As I write, the Dow is down 350 points and the stock market has given up all its gains for the year. Never fear: The rich have already moved into safe havens — and those with some exposure are a little less rich. Everyone seems to agree that "the game is up," as one financial analyst told me. But which game? That America and Europe are "broke" and must dismantle their "lavish public sectors and entitlements"? Or that crony capitalism, imperial overstretch, failure to invest in education and job-creating infrastructure by the richest nation in history is the losing game? The former have won the argument with barely any resistance from President Hoover and the Democrats. The results will be a catastrophe. The Tea Partiers are cleverly, or stupidly, claiming this austerity doesn't go far enough. That way, when it fails, they can claim victory and demand more ideological purity, rather like the apologists for Soviet communism.
We may not be looking at another recession. We may be in a Depression. For many, if not most, Americans, the recovery was chimerical. Their troubles began in the '00s, with stagnant incomes and the worst record of job creation since the real President Hoover. When the housing bubble crashed and the stock market followed, the were financially ruined. Now 24 million are unemployed or under-employed. And that was all before the federal government embarked on an austerity plan that might please Robert Rubin but otherwise guarantees more recession.
So how will Depression 2.0 be different from the Great Depression?
The Great Depression saw the election of Franklin Delano Roosevelt and an overwhelming Democratic majority to Congress. Although FDR didn't "end" the Depression, his willingness to experiment brought unemployment down to 10 percent and eased suffering, while building a vast body of infrastructure — even putting writers, photographers and artists to work. This time, the oligarchs were saved by TARP and the Federal Reserve, while a timid and temporizing new president let the crisis go to waste. His stimulus was too small and wrongly focused. Discredited, he set aside any notion of a real Keynesian intervention
The America of the 1930s was poor and heavily rural. The America of 2011 is comparatively wealthy, thanks in no part to the long-lived liberal consensus that ruled from 1933 to 1981. Lifted up in no small measure by a powerful federal government, social safety net, and intergenerational wealth accumulated in the old America, large segments of the middle class and even lower-middle class accept the Fox "News" and talk radio version of events, and continuously voted against their interests. They can be expected to continue this pattern as things get worse. The closed-loop dogma of the right has an easy answer for everything and it always involves blaming the liberals. Funny thing: This nonsensical thinking would only be possible in a nation with the programs built up for decades by "liberals."
Great Depression America was a petroleum superpower and enjoyed the world's largest manufacturing base, even if demand was lacking. Depression 2.0 America is hollowed out, dependent on financial swindles and low-paid service jobs. China is now the world's workshop and we import most of our oil. Where in 1929 climate change was unimagined, now it is happening and the costs are accumulating right now.
Sacrifice was shared in the Great Depression. Now, a great pulling apart. A sizable minority are doing very well. They have no stake in improving the lot of others. Rather, the wealth of many is dependent on continuing the policies that are damaging the nation as a whole. They are happy to destroy the social compact.
We were at peace in the 1930s. Now we're at war in Iraq, Afghanistan, Yemen, Somalia, Columbia, etc. These costs are enormous and never much mentioned by the deficit hawks. We can expect no new world war to pull us out of this malaise. Were it to happen, we would be at huge disadvantages that didn't exist in 1941. As things stand, China is in the driver's seat, even if its bubble pops.
Life went on in the Great Depression. It will now. But happy days are most definitely not here again.