A Repetition of History:
Comparing the Great Depression and the Great Recession
Throughout its history, the United States’ economy has fluctuated to points of great wealth and prosperity, to points of horrible recession, and even depression. Perhaps the two worst economic crises the United States has ever faced were the Great Depression, and the Great Recession. The Great Depression came as a surprise, due to the immense prosperity spread throughout the country during the “roaring twenties”. The 1920s earned their byname—the "Roaring Twenties"—through the decade's real and sustained prosperity: during this point in time lively culture, and technological advancements flourished. The decade marked the flourishing of the modern mass-production, mass-consumption economy, which delivered fantastic profits to investors while also raising the living standard of the urban middle- and working-class. For the Americans who still made their livelihoods in agriculture, the decade roared only with the pain of prolonged depression. While rural America faced depression throughout the twenties Urban America only began to share the pain late in 1929, when the stock market crash suddenly caused billions of dollars in assets to evaporate. While the Great Crash itself directly affected only the tiny minority of wealthy Americans who owned stock at the time, subsequent cutbacks in industrial production caused a nationwide economic downturn unparalleled in its depth and length. The descent from the Roaring Twenties into the Great Depression was steep. The second major economic crisis was the Great Recession, which was caused by a series of economic downturns including the housing market crash of 2006, as well as the failure or risk of failure at major financial institutions worldwide, starting with the rescue of investment bank Bear Stearns in March 2008 and the failure of Lehman Brothers in September 2008. Many of these institutions had invested in risky securities that resulted in the loss of a majority or even all of their value when U.S. and European housing bubbles began to deflate during the 2007-2009 period. The Great Depression was the most devastating economic disaster in United States history, and 60 some years later the Great Recession dawned upon the American people. As Karl Marx said in regards to history repeating itself “the first time as tragedy, the second as farce.” This quote can is very applicable when drawing the parallels between the two economic disasters. When looking at the Great Depression and the Great Recession side by side we can analyze what lessons the Great Depression tried to teach, and how well those were taught and which of those did we neglect in order to put ourselves in a recession so similar to the depression. The parallels between the Great Depression and the Great Recession can be broken down into terms of analyzing the causes of the crises and their relation to economic theory of the time: the spread of the crises and the way the economy fluctuated: and the final step- analyzing government policy and recovery.
When comparing these two events the first thing in order to fully understand the crisis is understanding what caused it to occur. Both of these dramatic and costly economic crises came from the interaction of economic imbalances in the world economy and the ideals of financial decision makers who confronted these imbalances. The first imbalance came from the First World War. The first world war was credited with bringing the long economic expansion of the nineteenth century