In the course of history, there have been numerous and regular economic crises. They have been called panics, crashes, recessions, and depressions, and some of them stand out historically.
A few periods of economic difficulty come immediately to mind: the Great Depression and the recent “Great Recession,” for instance. Others with broader knowledge of history might think of Japan’s “lost decade” or the “stagflation” of 1970s America.
Each of these is famous—or infamous, perhaps—for their duration or severity, or both.
But there are other economic crises that are not so well-known. Great Britain had a severe depression in 1825. In 1920-1921, the United States experienced a deep depression. The relatively well-known stock market crash of 1987, which was roughly comparable to the 1929 crash, had little effect on economic growth.
Both groupings are listed together for a reason: each has notable commonalities.
As for the former: Obviously the Great Depression is known for its length and severity, marking a decade in the dumps with almost uninterrupted double-digit unemployment. The recent “Great Recession” is known in large part because it just happened and for the accompanying housing crisis. Japan’s “lost decade” is notable because two different bubbles caused a double-dip recession. Lastly, the 1970s had an oil crisis, stagnant growth, and high inflation.
To many economic observers, these crises are significant because they came with—or were arguably caused and/or exacerbated by—broad, ambitious corrective programs by the state. The Great Depression’s remedy was the New Deal while the “Great Recession” led to TARP, stimulus, quantitative easing, as well as the political cover for a massive health care overhaul. Japan implemented three major stimulus packages, raised and then lowered interest rates (dramatically), and raised taxes. In the 1970s, the feds enacted price controls on consumer goods (most famously gasoline).
The latter group is relatively unknown in large part because each economy recovered at a reasonably quick pace, or it didn’t really need to, at all (1987 crash). Each had panic, but in each case, the state was relatively inactive. That is, the governments did practically nothing to head off each crisis. And this is why they are not well-known: after all, there were no slick-package programs to recall.
Likewise, restraint rarely bestows upon political leaders any sort of legacy; but bold action does. Even if that bold action creates additional problems that make conditions worse. Thus explains the tendency of politicians to do something—anything—at any sign of any sort of pain: they get rewarded for doing so. They can say, “When you struggled, I was there…I acted.” That’s a much easier sell to voters than, say, what Harding’s pitch about the 1920-1921 depression might have been: “When things went south, I stayed out of your way.”
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