The Worst Since the Great Depression How?

As the Dow continues on its 8000 to 9500 oscillation/roller coaster, we continue to see more news articles solemnly observing that this is "already worst economic disaster since the Great Depression."

I'm certainly not enjoying the looks of the stock market, and I fear that unemployment and poverty numbers will get worse before they get better. (If you asked me to take a guess -- I'd predict that unemployment will climb, slowly, for about six months before leveling off and going down.) However, the levels of unemployment are unlikely to go much beyond that of 92-93, must less 82-83 when unemployment hit a high of 10%.

The Great Depression comparisons are made because of the large percentage and absolute point drop in the stock market (the high for the Dow Jones Industrial Average was over 14000 in October of last year and it's dipped down into the mid 8000s -- a 40% drop) and the dangers of bank failure.

However, while one doesn't want to sugarcoat our current situation, historical parallels out of context can get irresponsible. The US of the 1930s had an economy far more primitive than our current one. A much larger percentage of the population was involved in small scale farming, and when the sale price of farm produce plummeted, the "dust bowl" hit making it harder to grow food in many parts of the Midwest, and farmers who had been taking out mortgages against their farms in order to meet bills in bad years found themselves unable to meet their payments -- the sudden transition from small scale to large scale farming pushed large numbers of low skilled unemployed workers into cities at exactly the time that unemployment was at a high anyway. Because our country is simply so much richer, and so much more productive, and thus able to produce basic goods and services much more easily, we would not see a human catastrophe on the level of the Great Depression in our modern country without a total governmental and social collapse.

So while it's true that in terms of the percentage decline in the major stock market indices we're seeing the largest financial decline since the great depression, in terms of real social chaos and human suffering we will in no way approach the level of what went on in the 30s.

I suppose it may seem like a pedantic point to those who find themselves struggling to pay the bills right now, but I'm always in favor of keeping a sense of historical perspective.