Was The Great Depression Really That Bad?

Edit 2023: Looking back five years later, what’s missing from this piece is consideration of the Great Depression’s international consequences: the collapse of international financial and economic coordination, the switch away from the gold standard to multiple incompatible financial standards, and upsetting the balance of power between the bankers of different nations. These were major transitions and also contributed to the outbreak of World War II. This puts the Great Depression into a different category from other financial disasters such as 1873 or 2008, even if the domestic material effects may have been comparable. 

The dominant narrative holds that the Great Depression was a uniquely horrible event, consisting of economic collapse and human suffering on a scale far beyond anything in contemporary experience. I suspect this may be substantially exaggerated, and the Depression may have been much less bad than is popularly supposed—say, not much worse than the 2008 depression and its aftermath, relative to what came before. (This is still very bad.)

There is a motive for such an exaggeration. The tale of the New Deal vanquishing the Great Depression and preventing its recurrence is a key piece of the founding mythology of the contemporary American regime. This story justifies not only the welfare state, but also the Federal Reserve and other financial regulations, all of which are vital to the current system. The worse the Great Depression was, the stronger these justifications become; as such, champions of the status quo would benefit from painting the Great Depression as a unique horror, for the same reasons that they benefit from painting the Nazis as a unique horror. (The Nazis, while horrible, were not unique.) Of course, the presence of this motive does not prove deception, but it does make me suspicious.

The stories used as justification for the Great Depression’s unique horror are all explainable by other means. In popular culture, the most common (now slightly anachronous) is grandparents of Boomers and Gen Xers who lived through the Depression and came out extremely frugal, hoarding disposable packaging and old shoes because they felt a need to keep every object of value. While this attitude reflects material poverty by modern standards, I think this is because of increasing industrialization and technologically-driven material abundance, rather than because of a temporary financial collapse. If you go back to, say, the 1870s, then all but the very wealthy would have hoarded and reused metal pins, cloth scraps (note that the link offhandedly dates the practice to the late 1800s, then has a lengthy section on its usage during the Depression decades later), and much else that is considered trash by today’s standards. This trend has continued, and today Millennials are generally less prone to hoard worn furniture, old computers, and other mid-value objects than their parents.

The Depression is also associated with the Dust Bowl collapse and emigration, which was a catastrophe contemporaneous with, but separate from, the Great Depression. When farmland literally blows away in the wind, this is not because of stock markets or employment rates, and is properly classified as a natural disaster rather than an economic event. However, the only contemporary memory of this event comes from The Grapes Of Wrath, in which Steinbeck uses the suffering caused by climate change to justify union power. As a result, the Dust Bowl is bound up with economic policy in the popular imagination.

There are also the stories of shantytowns, the camps where otherwise homeless people would erect crude shelters on parks or vacant land. I know of maybe half a dozen of these in Oakland and Berkeley today, and I don’t exactly have my finger on the pulse of my local community, so I find it hard to take this as a sign of the Depression’s unique horror. (I will also irresponsibly speculate that the presence or absence of shantytowns in cities depends more on police policy than on the economy, so long as the economy hasn’t fully solved the problem of scarcity.)

Of course, explaining away these stories is not a full proof that the Great Depression was less dire than is popularly supposed. Such a proof would require a full investigation of the relevant statistics and primary sources. This would be a huge undertaking, since I’m not willing to take most econometric analysis at face value in cases of this type. Economists can be among the most vocal defenders of the status quo. Many are more interested in pushing an ideological agenda than in reporting truth, as I saw firsthand during my brief career in that field. While I would be somewhat surprised if the data was literally falsified, I think it’s likely that much of the analysis is heavily skewed. In spite of the difficulty, I think such an investigation is warranted, and I hope to get around to it someday. Until then, I remain skeptical of the dominant narrative.

9 thoughts on “Was The Great Depression Really That Bad?”

  1. What do you think of the unemployment numbers? Great depression peaked at 20% unemployment, while 08 peaked at 10%. Do you mean to include 2x in ‘not much worse’ or do you doubt the numbers or relevance?

    1. I’d have to delve into how exactly “unemployment” is measured in both cases before I put much weight on that. Contemporary unemployment statistics are a bit of a joke, in that they exclude the long-term unemployed (“discouraged workers” is the search term if you want more detail) and count the part-time underemployed as “employed” in order to make the numbers look better. My sense is that the statistics were less Goodharted in the depression era, in which case the numbers can’t be directly compared, but I’m not certain. “Labor force participation rate” might be a less corrupt measure, but I couldn’t easily find good statistics for it from before 1948, and anyway it’s not exactly the thing we care about in this case. This is the type of thing I mean when I say I don’t take the econometric analysis at face value; I think you have to get into the precise details of the statistical methodology, and probably do your own analysis of the data, in order to get trustworthy conclusions.

