I-Search Essay: Depression and Recession

          Ever since the Recession started, everyone has compared it to the Great Depression. Journalists always introduce it as “the worst economic downturn since the Depression.” I began to wonder how alike the Great Depression and Great Recession really were. In my research, I hope to discover some of the similarities and differences between the Depression and the Recession. I will explore: what caused the Depression and the Recession, what the government did to try to fix the economy, what ultimately ended the Depression, and what possibilities we should consider in order to end the Recession.
          Before I began my research, I thought that the stock market crash caused the Depression, and nothing else. But the stock market crash was just part of the problem, and more the culmination of many different factors. We can consider the crash as acting like a firework explosion after the fuse is lit. In October 1929, the world became transfixed by the bright display of the plummeting stocks. The economic situation got much worse after the crash. I found out that the Great Depression and the Recession shared similarities in that they both occurred because of a combination of bank failures and stock market crashes, as well as rampant debt (Ferguson 36). People believed that they could buy whatever they wanted, even if they had no way to pay for it. They just had to get a loan from a bank. The banks gave loans to anyone, even people who had bad credit and no knowledge on how to manage money. The people who got the loan did not consider how they would pay back the bank, and so these people spiraled down ever deeper into debt. In the article, “The End of Prosperity?” author Niall Ferguson tells us that recently, the biggest increase in debt came from people investing in real estate. “The result was a bubble; at its peak, average U.S. house prices were rising at 20% a year. Then—as bubbles always do—it burst” (Ferguson 36).
          The government usually uses two main strategies to combat economic slumps. Sometimes politicians will use a strategy that involves financial stimulus. This includes giving tax cuts and financial stimulus packages to taxpayers, and bailing out financial institutions by propping them up with emergency funds so they do not go bankrupt. The other strategy involves public works projects. These projects operate by employing people to do a variety of jobs for the government, such as roadwork, construction work, and conservation work. Both strategies cost a lot of money. And spending money always causes problems in the government. In the case of spending money to combat an economic slump, government response gets slowed down by a lack of cooperation. One camp always thinks that we will spend too much money, and the other camp always thinks we will spend too little. I saw that today we have a different philosophy of the government’s budgeting than we did in the time of the Great Depression. Today the government rarely keeps a well balanced budget, but in the 1930s, politicians thought of a balanced budget as an extremely important thing in the government. As a result, the politicians reined in government spending. But reining in spending meant programs to help people got cut, which made the situation worse. In 1938 the government changed its approach and President Roosevelt got Congress to pass a five billion dollar relief program (“American President: Franklin Delano Roosevelt”). That is a lot of money to spend today, and it was an enormous amount to spend back then. Congress became upset when the relief program didn’t help much. According to today’s economists, the problem lay in that President Roosevelt still did not spend enough money for his plan to work. The theory of putting money in American’s pockets was sound; it was only the execution that needed work (“American President: Franklin Delano Roosevelt”). In today’s recession, lawmakers have certainly thrown a lot of money at the problem. In 2008, the government gave banks and other financial institutions hundreds of billions of dollars in bailout money in an effort to prevent them from falling apart (Boone 20).
          I noticed one significant difference between the responses in the Great Depression and the Recession. This difference has to do with the public works projects I mentioned earlier. President Obama has implemented stimulus funds which include public works (Clemmitt 155), but he has not used public works to the degree that President Roosevelt did. Public works projects were one of the biggest strategies President Roosevelt used in the Depression. He had many different types of these programs, such as the Works Progress Administration (WPA), and the Civilian Conservation Corps (CCC). I have a personal connection to the CCC in particular. My great-grandfather John James Lovas Jr. was a member of the CCC. I interviewed my grandmother about her father’s time there (You can read the full interview here).

John James Lovas Jr.

 She said that he joined the CCC “because there were no other jobs” (Ramos). The times were so bad that even a healthy young man was unable to find any job, never mind one that paid well. The CCC used a military model, provided food, lodging, and a small salary, and gave the young men tools for good work habits. 

The men worked in the National Parks. My great-grandfather got sent to the National Parks in Idaho and Wyoming. He spoke often to my grandmother about his time in Grand Teton Park. He fought forest fires and planted trees. The CCC really shaped his love of nature. One of the pictures my grandmother has from him shows the men attending Mass by Jackson Lake, with the Teton Mountains in the distance (Ramos). The CCC could not employ everyone, but it changed the lives of those it did employ, despite criticisms from some who said that public works projects did not do enough.

          The Great Depression eventually ended because of World War Two. No one cared about spending too much money after the attack on Pearl Harbor. The war created the jobs and spending needed to jump start the economy (“American President: Franklin Delano Roosevelt”). Meanwhile, in the present day, we still struggle with the economy. According to the calculations of the National Bureau of Economic Research, the Recession officially ended in June 2009, and now we just have to recover from the recession (Business Cycle Dating Committee). But we have had a sluggish, weak recovery. We have spent so much money on wars in the Middle East, and yet we hesitate when it comes to spending money to fix the economy. We have not really tried public works projects because of fears the projects would cost too much money. Bailouts and financial stimulus packages have only passed legislation after a large amount of bickering and deal-making in the government. Apparently, we have no problem spending as much money as possible when we fear an attack from the outside, but when a bad economy attacks us from the inside, we suddenly cannot decide how much to spend and where to spend it. There is a distinct lack of cooperation between the parties in the government, so any action towards fixing the economy takes a long time to get accomplished. Until we learn to work with each other instead of against each other, nothing will get better.
          In conclusion, I have found many similarities between the Great Depression and the Recession. The beginnings of both share amazing similarities, when people went deep into debt and invested unwisely, and financial institutions failed, causing stocks to crash. They both used some similar strategies. But there also remain some important differences between the two. Unlike the Depression, we have not used public works projects much at all, and instead we have relied mainly on bailouts. I also realized that we cannot recover in the same way that the US recovered from the Depression. War will not fix this. Cooperation within the government would prove most effective in fixing our problems, but politicians will not work together unless the public pushes them to do so. The Recession has tangled the economy thoroughly. Any plan we can come up with will take a long time to untangle it.