Report from the Front Lines

Like more and more people nowadays, I am constantly on the prowl for insights and first-hand reports that might add to or refine my sense of what to expect as the economy continues to unravel. In "Hanging On, or How to Get Through a Depression and Enjoy Life," Charles Smith, author of Weblogs & New Media: Marketing in Crisis and publisher of the Of Two Minds blog, points us to a fascinating account of life during the 1930s, courtesy of one of his regular visitors.

The Great Depression of the 1930s did not just affect financiers and farmers; it also gutted the middle class. It is instructive to ponder first-hand accounts of that era of "hanging on."

Knowledgeable correspondent M.B. recently forwarded an extremely timely and cogent essay on a first-hand account of the Great Depression from the point of view of a once-middle class family.

Before we get to that: I have finally plowed through the voluminous and exciting correspondence received in February, and have posted 12 thought-provoking readers' comments on everything from pimping the War on Drugs to narco-dollars for beginners to the Sierra snow surveys: reader comments 3/3/09. (There is also a very wonderful poem from Verona Y., "Arctic Terns," in the updated Readers Journal.)

M.B.'s essay Hanging On, or How to Get Through a Depression and Enjoy Life covers a book of the same title by Edmund G. Love: Hanging On, Or, How to Get Through a Depression and Enjoy Life (out of print but available used).

Here are the first few paragraphs of the essay; I think you'll find the entire piece most informative and even provocative in light of the global Depressionw e are now entering:

Though there are many short accounts and (e.g., Studs Terkel's Hard Times), novels (e.g., Grapes of Wrath), movies and historical analyses of how various populations (e.g., migrant workers, Okies, etc.), I’ve seen few interesting, in-depth accounts of how middle class and upper middle class Americans in particular experienced the 1930s depression.

So Edmund G. Love’s 1972 autobiographical novel, Hanging On, Or, How to Get Through a Depression and Enjoy Life was particularly intriguing to me when I found it at a local used bookstore, and his story struck me as an especially timely one given current events. Though the book certainly includes much more then just the depression, relating, for instance, the author’s college experience, it is in large part a discussion of how nation's economic circumstances impacted the author and his friends and family and how they responded to these challenges.

(Love published several other books including Subways are for Sleeping and The Situation in Flushing. Some of these titles are currently sold by the Wayne State University Press. Others titles do not appear to be sold currently but are available used on Amazon. Hanging On was originally published by William Morrow & Company, NY, and was reprinted in 1988 by Great Lakes Books, the imprint of Wayne State University Press.)

Certainly there are many differences, in ways both good and bad, between the 1930s and today, a point made by numerous bloggers and many others in recent weeks and months. Still, even given these differences I believe there are good general lessons which can be learned from how others have dealt with severe economic challenges and dislocations, both in our own nation and elsewhere in the world (e.g., Iceland, pre-collapse Soviet Union, Argentina).

Background

Love, a resident at the time of Flint, MI, a city then of 156,000 people, was young, college aged (he turned 17 in 1929) and upper middle class. At least in theory, the author's father, who owned a coal and lumberyard, was worth $1 million though the author notes that he later realized "[m]ost of his fortune was on paper and mighty flimsy paper at that" (p. 13). (One million dollars in 1930 was equivalent to about 10 million in 2007 depending on how computes this value e.g., based on the consumer price index, gross domestic product or relative purchasing power. See the historical value calculators.

The author's family had a nice house, housekeeper and maid and several cars. Love notes that his family and most of his neighbors had moved to Flint from more rural areas of Michigan in the past decade to work in trades such as plumbing or in the city's auto industry. Housing boomed -- according to the author his father's lumberyard had 20 or 30 contractors as clients in the late 20s (96)—and with the housing industry so too did sales for many other goods, such as (what were then) new types of household appliances including electric refrigerators, toasters and radios. "Prosperity touched everyone. It was a poor man who couldn't make money in Flint," writes the author.

For instance, Love notes that some of his friends families had second homes and he himself received a new car for his 18th birthday.

Denial

One of the undercurrents of this book, in my view, was how long it took the author and many others to realize just how drastically their circumstances had changed and that the depression was not going away anytime soon. Though Love notes that some historians later would divide the depression into different phases (depression, recovery), for him there was little to distinguish these years and when the depression finally did end, it did so fairly suddenly.

As the author explains, the depression, at least at its worst, did not happen overnight and the author was not greatly impacted in the early stages. For instance, in September 1929 between graduating high school and starting college the author attended a military school in Missouri for a year. He notes that between semesters some classmates could not afford to return. His father lost most of his money in the Oct 1929 crash, ended up in debt, had to mortgage the lumberyard and came close to bankruptcy (46). However, the author, away at military school was largely unaware of this. Several of the authors' friends fathers also had lost big in the stock market and many people were worried about slow 1930 model car sales.

His family and others families started to cut spending (47). Still, though people were careful, they were still largely optimistic at that time hoping "[t]hings would be better in the spring when people started building houses again. The situation was only temporary" (48).

By June 1930, with the depression 8 months old, "[t]he panic had subsided and the wreckage had been cleared away. Most people could look about them and see just about where they stood." Though the spring had passed "[t]here was an air of puzzlement but the optimism was there, too" with many still expressing the belief that " 'prosperity is just around the corner.’ "

As the author explains (48-49) this idea: "would be repeated and repeated. When the fall had some and gone, people talked about the upturn that would come the next spring. The next spring people would say that the upturn would come in the summer, and so on. The thing is that people really believed this. They had a blind faith in it, and because they did, they set up a pattern of living called 'hanging on.’

