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  • Cited by 3
  • Print publication year: 2006
  • Online publication date: January 2010

8 - The 1920s and the 1990s in mutual reflection


“The Great Depression of 1929 to 1940 in the United States was the greatest event in the history of business cycles. It devastated rich and poor alike. It destroyed wealth in the billions, tossed one-quarter of the 1929 labor force onto the shoals of unemployment, evaporated the hopes and aspirations of millions, left a majority of American families near destitution for a full decade in an event that was totally unnecessary, because properly applied monetary and fiscal policy could have cured the recession in 1930/31, not a decade later in 1941.”


The similarities in American economic performance between the decades of the 1920s and 1990s are tantalizing. Particularly when 1919 is aligned with 1990 and 1929 is aligned with 2000, the evolution of many key macro-variables over the intervening decade match remarkably closely. Growth in real GDP, real GDP per capita, employment, and productivity were almost identical, the conventionally measured unemployment rate was identical in 1928 and 1999, inflation was negligible (1920s) or low (1990s), and the late 1920s stock market boom is the only such episode in the century that comes close to the stock market's ebullience in the late 1990s. Like the 1990s, the 1920s witnessed prosperity, a productivity revival, low unemployment, and low inflation. Both decades featured an explosion of applications of a fundamental general-purpose technology, electricity and the internal combustion engine in the 1920s and computer hardware, software, and networking communications technology in the 1990s.

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