Global Crisis/Innovation Blog

1937 – 2011:  Does History Repeat Itself? 

 By Shlomo Maital 

   Santayana’s famous statement, those who forget history are doomed to repeat it, is generally untrue, because history rarely repeats itself, but rather finds new and creative ways to take its revenge on stupidity, greed, and amnesia. 

     Take for instance, the 2007-9 global crisis, which is now becoming the 2011-13 global crisis.  Why?

      In 1929 a stock market crash and then repeated crop failures signaled the onset of the Great Depression in America and then the world.  By 1936-7, the U.S. economy showed signs of recovering.  But in his New York Times column (International Herald Tribune, Sunday June 5), Paul Krugman quotes a Fed expert, who suggests America may be doing in 2011 what it did in 1937 – “pivot”, shift its attention away from the key issue, jobs and job creation, toward other issues.   When it did so, America’s economy again dipped into recession – one that ended only when World War II broke out and led to massive government spending. 

    In the same newspaper, a headline recounts, “US hiring brakes abruptly, stoking worries about recovery”.  In May, after months of job growth, unemployment rose to 9.1 per cent, and only 54,000 non-farm jobs were added, compared with the average of 220,000 in each of the previous three months. 

    The situation is even worse than the data suggest.  Many of those new jobs are low-paying Wal-Mart service jobs.  Very few are well-paying manufacturing jobs.  As we speak, the Fed is ending its quantitative easing program (buying bonds) and is under pressure to raise interest rates, like the European Central Bank.  Krugman says America has repeated a version of the 1937 mistake – withdrawing fiscal support too early and thus perpetuating high unemployment. And, he warns, it may get worse, with Republicans demanding more spending cuts.   The result is a very weak recovery that is rapidly losing steam – and as people realize it, the gloom this creates, and the panic, will make things worse.  Nor is there strong political leadership to take the helm and tell the people hard things.

     No, history does not repeat itself.  But it takes revenge on those who fail to learn from it.