Why You Just Can't Compare The Great Recession to The Great Depression
Economists first named a period of time the Great Depression in 1893. In 1933 they changed their minds.
Throughout modern economic history, the business cycle has experienced an abnormally severe downturn about every 75 years -- roughly once per generation. In 2007, it was the current generation's turn. It's in this context, with a multi-generational perspective, that we can recognize just how much worse the economy could be.
They psychology of business leaders
Today's economy is sluggish, but more significantly it feels sluggish in the minds of business leaders and decision makers. The recovery has been a long, grinding, fight just to stay above water. GDP growth is advancing painstakingly slow. The unemployment rate is frustratingly high. Cash flow remains tight for many businesses and families. It's been this way for more than five years. It feels like it will never end.
This is the reality, the backdrop, against which business leaders are making decisions. Decisions that have the potential to create the self-reinforcing growth we need.
The economy, like it or not, is a very sensitive animal. It feeds off of the psychology of businesses and individuals. The danger for businesses today is failure to act in the face of today's adversity, be it for fear or pessimism or shortsightedness. The economy needs a collective dose of optimism.
It's too easy to miss that the economy is, in fact, growing. The industries most affected by the crisis and recession are slowly but surely getting back on their feet. There are rays of hope peeping over the horizon. Today's struggle is, by historical standards, ephemeral.
That's right, the American economy and the American people have been through worse and come out stronger for it.
Today corporations are sitting on trillions of dollars of cash. This is money that could be deployed for the future -- money to renovate facilities or machinery, to enhance processes and operations, to train employees and better productivity. This is cash that can fuel GDP and the labor market. What's holding it back? The psychological impact of five years of a painfully slow and fragile recovery.
In the video below, I will walk you through a comparison of the economy today versus what it was like the last time we experienced a once-in-a-generation downturn. To me, this is cause for optimism.
The U.S. is not out of the woods just yet, but I remain confident for the long term. I hope business leaders will be as well.
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