Economist Dr. Robert Higgs shed light on the current economic crisis to a packed Hepburn Auditorium on Tuesday October 24, comparing it to The Great Depression of the 1930s.
Higgs’ concept of regime uncertainty is the underlying theme of all economic downfalls, he said. When the government assumes previous bailout methods will work twice we find ourselves in our current conundrum.
Presidents George W. Bush and Barack Obama both turned to the strategies of Franklin Roosevelt’s New Deal in attempts to redeem our federal government from it’s downfall. Higgs said that government bail-outs are not new.
President Hebert Hoover who is notoriously known as the “do-nothing” president who let the Great Depression worsen under his presidency actually started the concept of government bailouts. It is our reliance on government bailouts that have created the slippery slope of dependence on funding that does not exist, according to Higgs.
One lead-up similarity between the Great Depression and our current economic crisis was the real estate and construction boom from 1921 to 1926 and then again from 2002-2006. In the early 1920s, the desire for suburbia and the exodus to vacation spots like Florida sparked the construction boom. Panic did not sit in until October of 1929 after real estate values failed to rise, which was the initial premise of real estate holding companies. This crash spiraled into increased tariffs and taxes for the American people who were already too poor to afford basic necessities.
Again in 2008 the mortgage crisis came about because of unrealistic guarantees from large corporations. We then have to rely on unrealistic, billion-dollar government bailouts when we have new infrastructure or homes that cannot be paid for, according to Higgs.
Despite current frustrations with the government bailouts, we have learned a lot from the mistakes of the Great Depression and Higgs said the conditions of the 1930s are nowhere near those of our current recession.
