Parallelism of the Great Depression to the Present Economic Situation - Essay Example

Running Head: Historical Analogy Historical Analogy Historical Analogy The paper is aimed to present an analogy of the different events in history. One of the most discussed events in the 20th century is the Great Depression. The period of Great Depression can be considered as one of the most economically devastating event in history. It had presented lessons on the society and economy that can help in facing subsequent similar events. The focus of the study is to specifically present the parallelism of the Great Depression to the present economic situation referred to as the economic meltdown. The Great Depression is similar to the global economic meltdown of 2008 to 2009 on the basis of different points which will be discussed in the paper. The Great Depression The Great Depression is an economic event that began in 1928 in Germany and in 1929 in the United States that resulted in economic hardship, degrading changes in political systems and even sparked the World War II according to certain groups. The said event can be related to the policies implemented by the governments of Germany and United States (Temin, 1991, p.42). One point presented is the access to credit. This resulted to tightness of credit from 1920-1930 in Europe which can be related to the collapse of production and the prices during the early period of Depression (Temin, 1991, p.42). The financial meltdown due to global current account imbalances based on due to trade balances intensified by other factors can be considered as the main reasons for the Great Depression (Lehmann and Lehmann, 2010, p.101). Aside from the factors related to credit, production and prices of products, there are key events related to the Depression. The first event was the stock-market crash in New York. Other three other events were the Smoot-Hawley tariff in 1930, the first baking crisis of Friedman and Schwartz and the collapse of the commodity prices. Based on these events, the Great Depression can be significantly related to the dynamics in the economy of the United States (Temin, 1991, p.43). By analyzing the different events on the basis of the dynamics of the stock-market, there are numerous events that can be compared to the Great Depression but none of them resulted to the said economic catastrophe. The stock market changed but the income generation had not been achieved. The global economic meltdown can be considered very similar to the Great Depressions in numerous aspects. The Global Economic Meltdown The global economic meltdown can be compared to the Great Depression in certain points. The said event that occurred between 2008 and 2009 was based on defective monetary policy. The economic meltdown can be considered as the problem faced by the modern world which originated in the economic system of the United States specifically the collapse of the banking systems and the large financial institutions. This resulted to a collapse of the world trade that is “globally-synchronized” decrease in demand. This affected the trading systems specifically the import and export. The main result is the surplus and deficit in the economy (Baldwin 47) This is similar to the event that occurred in the Great Depression in terms of credits. This can be attributed to the fact that countries usually implement policies in the economy that cannot be considered sustainable on the basis of different aspects. Thus, after a while debt accumulates and inflation becomes uncontrollable. This happened in the global economic meltdown, an event that is similar to what happened during the Great Depression (Lehmann and Lehmann, 2010, p.101). The production and consumption dynamics is also another point that can be considered similar to that of the Great Depression. During that time, the instability of the different economic factors synergistically caused the unstable interactions between the producers and the consumers. This is very similar to the global economic meltdown. Countries such as China produce significantly large volume of goods and lead to over production which can lead to more economic problems (Lehmann and Lehmann, 2010). Another similarity of the global economic meltdown with the Great Depression is the ceasing of banks, financial institutions and businesses. This can be related to the problems and issues on credit systems. In the United States, credit had taken over the economy, thus, it had been compared to a financial system that is working on fantasy (Baldwin, 2009; Lehmann and Lehmann, 2010; Temin, 1991). Due to the need to sell products, credits were granted. This created a problem since monetary movement had been replaced by purchases made through the use of credits. Although the process was more modern than what had occurred during the Great Depression, the repercussions were similar. An economic vacuum was created (Badwin, 2009; Lehmann and Lehmann, 2010; Temin, 1991). There are other factors that can be considered similar between the Great Depression and the modern global economic meltdown. Although the latter can be considered less massive in scale based on certain factors, these similarities can lead to the observation that the global economic meltdown can worsen and lead to an even similar to the Great Depression (Baldwin, 2009; Lehmann and Lehmann, 2010; Temin, 1991). Discussion Based on the gathered data between the two events, the Great Depression and the global economic meltdown, it can be considered that there is a possibility that the Great Depression can be repeated. This is based on the parallelism of the events and the indicators that can be observed. According to the observations of certain groups, all the factors that had been present prior to the Great Depression can be observed in the events surrounding the global economic meltdown. On the other hand, others were expressing the significant difference in the situations and events leading to the global economic meltdown. Aside from the lessons of the Great Depression, the time in history is another factor with significant effect on the global economic meltdown. This can be attributed to the difference on the political, social and technological aspects. The Great Depression led to World War II, and presently there are conflicts and factions all over the world related to economy, specifically fuel sources – required in running the international process in every aspects. Based on the said analogy, the probability of an event as destructive as the Great Depression, can be perceived. Conclusion The Great Depression is an event in the world history that can be considered parallel to the global economic meltdown on the basis of the factors and indicators observed. The Great Depression marked a devastating footprint in history. The global economic meltdown represents a danger of being a destructive event. It is also known as the worst financial and economic problem since the Great Depression which posts increasing danger on the different aspects of the international community. References Baldwin, R. (2009). The Great Trade Collapse: Causes, Consequences and Prospects. CEPR. Lehmann, F. and J.P. Lehmann (2010). Peace and Prosperity Through World Trade. Cambridge University Press. Temin, P. (1991). Lessons from the Great Depression. MIT Press. Read More