The numbers are the numbers when it comes to current economic conditions, and they certainly aren't good. But Depression? I think that's a stretch if you compare 2009 to 1929.
Most economists take the historical perspective that a depression starts when unemployment rises above 10% and stays there for several years, wrote Justin Lahart in the March 30 Wall Street Journal. But there are a number of factors that would make a modern-day depression different from the great one of 80 years ago:
- In 1929 20% of Americans were employed in farming. They were decimated by the drop in agricultural commodity prices, not to mention the Dust Bowl climatology of the 1930s. Today fewer than 2% of Americans make their livelihood on the farm, lessening any potential blow to the ag sector. In addition price supports, enacted during the Depression woudl cushion and rapid deflation on commodity prices.
- In 1929 Americans thrown out of work, or evicted from their apartments, homes or farms were pretty much on their own. Today we have entitlement programs that cushion blows like these. Food stamps, TANF, WIC, LIHEAP, and unemployment compensation are just some of the programs enacted 80 years ago that help bridge people through the rough times.
- In 1929 a family expected to spend a quarter of its income on food. No income, no food. Today Americans spend less than 10% of their family income putting food on the table. In fact, consumer food prices in the U.S. are among the lowest in the developed world. The nutritional blow from an economic crisis is not as severe now as it was 75 or 80 years ago.
It's more likely that to weather the economic storm today, Americans are reducing their spending, not so much on food for the table, but on discretionary items like restaurant meals, video consoles or lavish vacations. This creates a rippling economic effect, but that's a story for another post.
Just thought you might like to know.
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