If you were in a business, you kept the business going any way you could until the upturn came and things got better. If you had a job, you hung onto it any way you could. You took less money and worked longer hours. Sooner or later things would return to normal. If you were laid off from your job, you hung around close by, so that you'd be able to go back to work[…] This was where the optimism came in. No one that I knew ever thought things would stay bad forever. The silver lining was there somewhere, and it was bound to turn up."

From the author's perspective and observation, 1930 was bad only in comparison to 1929. People felt pessimistic because most certainly were worse off than they had been a year ago. The author's father, who employed 25 people, still had enough business in 1930 to keep 12 coal trucks going and was able to give the author a summer job without displacing anyone. However, the author does note that when people left (e.g., to join the military or get married) they were not replaced. In Flint and elsewhere people still were living off accumulated savings and the auto companies, preparing for the 1931 model year, still offered solid employment. The author's fathers’ lumberyard still had coal and lumber stocks and could both sell and purchase on credit. For instance, many people purchased their winter coal supply that year on credit.

The author and his family were able to save enough to afford the author's first semester at the University of Michigan in the Fall of 1930 where he enrolled as a sophomore (after the one year at the military academy). The college still was "closer in spirit to the twenties than it was to the thirties" since the "real pinch" of the depression had yet to be felt.

But by Labor Day (Sept. 1930) the nation started to experience the "real depths" of the depression. The author's father started to get calls from his creditors and customers no longer were paying their accounts. By this time, "[t]he fat on which people had been living all summer was gone.” It was at this point, as 1931 model car sales ground to a halt, that mass layoffs began in Flint's auto factories (76) Prices dropped (e.g., 8 gallons of gas selling for $1, cigarettes for 10 cents a pack). Prices for the coal sold by his father's lumberyard also dropped but, unfortunately, their costs for purchasing this coal did not. Businesses in Flint not selling necessities- clothing stores, furniture stores - started to close down and were boarded up. His father had to start dismissing employees because he could not afford to pay his bills since his customers could no longer pay theirs. Coal deliveries to the lumberyard had to be paid upfront in cash or the suppliers would take the shipment back. "It was a grim and desperate time,” the author writes.

Please go to Hanging On, or How to Get Through a Depression and Enjoy Life to read the rest of the essay.

Comments

[Aaron from NJ]

We have had a massive loss of asset prices $25-50 trillion so far & wealth deflation effect that could take 10 years to rebuild asset prices world wide. This would overtake any policy responses we have at a national level as global current accounts fall/prices fall & assets fall it becomes a negative feedback loop.

The fall in assets across the globe is a very underreported story. My estimates are that US has lost $25 trillion in assets (Homes- $8T, Equities 12T, Corporate debt/plant & stock $5T)

We have another $10T at risk in the next year in the US. The EU has just started losing on the US scale. BRIC & Japan & rest of G20 is also falling. We could lose $50-75Trillion total during the 2007-11 period. That is massive wealth loss that could take a decade or more to reflate & have strong global GDP growth.

I think we need to start talking about the plan Z scenario. Where we get G20 central banks, finance min, political leaders & top 100 bank leaders to get a monster $50 Trillion plan ready. This is our insurance policy. When we look at the available capital between Private Equity/Hedge/sovereign wealth funds thats $5-10Trillion. G20 National budgets US/Japan/China/EU could add $5trillion. G20 Central banks could have $10 trillion added to their balance sheets. Global 10000 corporates have $2Trillion+ in working capital/cash. The G20 banks have $20 trillion in deposits

together we could coordinate the reflation of global balance sheets. If we had Plan Z ready and kicked it into action with a global weekly coordination on Friday & a media communications blitz over a year we would drive confidence and drive demand IS-LM style and get price levels stable.

If we don't start discussing this at a global level this could overtake any other policy responses we have.

[Jack]

No...I vote for meltdown (i.e. Financial Armageddon).
Having had my living standard continuously reduced since the Reagan years, having never been able to realistically afford a house anywher near coastal california (where I grew up)...NO, hell no!

Let's stop this corruption, this unsustainable farce, this rigged game of the financial elites, this system wide corruption.

I'm willing to let it all to go down the toilet and I prefer to take my chances in the re construction.

[scottt]

I'm with Jack here. Flush this crap , cuz its stinking up the whole joint .

I dont think that our dire circumstances have sunk in for the upper middle class or the majority of the midle class cuz they still watch cnn and fox etc .
They plug themselves in daily
to upgrade their 'faith and confidence ' programming .

So they dont get much of a view to reality unless it smacks them in the face in a very personal way .
Even then , it will
just be another 'personal experience ' cuz we've become so specialized and self-concentrated in our
consciousness of the world
that its impossible for most ppl to have a big picture perspective . Or somethin like that .

[mistah charley, ph.d.]

A 2008 movie aimed primarily at children that gives an idea of the experience of the Great Depression (in a way suitable for children, but potentially instructive to adults with only a vague historical consciousness - i.e. the great majority) is "Kit Kittredge: An American Girl"

http://www.imdb.com/title/tt0846308/

Spouse and self enjoyed it quite a bit - we rented it for a dollar from a "redbox" dvd vending machine

[garberpog]

There's also Russell Baker's memoir, "Growing Up." Informative and of course often funny.