"If we come out of this just having lost an extra $5 trillion and the economy recovers, that's going to be a great outcome. The whole point of saving for a rainy day is precisely to be able to borrow with abandon in a situation like this...." Economist Kenneth S. Rogoff [i] (3/25/20).
Our Natural Disaster Response
Allowing the American People to be put out of work was one of the critical errors which led to the Great Depression. Natural disasters create economic trauma. And the 1929 Stock Market crash should have taught us that unemployment is not a necessary effect or a remedy to the trauma of a natural disaster: Not in 1929 and not now with COVID pandemic.
The Great Depression and Economic Trauma
About the Great Depression, Historian Howard Zinn wrote:
After the crash, the economy was stunned, barely moving. Over five thousand banks closed and huge numbers of businesses, unable to get money closed too. Those that continued laid off employees and cut the wages of those who remained, again and again. Industrial production fell by 50 percent, and by 1933 perhaps 15 million....one-fourth to one-third of the labor force were out of work. The Ford Motor Company, which in the spring of 1929 had employed 128,000 workers, was down to 37,000 by August of 1931. By the end of 1930, almost half the 280,000 textile mill workers in New England were out of work.... [ii]
Comparing that situation to ours today, White House economic adviser Kevin Hassett, said on the ABC program "This Week," Sunday (4/26/20). "It's a really grave situation.... This is the biggest negative shock that our economy, I think, has ever seen. We're going to be looking at an unemployment rate that approaches rates that we saw during the Great Depression of the 1930s...."
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