This Time It's Better (AKA 1936 and All That)

Generali

There seems to be a misconception, probably fuelled by hyperbolic newspaper stories, that the current situation is worse than it was in the 1930s, especially in the US. This is bunkum.

For example:

tomterm8 wrote: »

It's quite interesting watching what happened in America. They took away the safety net, and unemployment is at the highest it has ever been. There are more people on food stamps than ever before - more people depending on the state for a food hand out than ever did in the great depression. It has worked so well that there are more people who rely on charity simply to be able to eat than any civilised nation I know of...

This is incorrect in almost every way. US unemployment is a little over 9% now having peaked at 10.1% in October 2009.

In the 1930s it was above 15% most months. The current unemployment figures have been measured in a continuous series by the BLS using the CPS (too many TLAs, sorry!) since 1940. In 1940 the unemployment rate was 14.6%. In addition, female unemployment would barely have been measured in the 1940s.

The safety nets have been continuously extended (at least twice by the Federal Government, many more times by the states and counties). The rate of food stamp use is far less now than it was in 1939 when they were first introduced. That was a time when every estimate of 1930s unemployment I've ever seen was well below the peaks seen in the early-mid 30s (unemployment peaked at about 25% in 1932-3). It should also be remembered that until the mid-70s, food stamps had to be bought by all but the destitute, they weren't just handed out like they are today.

Food stamps are distributed pretty generously these days in the US. A family of 5 can receive food stamps if they have a gross monthly income of $2,687 (about £20,000 a year). Not great riches but hardly breadline, especially given that most of the US is a lot cheaper to live in than the UK.

michaels

All true but I guess a related question is whether the stricter rules in the US for receiving benefits actually keeps the claimant count down - surely this is the point in the context of the UK debate about benefits entitlement and a work-shy underclass.

Until recently it would seem that the US model was more successful at preventing long term and intergenerational unemployment than the European one but the latest recession really does seem to have been different - not because it is a finanacila/debt crisis rather than a business/inventory cycle but more likely because the housing aspect of the crisis has sharply reduced the geographical mobility the had historically seen Americans head 'North', 'West' and 'South' to where the jobs were.

Is this another example of political meddling in markets coming home to roost - Bill Clinton's great home owning democracy pushed those previously unable to get home loans on to the housing ladder but with the inevitable consequence that loan quality fell and the unexpected consequence that those who were previously renting and could have upped sticks and gone to look for jobs are now often trapped with underwater mortgages in areas with no jobs.

tomterm8

Ok, as I said in the Nice People thread...

I really wasn't intending to make a comparison with the 1930's, except for food stamps. In the 1930's GDP dropped by 50%, and the economic situation was so bad it effectively started a world war. People were starving in the streets (or, they would have been without substantial state aid, and charity). Doing better than the Hoover administration is, in my view, no measure of success.

Now, I don't understand, in an economy working effectively, why there should be any need for food stamps at all. The American economy has roughly doubled every ten years since world war II. To put this in perspective, almost everyone in america in 1945 was well fed, well clothed, and well housed. Population has roughly doubled over the period (maybe I am wrong on the point... haven't looked at the statistics, just doing it from memory. My point, though, is that the economy has grown much faster than the population), but national wealth is somewhere between 32 and 64 times greater than in 1945.

Now, you can quibble with the statistics, but America is far wealthier than it was in 1945... as is the UK...

So, what am I missing? Why is it possible for anyone to be so poor as not to be able to house or feed themselves without state aid?

Generali wrote: »

This is incorrect in almost every way. US unemployment is a little over 9% now having peaked at 10.1% in October 2009.

Are the unemployment statistics measured in the same way as in 1930?

purch

....and we have the Internet nowadays too :eek:

Generali

tomterm8 wrote: »

Ok, as I said in the Nice People thread...

I really wasn't intending to make a comparison with the 1930's, except for food stamps. In the 1930's GDP dropped by 50%, and the economic situation was so bad it effectively started a world war. People were starving in the streets (or, they would have been without substantial state aid, and charity). Doing better than the Hoover administration is, in my view, no measure of success.

Now, I don't understand, in an economy working effectively, why there should be any need for food stamps at all. The American economy has roughly doubled every ten years since world war II. To put this in perspective, almost everyone in america in 1945 was well fed, well clothed, and well housed. Population has roughly doubled over the period (maybe I am wrong on the point... haven't looked at the statistics), but national wealth is somewhere between 32 and 64 times greater than in 1945.

Now, you can quibble with the statistics, but America is far wealthier than it was in 1945... as is the UK...

