The great crash of 1929 was a disaster.
But it wasn't really a humanitarian disaster. It was a status disaster.
During the 6 years after the great depression US life expectancy actually went up.
The reality was that, by 1929, America had a powerful transportation network, advanced food growing techniques, plenty of space, housing and natural resources. During the great depression a lot of people lost a lot of money, a lot of people had a lower quality of life, but very few, in America, were starving.
In 1989 the Japanese market lost almost half its value. It took almost 26 years for it to return to the same level. What changed in Japan after this historic crash?
Fewer extravagant parties. Less consumption. But otherwise, nothing. People still lived ridiculously long. Society stayed clean and safe. Transportation networks continued to grow.
How about the 2008 Global Recession? Same deal. Population health actually increased, even as our GDP dropped.
However there is one source of death that went up during all of the downturns highlighted above:
Suicide. Because the issue wasn't really losing money, it was losing status.
In the US, and most of the capitalistic world, the ability to earn an income plays prominently into status. Our view of ourselves and others is modulated largely by what we're getting paid. This is actually not a bad thing. If a lot of people pay me over an extended period of time, it's a pretty good sign I'm trustworthy and/or valuable. I probably deserve some status if people think I’m valuable enough to pay money to.
In this way money is really just status points that are exchanged and hoarded.
When you suddenly lose a lot of money and buying power due to an economic collapse, you lose a lot of status as well. If you can't live in the same house and own the same nice things, the societal measure of you, is lowered. This is obviously dumb, since your actual worth hasn’t changed, but seems like a natural and probably unavoidable result of capitalism.
One of the key features, from what I can tell, of a "developed" country is that the population can focus on efficient distribution of status instead of resources.
Before the 20th century in the US, when we were still “developing” there was a challenge in making sure that our resources were being used efficiently. There was a lot of capital and natural resources, but much of it was not being used or was used inefficiently. There was corruption, gangs, and other sources of waste.
This all was a big problem because the cost, in an absolute sense, to sustain a life, was pretty high. It took a lot more literal energy to grow food, power machines, move messages around etc. So when resources weren't used efficiently, people might die.
Technology and improved governance structures changed this. By the time the Great Depression hit it was cheap enough to sustain a life that, even when the output of the US dropped by 90%, we could still support everyone. The Great Depression, like all bubbles, was caused by inefficient allocation of resources, but even at our most inefficient, nobody starved.
Today, a depression should have even less of an effect. Thanks to technology, not only is food abundant for 90% of America regardless of income, but high quality entertainment and communication is as well. Americans across all income brackets spend 12 hours per day, on average, consuming some form of entertainment, for little to no cost.
So efficient allocation of resources is no longer really an existential issue in a developed country, or even a quality of life issue. And, as technology continues to improve, hopefully it will become less and less of an issue across the Global South, as well.
This means that, in "developed" countries, the market can go crazy, as is happening now in the US, with capital pouring into companies that are surely overvalued, and that's OK. We have more capital than we need, so inefficient allocation is fine.
Yet status distribution is still an issue. Inequity manifests even in abundance. We, as humans always want to experience growth in status relative to ourselves and others. It is an innate desire that is amplified by capitalism.
When automation replaces most of the jobs in the US, which seems likely in the next 50 years, everyone will likely still be able to do most of the things they did before. But we'll be super unhappy because we won't be accumulating status. Ditto if we experience a serious economic depression.
So how do we efficiently allocate status? How do we ensure that everyone, regardless of employment, knows they're valuable? There's no single fix— there will need to be cultural shifts, technological changes and improvements in governance.
One proposal, which seems promising to me, is a UBI funded entirely through deflation. Print a bunch of money, decreasing the value of the US dollar, and issue it to individual citizens simply for living. Those who have a lot of US dollars (wealthy folks and foreign countries) will be pissed, but that's probably OK. Again, focusing on the happiness of rich people and corporations makes sense when you are aspiring for efficient use of resources— when you want the market to be operating at full capacity. However, it's less important when you're so far past scarcity. Remember, even 100 years ago, when our unemployment rate was 25% the US was still able to avoid an increase in mortality.
Anyway, what do you think? How do we ensure equal distribution of status? Is that even an important issue? If not, how do we keep people happy when there are no jobs but plenty of livin to be lived?
Ep 61: Developing the Status Economy