The Great Depression and COVID-19
As of May 24th, the COVID-19 pandemic, throughout the world, has taken nearly 350,000 lives. However, it has impacted tens of millions of people more, look to anywhere in the world, and the impact of the virus is visible. Whether it be economically, socially, emotionally, the virus has taken a lot. Today, I am going to examine how the Great Depression and COVID-19 both shook society in terms of economics and displacement, and will shed light onto the government’s responses to such difficult times.
Note: This article does not represent my opinions on political matters going throughout the nation, I am here just reporting the facts and statistics as I see them, willingly.
The Great Depression
Let’s start by looking at the figures of the economy/society during the Great Depression, amongst the roughest periods of economic times in US History which occurred during from the late 1920’s to the late 1930’s. Furthermore, this “depression”, is the only “depression” which the nation has officially faced, yet it is starting to look like we may be headed in such a direction in the status quo.
Causes of the Depression
One of the largest reasons many people give to the initiation of the Great Depression is the 1929 Stock Market Crash in which the DOW Jones dropped a staggering 25%.This would account for more than $44 Billion worth of sell-offs occurring, effectively destroying confidence in the stock market. Now although this is for sure a large cause of the depression, it was a short term cause.
If we look at the long term, we see that the depression was being built up due to the way labor-saving technologies such as the tractor were also massively dropping agricultural prices. Additionally, at the time before the Great Depression officially started, there were pro-business presidents in the White House such as William Harding and Calvin Coolidge who enacted Laissez-Faire policies through the 1920’s. During such time, there were low taxes and little government intervention.
International strains did not help, the passage of the Hawley-Smoot Tariff of 1930 increased tariffs on foreign imports to the U.S. by about 20%, reaching a total of a whopping 60% tariff rate. Other nations across the globe would respond by increasing their own tariffs on American goods leading to global trade declining and fueling the Great Depression’s start.
Immediate Effects of the Great Depression
Due to the Great Depression, the nation went into one of the hardest economic times through our history. 25% unemployment rate during the Great Depression under Franklin D. Roosevelt’s administration. This unemployment would sky rocket the amount of displaced citizens which would lead to homelessness. In fact, such a staggering amount of homelessness would lead to more than 6000 “Hoovervilles” which were small towns built by the homeless. Here millions of families would live, and the reason for the name being pointed at Herbert Hoover’s lack of intervention to prevent the Depression.
The Housing Market also plummeted due to the vast number of foreclosures (Foreclosure is what happens when a homeowner fails to pay the mortgage for the property, leading to the property being possessed). In fact, more than 250,000 citizens had their homes foreclosed during the year 1932.
The Great Depression shook the United States down to its core. It reminded the nation how tough times can be without proper federal intervention which is why the federal response to the Great Depression was one which included many public works programs under FDR’s administration. These programs came to be known as the “New Deal”, which would save the nation from impeding into a further economic crisis.
Franklin D. Roosevelt had a set plan to bring the nation back on track, he often referred to it as the “Three R’s”: Relief, Recovery, Reform. His “New Deal” program came in two phases, the first “New Deal” included an immediate way to relieve the banking industry through issuing the Emergency Banking Relief Act in order to set up a banking holiday. Furthermore, he signed the Tennessee Valley Authority Act in order to authorize the federal government to build dams and build inexpensive energy. Additionally, FDR would ask Congress to end Prohibition in order to tax alcohol and increase government revenue. This would create several public works programs such as the Civilian Conservation Corps and the Civil Works Administration in order to provide jobs and experience to workers to help them get back on their feet.
The Second “New Deal” would later be launched in 1935 due to the way the Great Depression had continued and had impacted the Farmers sector. Such would lead to the Works Progress Administration which would allow for up to $11 Billion in funding towards public facilities like roads and bridges, putting nine million citizens to work.
All in all, the New Deal programs under FDR’s administration exemplified to the nation that the federal government would be there to help the nation fight through tough economic times, and would set such precedent if economic times got tough in the future, or did it?
The Pandemic, we have discussed how it has sent millions of families into panics, similar to that which many experienced during the Great Depression. For sure both of these difficult times presented/present adversities to the American public, however let’s examine the different causes, and more largely the government response.
Causes of the Pandemic
I wish I could write as much of a detailed explanation as I did for the Great Depression, however, I really cannot. The Pandemic was not caused by mounting tensions in international tariffs or a stock market crash, instead it is a disease, which seems to be caused by animals (CDC).
Immediate Effects of the Pandemic
The COVID-19 pandemic has spun the economy out of control, leading to the DOW Jones and S&P 500, erasing all of the gains the respective markets had made before President Donald Trump took office in 2017. Devastating for the economy, this plummet of stocks was an effect of the pandemic, and not a cause, exemplifying the reversal from the Great Depression.