So, what am I missing? Why is it possible for anyone to be so poor as not to be able to house or feed themselves without state aid?

Anyone who doesn't work and doesn't have savings is likely to need state assistance. Someone earning £20,000 a year probably doesn't need state assistance but gets it if they want it under the US system. Many Americans live at or beyond their means so don't have savings.

Incidentally, when the current system was devised under a bi-partisan agreement under the Clinton Presidency the point was to limit payments in the good times and extend them in the bad. That is exactly how it is working. I'm sure that there are plenty of examples of poor people falling through the net but in a country of 303,000,000 no policy is going to fit everyone perfectly and their treatment of illegal immigrants that need assistance is shameful IMHO. Generally the system seems to work pretty well.

tomterm8 wrote: »

Are the unemployment statistics measured in the same way as in 1930?

No. Unemployment stats weren't measured systematically before 1940 at which point the unemployment rate was about half as great again as today. Prior to that they have been estimated by a number of economic and social historians. The Journal of Economic History has a number of very interesting articles on this subject and is available in most academic libraries.

Here are probably the three most commonly cited (IME) estimates of unemployment rates in the US in the 1930s:



The continuous line is Lebergott's estimate. This has strengths but also weaknesses not least of which is that some classes of people employed in 'make work' schemes were counted as still unemployed.

The broken line shows Darby's estimated unemployment as a proportion of the civilian labour force (that is it excludes people in the military and on make-work schemes from the calculation entirely). This is likely to understate the proportion of unemployed. That can be seen by the fact that in 1940 it is about 2/3rds of the level of unemployment as estimated by the first official measure.

The higher estimate (the dotted line) is unemployment among private non-farm workers vs total private sector non-farm employees. This is more a measure of people that have worked but don't any longer than true unemployment but it too tells a story.

All these estimates show unemployment persistently above current levels in the 1930s.

It's worth noting BTW that neither in the UK or US do statisticians count every unemployed person as that would be massively expensive. They use sampling which in the UK is accurate to about the nearest 100,000 or so. Any change in UK unemployment of less than 100,000 is as likely to be noise as not. I don't know the level of accuracy for US unemployment but I could probably find out.

tomterm8

purch wrote: »

....and we have the Internet nowadays too :eek:

It is a pretty good point, Purch, the internet and communications networks we've developed in the last few years means we can run supply chains much more efficiently, so we can do more with less.

1984ReturnsForReal_2

In the 1930s did they have a welfare bill in the US?

tomterm8

1984ReturnsForReal wrote: »

In the 1930s did they have a welfare bill in the US?

They brought in the social security act in 1935, but even then the modern welfare schemes were introduced bit by bit, mainly during the 1950's.

As I understand it, the main welfare assistance during the great depression were make work schemes, and government food hand outs. Although, there were schemes at state level.

Generali

1984ReturnsForReal wrote: »

In the 1930s did they have a welfare bill in the US?

Of sorts. You got certain food items free if you bought food stamps. That served the twin purposes of propping up agricultural prices and providing cheap food.

The New Deal brought in social security and home construction to house the poor and homeless. Before that, there was a system of poor relief and charity based on local areas. It worked, AIUI, like poor relief in the UK prior to the New Poor Law that introduced workhouses in a systematic way to the UK.

dtsazza

tomterm8 wrote: »

Now, you can quibble with the statistics, but America is far wealthier than it was in 1945... as is the UK...

So, what am I missing? Why is it possible for anyone to be so poor as not to be able to house or feed themselves without state aid?

I suspect it's down to the inference of what "wealthier" means.

As I understand/use it, being wealthier means that you have the ability to consume more goods & services. Which by and large is true, as the real prices of almost everything have come down markedly, so on the same real wage you can buy more stuff.

However, this isn't true for houses/rent. As a multiple of income their price has increased (because there are more people, and we haven't really figured out how to produce land more efficiently). So while people are wealthier in general, they definitely aren't wealthier when it comes to housing themselves.


As for food - I don't know what the prices have done, but I suspect that food is actually cheaper than it used to be (even with recent increases). Any discrepancy here is likely due to not comparing like with like (for example, broader media coverage may make people that can't afford more visible, even if less numerous).

neverdespairgirl

tomterm8 wrote: »

Now, I don't understand, in an economy working effectively, why there should be any need for food stamps at all.

So, what am I missing? Why is it possible for anyone to be so poor as not to be able to house or feed themselves without state aid?

I don't quite get that. Would you say the same about the UK? Or any other country? That if the economy is working effectively, no-one at all would need income support, JSA, etc?

Food stamps, AIUI, is part of the social security system in the USA.