Great Depressions Are Not Preventable

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Great Depressions cannot be prevented. We’re living in a fool’s paradise, as unprepared as New Orleans before Katrina.

“Since World War II, economists assumed they can prevent Great Depressions. They cannot. Never could,” says Jack Lessinger, Professor Emeritus, University of Washington. “Yes. They can end recessions. Not Great Depressions. A recession reflects economic imbalances—in prices, money supply, trade, etc. A Great Depression signals a swerve in global direction, a massive transformation of the world society and economy. One great system perishes. Another takes its place.

In his book, Schizomania, Split Society, Perilous Economy, 1990-2020, Lessinger analyzes depressions from 1790 to 2020. The Great Depression marked a critical stage in a transformation of the global economy that began around 1900. That’s when the Industrial Economy of the 19th century slowly and fitfully began to morph into the 20th century’s Consumer Economy. (The book is available at http://www.predicting2020.com/TGD.)

To tame the almost naked continent of 1845, the Industrial Economy required immense savings. To save and invest became the 11th Commandment. Imagine. Americans (at least the minority above the poverty level) saved up to 40 percent of their income!

By 1900, however, the industrial infrastructure of the nation had reached a high level of completion. Railroads, mines and dense industrial cities were increasingly falling out of favor. “Overproduction,” as some called it, aroused the specter of massive unemployment.

An alluring—and opposing—new vision now beckoned. "Consume. Forget your scrimping ways, Life is short. Don’t wait. Join unions. Demand higher wages. Stop saving for the future. Borrow. Spend. Create the Consumer Economy of the 20th century. Seek instant gratification.”

To develop an entirely new pattern of supply and demand, the Consumer Economy-to-be would begin a great learning curve. And to complete the global transformation, the Industrial Economy would eventually perish.

The Great Depression struck the economy in mid-transformation—when GDP remained stunted by the too-slow demise of old parsimonious attitudes and the too-slow growth of profligacy, when millions remained adamant about blanketing the world with increasingly unloved railroads and industrial cities instead of freeways and suburbs, when too few new consumer products (like refrigerators, radios or TV) had yet been invented or widely adopted, when retailers were mostly Mom and Pop stores, when consumer advertising was still primitive, when consumer credit was both undeveloped and unwanted, when unions were still reviled and had not yet won sufficient wage concessions to boost spending, when the poor had not yet entered the middle class, when legislation still favored the rich and when the inventors of suburban Levittowns had not yet been born.

Should we expect a new Great Depression? Another global swerve in direction has been coming on for nearly half a century. To illuminate the new opportunities, challenges and perils, Lessinger is launching a series of innovative installments at http://www.predicting2020.com/TGD.

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