Friday, July 25, 2008

Different This Time

For what it’s worth, here’s Wikipedia on the Depression. There are similarities with modern times:

1. A credit bubble in the 1920s.
2. Bank failures.
3. Tightening of credit among the surviving banks.

But there are differences. And those differences will make things worse.

1. The Depression was due in large part to too much stuff. Food prices fell during the Depression. This time we will be facing food shortages, especially in urban areas, as costs rise with the price of liquid fuel and fertilizer.
2. The US was racially homogeneous in 1929. The majority of black people lived on rural farms. This led to a greater sense of community and willingness for shared sacrifice. See Los Angeles today in the good times for a modern datapoint. People are killing each other over tennis shoes. Just wait until they get hungry.
3. Peak Oil. Although a severe economic downturn will temporarily mitigate the price impacts of Peak Oil, there is a baseline amount of oil that is necessary to sustain our biomass.
4. Urbanization. People have moved away from the food supplies.
5. The loss of the industrial base. We have become a dependent people, both in terms of things and skills.
6. There was no such thing as government social programs in 1929. Today they make up 70% of the federal budget and people have become dependent.
7. The Depression took years to unfold. With the advent of computers and centralized everything, a modern event could unfold in weeks. If you think about it, if the right combination of forces decided to wage economic warfare on the US, it could unfold in minutes.

A friendly reminder to plan ahead. It actually could be a good time for engineers. We’ll need to rebuild our country.

No comments: