion that was not available post WW II. President Kennedy never intended for us to forget about the moon once we visited.

What is actually productive in our economy? Financial derivatives are detrimental in that the brokers for them reap immediate profits but care not if the derivatives pay off. Derivatives produce nothing beneficial for society as a whole, leaving enormous profits/loot in the hands of a few. Manufacturing is productive if the union demands are not ultimately self defeating if the company goes broke due to lack of financial stability and union control of resources. Insurance is a racket and AIG is now being bailed out by the Federal government, for example. Mandatory insurance takes too much out of the economy and ties up the money for the executives to use for their own interests and bonuses. Competitive insurance needs to happen and employers need to get out of the insurance providing treadmill of ever escalating costs. Insurance is sucking the economy dry of cash and then using the money carelessly. Lawsuits are another nonproductive issue where enormous sums are invested in malpractice insurance and lawyers, which raises the cost of health care.

So what is productive? Our information technology is superior in the world. Our agriculture feeds the hungry and our manufactured goods are top quality. We can become more energy efficient and provide jobs while doing it. Our society must adapt to the new conditions of higher energy costs, overcrowding and dwindling resources. We can succeed by using our technology and increasing our horizons with an expanded space program that provides jobs and opportunity for technological advancement. We can succeed by investing in the United States and by buying goods made in the United States and trading with our neighbors in Canada and Mexico and Cuba.

Raise the interest rates to encourage saving, create jobs to repair the infrastructure, require down payments for credit requests, control credit card charges and restructure insurance into a competitive industry instead of a mandated program, protect medical personnel from frivolous malpractice lawsuits, tax companies that take jobs overseas and encourage a strong dollar to bring petroleum prices down.

The national debt is a scandal and there are those who want a weak dollar and inflation that causes the national debt to be drawn down on a global level. This is total selfishness in that inflation hurts every consumer. Find another way to pay back the debt. Deflation in prices is what the consumer needs but prices do not seem to fluctuate to the downside as quickly as they rise. A strong dollar appears to bring the price of petroleum down worldwide, which benefits struggling economies by lowering energy costs.

Low interest rates appear to discourage investment in the United States. Low interest rates discourage saving. Of course, low interest rates also avoid raising the payments on the Adjustable Rate Mortgages (ARMS), which is something that our leadership is using to avoid more foreclosures, to the detriment of the economic system. Perhaps these ARMS should be handled separately from the entire economic system, instead of controlling it.

ARMS are possibly one of those “financial inventions” that should be discontinued. Any other mortgage scheme that allows the broker to presume a future spike in income on the part of the buyer should be discouraged, out of moral issue or in an attempt to slow down future foreclosures. The provision of housing should not be a cash cow for lenders and brokers who take no responsibility for the social and economic damage done while they profit take. Brokering and lending are legitimate enterprises that serve a social good but the process becomes parasitic when used to create value in lending where none exists.

The past is gone forever, and that includes wide open spaces for the taking, free water and cheap energy. We must now deal with the new reality. We can succeed by working together, conserving resources, saving our money and investing in the United States.