Monday, March 31, 2008

The Depression of 2008?


I'm amazed that some media reporting's comparing the current economic troubles to the Great Depression of the 1930s, for example, in this piece from the Independent (UK), "USA 2008: The Great Depression":

We knew things were bad on Wall Street, but on Main Street it may be worse. Startling official statistics show that as a new economic recession stalks the United States, a record number of Americans will shortly be depending on food stamps just to feed themselves and their families.

Dismal projections by the Congressional Budget Office in Washington suggest that in the fiscal year starting in October, 28 million people in the US will be using government food stamps to buy essential groceries, the highest level since the food assistance programme was introduced in the 1960s.

The increase – from 26.5 million in 2007 – is due partly to recent efforts to increase public awareness of the programme and also a switch from paper coupons to electronic debit cards. But above all it is the pressures being exerted on ordinary Americans by an economy that is suddenly beset by troubles. Housing foreclosures, accelerating jobs losses and fast-rising prices all add to the squeeze.

Emblematic of the downturn until now has been the parades of houses seized in foreclosure all across the country, and myriad families separated from their homes. But now the crisis is starting to hit the country in its gut. Getting food on the table is a challenge many Americans are finding harder to meet. As a barometer of the country's economic health, food stamp usage may not be perfect, but can certainly tell a story.

It's not perfect? That's putting it mildly.

So far, the most conclusive fact economists can assert is that we might - we might - be in a recession. The most recent unemployment figures have the U.S. up to 5 percent who are unable to find work. We had 25 percent in the 1930s, and food stamps we're unavailable then.

Sure, the article makes data comparisons to the 1960s, but anyone who mentions "the depression" is referring to the collapse of capitalism for the entire decade before WWII. The U.S. today is nowhere near such economic disaster.

I see help wanted signs all around, people are driving new cars, recruiting firms are not finding enough top managerial prospects, and some analysts say we'll likely avoid a recession.

The Independent article even noted that greater outreach efforts by the Department of Agriculture are to account for the 1.5 million or so more food aid recipients, but the author still goes on to suggest that: "But above all it is the pressures being exerted on ordinary Americans by an economy that is suddenly beset by troubles."

People may be losing their homes, but they're not overwhelmingly losing their jobs.

Until we see true bread lines like the 1930s, it's simply journalistic malpractice to make such arguments.

Photo Credit: The Independent (UK)