After the crash in ’29, he read about men leaping from tall buildings after they’d lost everything. Then he watched his father’s two jewelry stores go under and worried that desperation might touch his own family.
For 10-year-old Stan Harper, the Great Depression stirred dark fears and even took a seat at the dinner table, where he heard his grandmother tell him he could have butter or jelly on his bread but not both.
“Back then, people lost everything,” said Harper, now 89 and living in Golden. “They lost their homes quickly. There was no work at all. I don’t think we’re going to be facing anything like that.”
Twenty-five percent unemployment, more than 9,000 failed banks, bread lines, fear: That was then.
Six percent unemployment, manic markets, bailouts, concern: This is now.
Economists find little comparison between current conditions and the 1929 crash that heralded the Great Depression, largely because a hypervigilance among American economic leaders has lingered since that grim era and served the country well.
But that doesn’t stop people from asking: Could history repeat itself?
“There are parallels, and it is the worst financial condition we’ve been in since then,” said Randall Parker, an East Carolina University economist and author of a book on the economics of that era. “But we are not headed toward another Great Depression. The big difference now is that we have government institutions who feel it is their job to have an orderly unwinding of the markets.”
Some economic observers have argued that, so far, the current downturn is a problem for Wall Street, not Main Street. But the most compelling reason to reject the possibility of a repeat might well be the Great Depression itself — or more specifically, the large-scale economic introspection it triggered.
“The reason I am absolutely convinced we are not headed for a depression is that we have a learned a lot,” said William Freund, former chief economist of the New York Stock Exchange and emeritus professor of economics at Pace University in New York.
Federal Reserve Chairman Ben Bernanke had a previous career as an academic focused on the Great Depression and its credit problems, Freund noted. The decisive moves of the Federal Reserve and the Treasury Department to extend government credit and take over failing firms such as mortgage holder Fannie Mae and insurance giant AIG were “unheard of in the Great Depression. There isn’t anybody better versed than Ben Bernanke to handle this.”
Freund sees mild panic but not widespread liquidation. Market volatility has become a given — something to ride out or play artfully for gain.
Never invested in market
Today’s relative calm may be even more striking, given how much more common stock ownership has become in the decades since the 1930s. Only about 10 percent of U.S. households owned stocks when the 1929 crash slashed stock prices 89 percent over three years.
Today, roughly half of Americans own stocks.
Harper, recalling the devastating losses he read about while growing up in St. Louis, never invested in the stock market. He avoided banks when he could. He started and sold businesses, bought real estate, invested in things like the Coast Guard cutter that he and a partner restored and sold for a profit.
Things he understood.
“The Depression taught me that you shouldn’t be in something you have no control over,” he said. “That’s my feeling with the market — it’s a gamble every day, but that’s what keeps our country alive. I was just not a market player.”
Over the long term, he figures that was his mistake. But now, he worries about how the current economic situation could affect his four adult daughters.
“I’m sure they’re affected by it because they’ll talk to me and complain about what’s happening in the country,” he said. “But I don’t think they feel the fear of what we went through.”
Louise Bohmer Turnbull, 91, has tried to avoid the kind of economic upheaval she witnessed as a child by refusing to be a stock picker or financial daredevil.
Her dad kept his job as a chef for the wealthy while she grew up in central Denver, but her parents lost a lot of Great Depression money on one stock.
“I’ve never been one to buy stocks or bonds,” Turnbull said. “Plus I had four children, which tends to cut down on the financial gambling.”
She worries that recent generations of Americans couldn’t handle a real depression.
“I don’t think kids have ever had to conserve,” she said, “and if you’re not used to saving, it’s tough.”
Grew their own food
Dorothy Spencer grew up on a farm in central Illinois, unusually insulated from the most devastating ravages of the Great Depression. Her family owned its spread free and clear and — debt being perhaps the most burdensome element of the times — fared better than many neighbors who lost not only their homes and land but their livestock.
Spencer’s family raised its own food. Her father would milk their 20 cows, keep the milk and sell the cream. That was their income.
Her mother made sandwiches for the transients who knocked on the door asking for food. She heard rumors about suicidal investors leaping from buildings.
Just rumors.
“My dad didn’t invest in the stock market,” said Spencer, 87. “If he needed a loan, he could go to the bank and get a loan because he owned the farm. But the stock market was pretty much off-limits in my family. That was for the rich people.”
But Spencer and her husband, now deceased, did invest — particularly in the mid-1970s after the introduction of Individual Retirement Accounts. She still does. One of her daughters works as a certified financial planner and handles her investments.
“My daughter comes over here usually once a week, and we talk,” Spencer said. “I ask her, ‘You think everything is OK?’ She thinks so. So I don’t worry. I let her worry.”
The fact that many more Americans are exposed to stock-market whipsaws through their pensions and 401(k) plans is not really that scary, said economist Parker. People seem to have absorbed the boilerplate guidance that the older they get, and the closer they come to needing their money, the more conservative they should become in their investments.
“If you’re 65, and you have 100 percent of your assets in stocks, well, then, you got bad advice,” Parker said. “If you are 65 and retiring and going to sit back and watch the market fluctuate every day, then you’ll be ‘Sybil’ in Panavision. There are not enough different personalities in the world to handle that.”
Leadership vacuum
It’s not just the economists who appreciate the difference between current leadership and a leadership vacuum during the Great Depression. Those who lived through the hatred-of-Hoover era find little comparison.
“Herbert Hoover didn’t do anything. The president of the United States!” said Bert Spalding, a retired Air Force officer in Monument. Spalding, 83, was a boy during the worst of the Depression and grew up on his parents’ cautionary tales.
Even then, he knew something was very wrong in his Chicago bedroom community. His father kept his job at Western Electric, surviving on the monopoly of the phone-equipment company.
But every day, Spalding said, his mother cooked extra food for the one or two haunted, jobless souls who would come by the house looking for a hand up.
“They were not panhandlers,” Spalding said. “They were regular people.”
His father lost a lot of money in the stock market, but Spalding argues that the U.S. economy has changed since then. There are controls on market slides, unemployment insurance for those who lose jobs, backup systems for banks that fail their depositors.
“I’m plenty worried,” Spalding said. “I’ve got two children and four grandchildren. But it won’t happen again. It can’t possibly happen again.”
Asked if he’d done anything differently than his parents to protect against uncertain economic times for his family, Spalding had to laugh.
“One of the things I have,” he said ruefully, “is some AIG insurance.”
Then and Now
A comparison of conditions during the Great Depression and the current market crisis:
UNEMPLOYMENT
Then: The unemployment rate reached more than 25 percent by 1933.
Now:Unemployment hovers near 6 percent.
HOMEOWNERSHIP
Then: In 1940, after the economic ravages of the Depression, 44 percent of the population owned the home they lived in.
Now:In 2008, 68.1 percent own their homes.
PERSONAL INVESTING
Then: About 10 percent of U.S. households owned stock.
Now:About 50 percent of U.S. households own stock.
BANKING
Then: Roughly 9,000 banks failed during the 1930s.
Now:Since 2000, 38 banks have failed, according to the Federal Deposit Insurance Corp., created in 1933 in response to Depression-era bank failures.
STOCK MARKET
Then: The Dow Jones industrial average, a key indicator of overall stock-market performance, fell 89 percent from 1929 to 1932.
Now:From its high in 2007, the Dow fell nearly 27 percent by last week. It has since rebounded.
Sources: FDIC; Dow Jones; U.S. Department of Labor; economist Randall Parker; U.S. Census Bureau
