The Great Depression 7 - Arsenal of democracy

There are a lot of parallels between the present moment and the late 1800s, including a backlash against globalization: economist Author photo By ANDREA RIQUIER Courtesy Everett Collection Nope, not the Great Depression - there was one that by many accounts was even worse A financial crisis that left in its wake deflationary price pressures, low productivity, stagnant incomes, a spike in populism, a backlash against globalization: if that all sounds familiar, you may not like the following insight. It comes from Dario Perkins, global macro economist for TS Lombard, who, in a Wednesday note, described the historical period he thinks most resembles the current moment.

That era is called, a bit bleakly, the Long Depression, and stretched from 1873 to about 1896, depending on the country. TS Lombard The U.S., for example, was in recession from October 1873 to March 1879, a stretch that remains the longest downturn on record, and which was followed by four more recessionary periods, for a total of 161 months, or over 13 years, in contraction during that time frame. “The panic of 1873 was arguably the first truly international crisis,” Perkins explained. “It began in central Europe with the collapse of the Vienna stock market, then spread to the United States after the failure of the banking house of Cooke and Co. over its investment in the Northern Pacific Railroad.”

 A financial crisis kick-starting a long period of economic malaise may also sound familiar, but Perkins is more interested in other features of the depression. He notes the slump in productivity that hit Great Britain especially hard: “this is the only period in the last three hundred years with a downturn comparable to what we see today.”

 Perkins also calls attention to deflation. While most analysts agree that the effects of globalization, technological innovation, and a shift to a services-oriented economy away from manufacturing have all combined to keep inflation tepid, “these deflationary pressures were even stronger in the late 1800s, producing a sustained period of failing prices,” he writes. “U.K. inflation averaged -1.4% between 1873 and 1888.” See: The world is de-globalizing. Here’s what it may mean for investors. Another feature of the Long Depression was polarization of the job market, caused by rapid technological change that “hollows out” the middle-wage segment of the workforce. In the late 1800s, that innovation included the invention of the telephone, the lightbulb, the automobile, and more; today, we‘re trying to learn how to live with machines that learn, microwaves that connect to the internet, and cameras tracking our every move.

 The second half of the 19th century brought about a surge of globalization, Perkins noted, that was just as disruptive to people then as the one we’ve just lived through. “Industrialization plus huge advancements in transportation and communication allowed mass production and the shipping of agricultural products and cheap manufactured goods.” It is probably not surprising, then, that populism as we know it now originated in the late 1800s. “The word ‘populist’ first appeared in 1891, as the name for a dynamic movement launched by farmers and workers in the Midwestern and Southern United States. Most socialist parties were also founded in the late 1800s.

Some feared a Marxist revolution.” Sound familiar? So what gave? The positive effects of the newly emerging technologies finally found their way to consumers, Perkins says. “This is a reminder that technology can provide a way out of today’s slump, if the gains spread beyond the ‘superstars’.” (In earlier research, Perkins explained the idea of “superstars” as “a powerful winner-takes-most dynamic where a small number of firms gain a very large share of the market.” Some examples include Amazon.com Inc. AMZN, +0.64% and Google. GOOG, +0.94% ) In the 1890s, growth also got a boost from an acceleration in wages, he noted. “Populism played a role, especially as it led to the development of the welfare state and the organization of workers into trade unions.

There was no Marxist revolution but worries about ‘socialism’ did cause a powerful shift in the distribution of income. So, while many investors struggle to understand the appeal of movements such as Modern Monetary Theory, ‘the left’ might actually have history on its side.” Related: Does America need to be made great again? ANDREA RIQUIER Andrea Riquier reports on housing and banking from MarketWatch's New York newsroom. Follow her on Twitter @ARiquier. WE WANT TO HEAR FROM YOU Join the conversation COMMENT Related Topics U.S. Stocks Markets Investing QUOTE REFERENCES AMZN +11.12 +0.64% GOOG +12.49 +0.94% MOST POPULAR This teenager was making $4,000 a month reposting memes on Instagram — until he got purged I’m 56 and unemployed, but have $100,000 to live off until I find a job.

