Sep 19 2011

Is the Financial Panic of 1893 “Eerily Similar” to Our Current Predicament?

Published by at 7:43 pm under Wave Guide 1: Economic Growth

This morning Real Clear Politics featured an important piece by Salena Zito of the Pittsburgh Tribune-Review on parallels between the great 1890s recession and our continuing economic problems.

According to Zito, Michael Genovese, a political science professor at Loyola Marymount University in Los Angeles, believes that the financial Panic of 1893 and the wave elections of 1884 to 1896 are “eerily similar” to the Panic of 2008 and the great recession that began in 2008.

Ironically, establishing a parallel between a disastrous 1890s recession and today would potentially be good news because of the story’s happy ending.

At the Chicago World’s Fair in 1893 — the year of the financial Panic — was Charles Ferris making an economic point with his first Wheel? For example, ‘Things that go around, come around…’
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in October, 2008, I noted the exceptional prosperity and ebullience that followed the great 1890s recession:

Although the Panic of 1893 began about 10 years before the opening of the 1903 Adm. Peary Maslow Window, the 1903-1913 decade featured exceptional ebullience, including the daring, world-famous races to both N. and S. poles, and construction of the greatest MEP of the last 200 years (until Apollo): the Panama Canal.

And on April 23 I felt something eerie going on too.

This political situation is eerily reminiscent of the Great 1890s Recession that followed the financial Panic of 1893, and the challenges of President Grover Cleveland.

As the issue of a “double-dip” ascends again, I noted in January, 2011:

Three years after the Panic of 1893 — about where we are now in January, 2011 relative to the Panic of 2008 — the second contraction of the 1890s Great double-dip Recession occurred. This may mean we’re either luckier or smarter than folks one century ago.

Or it may mean we’re not out of the woods yet.

According to Zito,

Both eras feature … fiercely competitive and highly partisan elections, an ineffectual and seemingly corrupt government, and an angry, disillusioned electorate.

Hugh Rockoff, an economist with Rutgers sees stronger parallels with the 1890s than the Great Depression.

I think the analogy between the 1890s and today is better than the analogy with the Great Depression … that we often focus on. One of the many similarities is the real estate crisis. There was a subprime mortgage problem in the 1890s that was very similar to what precipitated the recent crisis.

In any case, the U.S. continues to have one of the most technologically advanced workforces in the world, with the potential to move rapidly once the current self-inflicted barriers to action are removed.

It’s likely that during the next year or so the political realignment that began in 2008 will continue to set the stage for a renewed burst of economic and social dynamism by mid-decade.

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