The Great Depression is one of the most significant periods in American history. This period of economic recession began in 1929 and continued for another ten years. Today we are in the midst of another economic recession, one that was triggered by the sub-prime mortgage crisis of 2008. The intensity and scale of the present recession is not as big as that of Great Depression, but the two events have quite a few similarities and differences.
The two events in discussion are similar in that they were the result of excessive greed on part of Corporate America. In the years leading up to the stock market collapse of 1929, the then President Calvin Coolidge had deregulated the corporate environment, thereby eliminating the necessary checks and balances required for accountability. This led to a free climb in stock prices purely based on financial speculation. In other words, the quoted stock prices were much higher than actual values. At that time in American history there was a large disparity in income distribution between the top and bottom quintiles of the population. All these factors culminated in initiating the period of great economic distress, retrospectively termed as the Great Depression.
One realizes that all of the aforementioned factors of the Great Depression, namely corporate greed, financial deregulation and disparity in income distribution are all contributing factors to the most recent crisis as well. As the case of the collapse of Lehman Brothers clearly illustrates, the unrealistic ambition of CEOs of large corporations is a major factor. For example, Richard Fuld, the Lehman Brothers CEO who took his company to bankruptcy had earned $350 million as compensation in the three years before the collapse. This figure is comparable to the money earned by Henry Ford, the founder of the Ford Motor Company in the three years leading up to the Great Depression. The deregulated economic environment of the Coolidge years is quite similar to the right-wing economic policies implemented by the Bush Administration during its 8 year tenure.
It seems remarkable that in spite of several episodes of recession in the last sixty years, the American legislatures have not been suitably amended to mitigate future recessions. Even under the new leadership of President Obama, no major changes have been made to change the policy framework. In fact, judging by the remedial measures taken, it seems that the stimulus and bailout packages offered by President Obama does not measure up to the New Deal initiatives taken by President Franklin Roosevelt in the aftermath of the Great Depression.