Opinion

Whyte: What the Great Depression can teach us about the Great Lockdown

A crowd of speculators gather in front of the New York Stock Exchange after the news of the Wall Street crash in October 1929. Keystone-France/Gamma-Keystone via Getty Images
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It makes sense to look at the Great Depression for guidance on managing the coronavirus pandemic. The parallels are obvious: the Depression, too, was a massive and complex global emergency, and the only one in modern history likely to compete with this one in terms of devastating social and economic consequences. It has much to teach us. Just don’t expect the lessons to be comforting.

In 2017, I published a biography of Herbert Hoover, America’s president (1929–1933) at the start of the Great Depression. What struck me most about his efforts to fight the crisis—efforts that were more vigorous and imaginative than popularly imagined—was the poor quality of information at his disposal.

Hoover knew he was in the midst of an economic crisis, but economists, in particular, could not form a consensus on what was happening and why. The one point on which most of them agreed after the 1929 stock market crash was that if a depression followed, it would be short and mild. Even when it turned out to be long and serious, there was no agreement on whether the U.S. was experiencing a routine downswing of its business cycle, an unprecedented global contraction or the collapse of the entire capitalist system. 

The economists weren’t idiots. They were dealing with unprecedented circumstances. The causes and consequences of the Great Depression are still being litigated by economists and historians today, almost a century later. As the financial crisis of 2008–2009 demonstrated, we are still inexpert at managing economic collapse despite the intervening years of study and practice.

So here’s our first caution: leaders are only as good as the information available to them. And here’s the second: complex phenomena are more complex than even experts can handle.

Ours is a health crisis rather than an economic one. We are looking to infectious-disease specialists for answers. Since the outbreak began, they have struggled to tell us how fast the virus would spread, how deadly it would be and how to treat it. We still don’t have complete answers to those questions. Epidemiology and economics are different disciplines, but don’t be surprised if airtight answers are a long time coming.

A related caution is that experts can be spectacularly wrong, as the economists were in ‘29. Many policymakers today are convinced that the economic downturn caused by our lockdown will be V-shaped. We’ll turn the lights back on when we’re ready and the economy will hum. All it will take, the head of the Bank of Canada said this past week, is for business and consumer confidence to hold up.

All it will take is for millions of unemployed workers and closed businesses to pick up where they left off before the lockdown. How quickly did business and consumer confidence bounce back after the 1929 crash? One of our best indicators of confidence is the stock market. The Dow Jones Industrial Average regained its 1929 peak in 1959, 30 years and a world war later.

Feeling confident?

Here’s perhaps the most important caution: It took generations for economists to understand the crucial role the gold standard played in transmitting economic pain around the globe in the ‘30s. We now know that if there was one thing Hoover could have done to fix the Depression, it would have been to take America off of gold. The trouble was that every credible economic expert, everyone on Wall Street and Hoover himself believed that maintenance of the gold standard was the key to recovery. Only cranks wanted to abandon gold.

The challenge this poses is profound: we can be wrong on the things we are most certain about.

At the moment, the world is convinced that a lockdown—some combination of stay-at-home orders and social distancing—is the surest route to salvation from coronavirus. Almost every major country is doing it. We may be right. Lockdowns may work, and the economy might wait. But it would be foolish to think we can’t be wrong, and it would be foolish not to investigate alternatives.

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Kenneth Whyte is the author of Hoover: An Extraordinary Life in Extraordinary Times (Knopf), a finalist for the National Book Critics Circle Award, and The Uncrowned King: The Sensational Rise of William Randolph Hearst. He is the former editor-in-chief of Saturday Night, the founding editor of National Post and the former editor and publisher of Maclean’s. He is also the founder of Sutherland House Books, a non-fiction publishing house, and writes SHuSH, a newsletter about books and publishing.