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'A Lot To Be Hopeful For': Crisis Seen As Historic, Not Another Great Depression


A lot of cash registers were quiet last month. Retail stores were closed and would-be shoppers stuck at home. As we try to predict what's ahead, a lot of forecasters have been digging deep into the history books, looking for a road map. Often they find themselves studying the 1930s.


UNIDENTIFIED PERSON #1: This morning, new numbers showing the worst unemployment rate since the Great Depression.

UNIDENTIFIED PERSON #2: A staggering number and the worst since the Great Depression.

UNIDENTIFIED PERSON #3: Worse than anything we have seen since the Great Depression.

GARCIA-NAVARRO: While unemployment and other distress signals are approaching Depression-era levels, here's the good news. Experts say there are important differences that should make this coronavirus downturn less damaging in the long run. NPR's Scott Horsley reports.

SCOTT HORSLEY, BYLINE: The pandemic has already taken a staggering toll, both in lives lost and jobs interrupted. But former Federal Reserve Chairman Ben Bernanke says this is not a rerun of the last century's financial calamity.


BEN BERNANKE: Clearly, people have made comparisons to the Great Depression. It's not a very good comparison.

HORSLEY: Bernanke, who is a student of the Great Depression, says that crisis was triggered by a financial meltdown and made worse by bad policy choices, including the decision to raise interest rates. What's more, as Bernanke told an audience at the Brookings Institution, the Depression dragged on for a dozen years. While he doesn't expect a rebound from our current crisis in the next six months or so, he doesn't see it stretching out indefinitely either.


BERNANKE: If all goes well, in a year or two, we should be in a substantially better position.

HORSLEY: That's supported by a different historical example from more than a decade before the Great Depression. After the flu pandemic of 1918, the U.S. economy bounced back relatively quickly.

CAROLA FRYDMAN: I think there is quite a lot to be hopeful for.

HORSLEY: Economic historian Carola Frydman of the Kellogg School of Management says the so-called Spanish flu pandemic killed 50 million people worldwide, including hundreds of thousands in the U.S.. It also prompted some of the same social distancing measures we've adopted against the coronavirus - with shuttered bars, schools and churches. Still, the economic damage was short-lived, and the U.S. enjoyed strong growth in the decade that followed. Frydman believes that could happen this time, as well.

FRYDMAN: As soon as people feel confident again interacting and being able to go about their business, I would not expect the economic fallout to last a lot longer than that.

HORSLEY: Of course, no one's certain how long it will take for people to feel comfortable shopping or traveling again and how many businesses and families might go under in the meantime. In 1918, Frydman says, government spending on the tail end of World War I helped make up for some of the lost private demand. No one's advocating another world war, but Fed Chairman Jerome Powell says the Federal Government might have to spend more than the trillions it's already shelled out to keep businesses and families afloat.


JEROME POWELL: Additional fiscal support could be costly but worth it if it helps avoid long-term damage and leaves us with a stronger recovery.

HORSLEY: Other government policies could hamper the recovery, including protectionism. President Trump has long been pushing for higher trade barriers. He told Fox Business this past week he's getting less resistance thanks to the pandemic.


PRESIDENT DONALD TRUMP: These stupid supply chains that are all over the world - we have a supply chain where they're made in all different parts of the world, and one little piece of the world goes bad, and the whole thing is messed up. I said, we shouldn't have supply chains. We should have them all in the United States.

HORSLEY: Here the Great Depression does offer a useful lesson. In the 1930s, the U.S. and other countries turned their backs on trade, adopting steep tariffs in an effort to prop up their Depression-scarred economies. Chad Bown of the Peterson Institute for International Economics says it backfired.

CHAD BOWN: And that, economists have come to believe, contributed to how long the Great Depression actually lasted. It made it very, very difficult for countries to grow their economies again and use trade to help them get there.

HORSLEY: Bown acknowledges protectionism is a natural reflex at a time like this, but he warns it's counterproductive. The coronavirus doesn't have to touch off another Great Depression, but with misguided policy, it could. Scott Horsley, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.