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Tuesday, March 24, 2009

America's Last Depression

So what's the difference between a recession and depression? They're both economic contractions, but there's no widely accepted set of economic indicators that separates one from the other. And why is it called "depression" which also has the definition, "gloom; ... sadness greater and more prolonged than that warranted by any objective reason..."

Perhaps the difference between recession and depression is mostly psychological. If we give up, then long term recession and stagnation may be inevitable. John Maynard Keynes said, "If the animal spirits are dimmed and the spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die." I'm not sure I completely agree with that, but I do think that the mathematical expectation drops precipitously if the "animal spirits are dimmed". If everybody is all depressed and doesn't work as hard, doesn't invest as much, and doesn't partake as much of the available goods and services, it puts the economy into a more or less permanent downward spiral.

From the mathematical expectation standpoint, we're nowhere near the great depression. We're only starting to approach the recession of the early 1980s.

But from a psychological depression standpoint, it seems to me that we've already shot by that recession and are headed to unknown depths. The diversity of gloom is impressive. It's not surprising that Republicans and the Right are depressed - they're out of power, out of (marketable) ideas, and out of luck and they know it. However, when people like Paul Krugman are also depressed, given that they control all the reins of power and should be ecstatic to be able to enact all of the programs they've been drooling over for decades, it shows an extraordinary breadth of despair.

With despair, despondency, and depression can come political instability. Political instability has led to some truly frightening scenarios in the past:

The sad truth is that democracy itself is often unstable. Intellectuals lose faith. Democracy is not flashy. It falls out of fashion. The intelligentsia feel scorned, unappreciated, and turn to new theories.

There are other pressures. Republics stand until the citizens begin to vote themselves largess from the public treasury. When the plunder begins, those plundered feel no loyalty to the nation—and the beneficiaries demand ever more, until few are left unplundered. Eventually everyone plunders everyone, the state serving as little more than an agency for collecting and dispensing largess. The economy falters. Inflation begins. Deficits mount.
It's remarkable how apropos the above excerpt is to the current situation given that it was written in 1983 as "the introduction to an anthology of science fiction stories" by writer Jerry Pournelle. Remarkably descriptive and predictive. I'm rather hoping that the next part of his introduction isn't predictive:
Something must be done. Strong measures are demanded, but nothing can be agreed to. [...]

Enter the strong man, who will save the state.
From the ancient Greeks to the Romans to the Germans, democracies with economic problems faltered and turned to the dictator. I have no doubt that eventually America's time will come when it turns to the dictator.

Is that time here already?


erp said...

Republics stand until the citizens begin to vote themselves largess from the public treasury.

Cicero said something along those lines some two thousand years ago. (I'm too lazy to look up the quote) Note, I said too lazy, not too depressed.

Bret said...

Hmmm. On thought-mesh (I think) you mentioned feeling old and tired and here you're feeling lethargic (lazy) which is a symptom of depression. Are you sure you're not feeling depressed about the economic-political situation? :-)

erp said...

;-{ moi?

Brad S said...

This Republican and conservative is actually feeling a lot better about the future than he was at this time last year. It really helps to have the pressure off your party and your ideology for a few years.

And as far as the current economic situation goes, it is a testament to the power of marketing that one can adjust their whole business plan to exploit depressive feelings. Or perhaps you didn't notice that the majority of ads, even for travel and leisure, are mentioning how "you can save in this troubled economic time."

Dictator for America? Been there, done that, if you hang around critics of Lincoln, TR, and FDR long enough:)

Bret said...

Brad S,

I do think that FDR (and perhaps Lincoln to a lesser extent) did help move the US towards an eventual real dictatorship. They didn't (probably) have any choice, since if you don't survive the short term, the long term doesn't much matter. But it's still an example of how the populace needing "something" to be done pushes a democracy into the arms of a strongman eventually.

I'm glad you're feeling better about the future. If the republicans can at least maintain enough for filibustering, that'd help delay the current unhappy progression.

Hey Skipper said...

Is that time here already?


No more than Chimpy Bushitler was going to send storm troopers into everyone's homes and cancel the election.

Think about McCarthy, and that went on then to get a little historical perspective.

Bret said...

Well, let me clarify a little. By "already" I don't mean today, I mean over the next couple of decades - these sorts of things take awhile to unwind.

There was little (no) danger of bushitler taking over because there would've been no popular support. I think the fact that we've clearly sprinting towards being a "bailout nation" where everybody is basically plundering everybody else coupled with the possibility of economic collapse (which I personally don't think is too likely) could have people clamoring for someone to "fix" things in a way that wasn't really possible before. In the Great Depression we were not yet plundering each other. McCarthy was being nasty, but nobody was calling for a strong man to fix things.

Hey Skipper said...

No one is now, either.

If you don't think an economic collapse is likely, and I don't either, then I don't see how you can think a dictatorship is on the way.

Further, it is at least arguable that the bailouts are necessary to prevent the financial collapse that could lead to that very end.

And it is also at least arguable that if the economy does not collapse, the government will be repaid in full.

I think that is the most likely outcome, which is why I don't think we need worry about a dictator.