      If the 2x difference does hold up after examination, I would consider that a refutation.

  2. I think I was expecting this to look at numbers more than speculating on reasons why everything could be a conspiracy or mistake.

    I’ll note that you live in a city with no real winter and unusually high levels of shantytowns, and you presumably didn’t see tent cities when you lived in Boston. Whereas in 1932, unemployed brickworkers built a *brick* shanty in Central Park, which could just indicate looser enforcement at the time, but one obvious possible reason for looser enforcement is extreme circumstances that the police had given up on changing. https://www.6sqft.com/the-history-of-central-parks-hooverville-the-great-depression-pop-up-shanty-town/

    I didn’t find overall numbers for NYC homelessness over time, but at least women’s homelessness seemed to rise sharply: “By comparing the number of “female beds” occupied in the women’s division of the Municipal Lodging House in New York City between 1920 and 1932, the dramatic increase in the numbers of women given shelter is evident. Recording 3,039 female beds in 1920, 5,814 in 1929, 23,380 in 1931, and 56,808 in 1932.” (https://www.jstor.org/stable/3178478) Whereas currently around 62,000 people total are in NYC’s municipal shelters, the majority of which are men. (http://www.coalitionforthehomeless.org/basic-facts-about-homelessness-new-york-city/) Maybe that reflects that a larger proportion of homeless in 1932 were staying in municipal shelters than do now, and the somewhat larger population of NYC at that time. But the obvious interpretation is that homelessness was in fact worse in NYC in 1932 than it is now.

    I’ve already gotten more nerdsniped than I intended, but seems like something like the 1930 census would be a good starting point to actually answering the question. https://www.census.gov/prod/www/decennial.html

    1. Good points on the shantytowns. I hadn’t seen the brick shanty, and if it stayed up, then that paints a picture that’s notably different from what’s happening now. I agree that dire circumstances will sometimes make police more lenient, and I suspect that’s one factor behind the current situation in the East Bay.

      I don’t believe Abelson’s statistics on homelessness. The Municipal Lodging House she describes wasn’t a city-wide network of shelters, it was a single building. There’s no way it contained >50,000 female beds, on top of men and children. Other sources give much lower estimates, e.g. 4,500 total capacity in 1932. In fairness to Abelson, she does note that her numbers are “based on limited information, educated guesses, and, very often, political manipulation.” I don’t think limited information or educated guesses would lead someone to claim that several corps worth of people were living inside this building. Presumably homelessness did rise, but I don’t think Abelson’s numbers are a good way to tell how much. I’ve found that bizarre statistical claims like this are common, particularly in these sorts of summaries-of-summaries-of-summaries. This is why I advocate checking such claims rather than taking them at face value, and staying close to raw data and primary sources. Finding reliable numbers in these areas is a serious effort.

      1. You’re right, that’s obviously an insane number for beds inside a single building. The citation says “These numbers do not mean that this many women passed through the Municipal Lodging House” but I have no idea what that means – it may have been an estimate for beds across a larger number of buildings run by the city? or something else?

  3. What are your thoughts on GDP during that time?

    This is a pretty representative graph of what I’ve seen in the data:


    Note that next to the general trend of the post-industrial revolution, the great depression is practically the only event that really shows up on that graph. With a total decrease of GDP per capita of something like 20%, which is at least a factor of 5 more than any other recession we have data on to this date.

    1. My response is turning into a post of its own. In the meantime I’ll just say that I’m very unsure how much weight to put on GDP numbers, for reasons similar to my concerns about unemployment above. I’ll lay out my reasoning in a future post.

  4. I think the best evidence that the Great Depression was worse was the political fallout. Four first world countries (Germany, Austria, Newfoundland and arguably the USA) saw regime changes. In a world with far more independent countries, the 2008 crisis saw regime changes in Kyrgyzstan, Tunisia, Libya, Egypt, Syria and Yemen – zero first world countries and generally fewer, less important countries (as a fraction of the total number of sovereign states). Similarly, the 1990s Asian crisis saw regime changes in Indonesia and South Korea – two of the most important countries in the region.

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