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The important way the 2008 crisis was worse than the Great Depression

Roundup
tags: economic history, Great Depression, financial history



Matt O'Brien is a reporter for Wonkblog covering economic affairs. He was previously a senior associate editor at the Atlantic. 

Now that we have a little historical distance from it, we can definitively say the 2008 financial crisis was nowhere near as bad as the Great Depression except in the way that mattered most: how we recovered from it. By that measure, we’re actually on track to do quite a bit worse this time around.

How is that possible? The easiest way to think about this is we’re comparing how much we reasonably could have expected the economy to grow if there hadn’t been a crash with how much it actually did. The relevant question, then, is whether the recovery was strong enough to make up for all the ground we not only lost during the recession but also didn’t gain during that time but “should” have. In other words, whether the economy was able to get back to its pre-crisis growth trend or was permanently pushed onto a lower path.

Now, while it certainly took awhile — and had the benefit of a massive stimulus project known as World War II — the important thing is the economy did eventually bounce all the way back from the Great Depression. It wasn’t always clear that it would, however.

Read entire article at Washington Post

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