A Sharp Shock, But Not a Depression: A Historian's View

Historian David Kennedy of Stanford University was interviewed by Governing to shed light on the possible impact of COVID on state and local government based on his research on the Great Depression.

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You’ve studied the depression and of course lived through the Great Recession. What is there about today’s circumstances that looks different to you and where do you see parallels?

We’re better insulated today than we were in the 1930s. We saw in the headlines on Thursday that there were about 7 million more unemployment insurance applications. In 1931, ’32, ’33 — all the way to 1935 — there was no unemployment insurance. That’s a big difference. We’ve put in a few more circuit-breakers as a society, maybe not enough but a lot more than were in place in the 1930s.

There were 13 million people unemployed in 1933, when Franklin Roosevelt was inaugurated, which was 25 percent of the workforce. The demographics of the workforce were a lot different. At that time, only 9 percent of married women were working outside the house. The unemployment numbers, as bad as they are now, don’t mirror exactly what they looked like in the 1930s, because many, many households have one person still working and bringing in an income.

We’ve seen Congress already pass a series of stimulus measures, while the Federal Reserve is also pumping trillions of dollars into the economy. How does that differ from the initial policy response during the 1930s?

We’re better equipped than we were decades ago in terms of taking up arms against this crisis. We’ve changed the architecture of our institutions to give us better tools for dealing with the economic side of this. That lesson came from the Great Depression and it was reinforced by the Great Recession. The Federal Reserve was not a significant player in the 1930s.

Today, it’s a very vigorous counterpuncher to the economic damage. As early as 1930, Robert Wagner, a senator from New York, introduced legislation to provide widespread aid to individuals. It didn’t go anywhere in part because nobody knew how many people would have to be helped, whether 1 million or 2 million. It ended up being 13 million. It’s a function of the anemia or weakness of political institutions at the time that there was just not any reliable data about what was happening. Herbert Hoover quite understandably thought it was another familiar downturn in the business cycle. Nobody knew, or could get their hands around this thing. We're much more committed to the idea that reliable data is essential to good policy.

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