The negativity does not stop at the stock market, looking at just the United States of America today, more than 38.6 million people have filed for unemployment, with the unemployment rate being 23.6% due to the grave impact of the COVID-19 pandemic
“In just two months the unemployment rate has gone from the lowest rate in 50 years to the highest rate in almost 90 years,” said Gus Faucher, chief economist at PNC Financial.
Unemployment leads to families using their emergency funds if they were not ready for such financial times, which millions of families were not due to the way there were no predictive signs showing that such could occur. Furthermore, families being forced to use their emergency funds means there is a financial problem occurring, meaning families have to greatly budget what they can spend their money on, ideally, that being on groceries, and shelter. However, in the past month of April more than 20% of U.S. renters did not pay their rent, demonstrating that families were not prepared and the damage will only get worse when landlords come knocking on their doors to collect rents. Granted that there are those land-lords who have a large enough heart to cancel rent payments, however, not all are like this, leaving much fear within families as to whether to place food on the table or to keep a roof over their heads-simply is not fair.
The COVID-19 virus was not detected at first, in fact artificial intelligence knew about the virus before the CDC did. Furthermore, even when the virus would get detected, the governmental response would be delayed in terms of action through legislation coming about immediately.
One of the first substantial moves made by the United States, after the Presidential administration had been informed about/witnessed what the virus was doing to nations across the world, was on January 31st, when the President announced a travel ban from China by foreign nationals in order to stop the spread of the virus from what seemed to be the origination point-Wuhan, China. Such would not be the only act put in place to blockade the entrance of people into the nation, as on March 11th, the President announced a 30 day travel ban from countries under the European Union.
These actions can be seen as measures placed by the government in order to stop the spread of the virus, let’s look at what the government has done to actually help the citizens during these tough times.
On March 27th, the federal government would pass a historic $2 Trillion stimulus package aimed towards the American public in order to help them back on their feet and kick start the economy. One of the most substantial factors of the stimulus was the way it provided direct financial assistance to American families in the form of a direct check based on the income of a family. Basically, it would provide up to $1,200 per individual who earned less than $75,000 a year plus $500 per child, more details regarding the stimulus can be found here.
Furthermore, the stimulus would provide billions of dollars of support to hospitals who are struggling to deal with the pandemic and the increased utilization of their facilities.
Short Term Fix?
Now the federal government had a great response to the pandemic, and although it should have come earlier considering the United States is the most powerful nation with the most intel in the world, at the end of the day it was a short term fix.
It is sort of like when you give a baby a pacifier in order to stop making the child cry, however, the actual remedy to stop the child from crying is most likely that they are hungry for food/milk.
Similarly, in this situation the federal government distributed a check in order to help families get past two weeks, one month at best? Sure the stimulus check allowed for families to potentially pay off a month of rent, or provide food for a short period of time, however, it did not solve the problem of staggering numbers of unemployment and families still looking to make ends meet in order to provide for their families.
However, we must remember that the federal government cannot enact monumental programs like the Works Progress Administration or any other program from the Great Depression, as those programs in response to the Great Depression were able to succeed because they allowed for millions of Americans to go back into the physical work force and led to the construction of public infrastructure, solving unemployment figures.
Right now, the story is completely different, for even if the federal government dumped billions into public infrastructure programs, people cannot simply go out to the physical workforce due to the social-distancing guidelines and stay-at home orders in place throughout the 50 states in the United States.
Such is why any response which the government makes to the pandemic is a tricky one, for on one hand, they could simply keep up the short term fixes or look at a long term plan which involves the defeating of the virus through increasing the number of supplies and finding methods to expedite the distribution of testing/antibody kits.
The 50 states across the United States are now rolling back restrictions placed on their constituents and are allowing for people to congregate. States like Alabama, Alaska, and Arizona ended their stay-at home orders on April 30th, allowing citizens and many businesses to resume operations and bolster the economy. On the other hand there are states like Delaware and Illinois, which won’t roll back guidelines until May 31st. Such exemplifying the various responses states have had, for there are states which are taking the reopening process slowly in an effort to prevent a second wave of the pandemic and economic hardships, while some other states are allowing for low regulation and a quick return to normalcy to occur.
All of such begs the million dollar question for today’s article:
Million Dollar Question: Are we as a nation ready to return to normalcy rather quickly to prevent further displacement or do we go slowly in an effort to prevent a second wave which could cause double the displacement?
Thanks for reading my Medium Article! I hope that you learned something interesting about how the current times are facing were similar in some senses to those of a century ago! However we get through these times, we are all in this together as a country, regardless of what side of the politics we believe in, we will get through this together, and will recover to become stronger, together.