Why These Ain’t the Dirty Thirties

This special edition is significantly longer than the usual Friday Briefing. If you think it may be useful to ease a friend’s fears, please pass it on. Either click the link below, or open this in your browser (see link above) and send the web-link.

The coronavirus-driven economic winter we’re entering is serious enough, but comparisons to the Dirty Thirties are sensationalistic and overblown. Why? Because it’s a very different world than what it was ninety years ago.

In 1929 the world depended entirely on muscle power, directly or indirectly. Today the world depends mostly on brain power, directly or indirectly. In 1929 all activity was geographically restrained, today you can do virtually anything at a great distance. Who in 1929 would have imagined a robot on Mars, let alone repairing it from Earth?

Consider home heating, for example. In 1929 city dwellers heated mostly with coal, brought to your house in sacks piled on a horse-drawn wagon. The coal itself had been extracted and processed almost exclusively by muscle power. The trains which hauled coal from the pithead to the city were fueled by a fireman shoveling coal.

Today the likelihood is that you heat with natural gas, delivered as-needed by ducting, which in turn is fed by a pipeline which draws from automated gas wells. No horses, no trains, and very little muscle power. Most control of the delivery system is by computer, perhaps with a technician on his couch, or even fully automated.

The factories of 1929 were massive, dirty, noisy, and filled with thousands of unskilled workers lifting and carrying and hammering. A typical factory today is bright, airy, clinically clean, and operated by a handful of highly-skilled technicians, many of whom could easily work from home.

The office of 1929, again, was typically dark and noisy, crammed with filing cabinets, and typists clacking away amid the din of manual typewriters. The office of today is your coffee table, with access to immeasurably more data than thousands of those old filing cabinets, the only sound being your background music.

Technical knowledge in 1929 was essentially locked up in physical libraries and individual memories. If you had an engineering problem, for instance, you’d have to find the right book or consult a nearby colleague. If you thought that a colleague in Chicago might have an answer, you would write or telegraph, unless the situation was critical enough to justify the enormous cost of a long distance telephone call. Today there are online discussion groups where scientists, engineers and medical experts from around the world are collaborating in real time on coronavirus-related medical technology such as vaccines and ventilators, or building parts on 3D printers..

All of this means that a very significant amount of daily economic activity will continue to occur notwithstanding the fact you aren’t battling rush hour twice a day. That didn’t happen in 1929, nor could it have.

There are at least three more reasons that it’s different today, the first of which is the high level of income security which did not exist in 1929. The Roaring Twenties hadn’t roared for everyone, and the ostentatious wealth of the Great Gatsby had not been shared by the millions of labourers and factory hands who were one pay envelope away from the precipice, or farmers one crop failure away from bankruptcy. Miners and fishers literally owed their souls to the company store. So when the plug was pulled in the autumn of 1929, life went from subsistence to unimaginable for untold millions. There were no safety nets and the majority fell ever deeper into abject poverty.

But today in Canada, for instance, nearly ten percent of the population receives the Old Age Pension which, even where it is the sole source of income, is enough (even if barely) to keep the wolf away from the door. Add to that the number of recipients of public assistance in such forms as public housing or disability income, and you have a sizable population who aren’t going to freeze or starve, as literally happened in the Dirty Thirties. (This is not to suggest we can’t and shouldn‘t do better for society’s less-privileged, just to say that things are infinitely better than in 1929.) Moreover, when you add the number of public servants — bureaucrats, police officers, public utility workers, bus drivers, teachers, nurses…, and private-sector essential service workers, you have a very significant portion of the population whose income is not at risk, even in the medium term. In other words, a very significant stream of earning and spending continues unabated.

And let’s not forget the still-intact and vast reservoir of community wealth. The massive funds in public and private retirement investments are, of course, taking a beating, and may get beaten up some more. But they’re not going to disappear, and even if they are ultimately halved from their 2016 level, will remain vast. There’s still enough money to buy entire countries. This money does not want to sit forever on the sidelines and it never stops looking for opportunities. That kind of democratic capital did not exist in 1929.

Finally, governments around the world are responding very differently than they did in the early 1930s. Legislation such as the Smoot-Hawley Tariff Act of 1930 effectively slashed the tires of the world’s economy, turning temporary bad times into enduring terrible times. Public assistance measures were stingy, local, and feeble, and any kind of Keynesian jump-starting such as the New Deal still half a decade away. So far today, governments around the world are dumping money onto the meltdown like concrete on Chernobyl.

So, are we in for some stormy weather thanks to COVID-19? Of course– let’s not be naive. But it’s not the Dirty Thirties, and it will never approach that. Whether it’s six months, a year, even two years, we’re going to bump uncomfortably along for a spell, but nobody is going to starve or have to ride the rails, or live in Hoovervilles.

On the contrary, this period is demonstrating the resiliency of our society and infrastructure, and with one significant braying exception, the quality of our leadership. Some industries will die, but their time was coming, anyway. Some enterprises will tank, and that’s always a tragedy, but entrepreneurs are entrepreneurs and they always pick up the pieces and rebuild, stronger and smarter.

This may not be a walk in the park, but it ain’t the Dirty Thirties.