Where should I put this money? I’ll retire at 62 with $1.2 million and want to live in an affordable, safe place near the beach — where should I look? We get $2,470 a month from Social Security and want a warm, friendly city near the ocean. Where should we retire? CNBC’s Cramer says U.S. ‘can walk away from the table’ in China trade talks after jobs report COMMUNITY GUIDELINES • FAQS Conversation(267) Sort byNewest Add a comment... America grew immensely from 1870 to 1900. I don’t see the parallels. Long Depression? Then how to reconcile real growth with such a dismal view? ...See more Reply Share 1 Like No way. For we have learned the big secret. We can borrow our way to perpetual prosperity. So lets have another tax cut for the ridiculously rich which does not "trickle down" and everything will be alright, because the Fed can just print more money. Reply Share 2 Likes Agreed! As mentioned before, the next Q.E. should be QE4the People.

Quite buoying the banks and start supporting money velocity directly to those who would circulate it best. Reply Share American consumers and workers are enjoying record wealth with fastest wage growth in decades for middle class and recent lower taxation. Consumer is strongest in decades. American economic strength dominates the global scene. China experiencing weakest growth in 30 years, if you can believe their propaganda and supply chain losses to SE Asia and India. My money will stay fully invested in USA! SP 500 will break 4000 a few years after Trump wins next fall! Reply Share 5 Likes It's because of record employment and wages there is a stagnation in corporate profits. They have been going down in real terms since 2012 and even faster as a percent of GDP. TFP growth has been flat for a long time.

Reply Share 1 Like Show 1 more replies Income inequality and wealth transfer...depression. again. Too cheap of money does this. Reply Share 3 Likes I doubt it. Reply Share You just can't make a break from this story can you ? ... Let it go, it's time ...Cheers Reply Share The reason why productivity has gone to hell is because everyone is playing on their phones rather than working. Reply Share 9 Likes No the reason everything is going to hell is because of irresponsible economic, monetary, and fiscal policies of our government from the last 4 decades. Reply Share 2 Likes New Gen Millennial's ... :) ... Easy to look qualified in all aspects over wasted unrealistic simple words.... Cheers Reply Share 2 Likes "Are we in for a repeat of the ‘Long Depression’?" Where do they find these people? What planet are they from? Reply Share 15 Likes So just why is it that you think this can’t happen again? Reply Share 3 Likes Show 2 more replies It's because of idiots like these, we get richer by buying when the market goes down. Reply Share 3 Likes "Never was so much extorted by so few from so many" As an example: Last Year the Pfizer CEO got a 61% raise to $27.9 million, for making cronies, disguised as shareholders much richer! In a 3-week span, the company hiked 116 drug prices as much as 9.46 percent (see ARSTECHNICA.COM 2018). Why ? Because they could get away with it!

All ethical considerations are thrown overboard to make the already very rich, still richer, with pure greed as only motivation! That healthcare, already an almost impossible to pay for luxury, becomes still more non affordable for many more is a detail! Americans accept their deep misery. Because they continue to believe in the "American Dream", now only possible for ever less fortunates. Because they continue to believe in "Capitalism" and are blind to reality. What once was a doctrine working for many Americans, has been perverted by a ruthless elite into a tool to usurpate and to rob them, and to transform it in a system to enslave as many people as possible. Americans, having honored Thanksgiving! Remember how Your forefathers left their countries to flee oppression and exploitation by the elites there. Will You allow other elites in the U.S. to highjack Your future? Awake to reality and use Your democratic powers to curb the actual evil evolution and harness the demons of capitalism as it is now, to make the return to a form of capitalism that again will function for all Americans possible! AWAKE from the non American nightmare! Reply Share 18 Likes Show 1 previous replies People like you would do well to look at the fact that Americans are doing better and have more than ever before. Focusing instead on what someone else has, like Bill Gates or someone else who invented, made, risked for their companies, is nothing more than jealousy. Reply Share 2 Likes Show 1 more replies Man whatchya smokin.... Reply Share 5 Likes I am shocked that the Midwest and South, who hold us all back in 2019, were doing the same thing in the 1800s.