Unlike recession, depression is always the result of a struggle to totally remake a society-and-economy (socio-economy). In the Great Depression of the 1930s, the socio-economy that minimized consumer spending (1845-1960) was transformed screaming and kicking into a socio-economy that maximized consumer spending (1900-2020).
In the 2lst century, we are in the midst of a very different problem, a struggle to end our fascination with consumer spending and create a responsible socio-economy. We are resolutely confronting long-neglected problems of the environment, infrastructure, debts, deficits, climate change, water and air pollution, housing boom and bust, defective infrastructure, medical and educational deficiencies, etc. The new socio-economy overcomes excesses of consumer spending and rewards responsible behavior.
The socio-economy that minimized consumption spending, 1845-1960
Look at an 1840’s map of the United States. In the vast interior there were no railroads, no industrial cities, no industry. It was when young Americans began to believe it their manifest destiny to tame that vast land supply into the world’s most powerful industrial power.
But how could a desperately poor and largely uneducated people make that happen? To realize their manifest destiny, men would work long and hard for little money. They’d accept low wages, scrimp, save and invest. (How many Americans were obese in those years of conquest?)
In only 60 years, dirt-poor America filled that great empty interior with railroads, mines, farms and industrial cities. A tiny river village called Chicago would become the central hub of a Colossal Industrial socio-economy. From 1840 to 1900 Chicago grew from 4,470 to 1.7 million! And other large cities soon ringed that hub.
The socio-economy that maximized consumer spending, 1900-2020
After decades of building and connecting new cities, the industrial colossus was starved for customers able and willing to buy ever more expensive supplies of goods and services.
While Europeans colonized, Americans became spenders and consumers.
Rising on silent cat feet, the consumer socio-economy made its first inauspicious appearance around 1900. Capitalistic progress would no longer be measured by industrial expansion. The new benchmark would be an ever-increasing level of consumption spending along with the unprecedented height of landfills.
Eventually, we welcomed the acceleration of consumer spending by easy credit, credit cards, radio, TV, other consumer-oriented innovations, annual style changes, ‘no money down, no payments until…,’ and endless advertisements via every channel of communication. We created the new consumer city-suburbia-with its endless “palaces” for little kings.
Not so fast. The transition from minimum to maximum consumption spending would not come easy to those strong-willed Americans. That difficult transition would bring a Great Depression.
What Caused Great Depression I-the New Theory
Unyielding Yankee savers had to be rewired, mentally reprogrammed into fully developed consumer addicts. Everything had to change-family life, ambitions, child-rearing, education, political attitudes. To increase incomes, unions had to become much more powerful. But revising the “common-sense” of the late 19th century would prove to be a most difficult mountain to climb.
The whole economic landscape had to change.
Suburban homes and automobiles were pivotal mainstays of the rising socio-economy. But they had to be developed together. Cars and suburbs were twins joined at the hip. For people living in city tenements, cars were superfluous. Street-cars were just fine. But living in suburbia was impossible without cars.
Suburbia exploded after 1945. In the 1930s, however, suburbia was more an idea than a reality. William J. Levitt, father of Levittowns, did not yet have that gleam in his eye.
Nor was auto insurance sufficiently demanded or provided.
Nor did we have many auto-ready highways.
Nor were Americans ready to end entrenched habits of saving.
Nor were they ready to accept the life of consumer conformity in suburbia.
Nor were masses of people rich enough to buy suburban homes.
Nor were lenders ready to make loans with very low down payments.
Nor were sufficient jobs or shopping facilities available in suburbia.
Nor were county planning departments ready to issue new suburban standards.
Nor did merchants have the advantage of TV advertising and credit cards.
Is it surprising that the Great Depression lasted over a decade?
The socio-economy that is ending excessive consumption spending, 1960-2020:
Since 1960, repairing the damages of excessive consumption spending has given rise to a flood of environmentalists, health-food enthusiasts, climate change warriors and people dedicated to simple living.
Welcome the Responsible Capitalist, the socio-economy that opposes maximum consumption spending and the excesses of the 20th century. Progress of the universal health-care bill signals one approaching victory of “What’s in it for US.”
Great Depression II?
Half a century after launching of the consumer era’s suburbia, pummeled by an unwarranted housing boom and bust (largely radiating from the consumer era’s suburbia), and seriously torn by deficits, debts, climate change, infrastructure obsolescence, environmental damages and more, we are abandoning the 20th century’s consumption-spending socio-economy.
But chucking the old and embracing the new will take years.
Almost imperceptibly, a new society is creating a brand new economy. We are now convincing each other that another kind of life is more rewarding and worthy. Industries and advertising devoted to the old way of life will be jettisoned. Rising since the 1960s, new attitudes, industries, skills, education and satisfactions will repair damages inflicted by excessive consumption spending.
Finally, the favorite policy tool of 20th century economics is now defunct-reducing taxes to increase consumption spending. If we are to emerge from the next 10 years without a serious time of depression occurring, policy-makers will need to embrace an entirely new set of tools, as well as recognize the changing values the U.S. population will choose in place of its current fascination with rampant-and unsustainable-consumerism.