At present the United States undergoes the most serious economic crisis since thirties. It produces profound effects on the countrys industry, business, finance system and welfare of citizens. Scholars advance various theories about its causes and timelines. Some of them compare this recession to the Great Depression; they argue that these calamities have common origins, in particular the governments policy of non-interference into private business (Roberts, 2008, p 26). Thus, it is necessary to analyze existing evidence in order to prove or disprove this hypothesis.
First, recent crisis is closely intertwined with the so-called Housing Bubble. For a considerable period of time the prices on real estate were stable and relatively high. Real estate was the basis for the prosperity of American people because it could be used as a mortgage. But in 2007 the prices on unmovable property began to drop and now many banks find themselves on the brink of bankruptcy. Additionally, the purchasing power of American people weakens. They can no longer receive credits in the banks because their housing is now devaluated (Roberts, 2008, p 31). Of course, the government tries to stabilize the market but the aftermaths of the housing bubble are still noticeable.
Current recession may also be explained by economic policies of the state. For a very long time laisser-faire capitalism has been the most dominant economic policy (McConnell & Brue. 2005, p 338). The government does not interfere into the functioning of major companies that practice outsourcing and off-shoring of US-based jobs to other regions of the world, namely to the developing countries. Thus, a great number of employees are made redundant because their services are no longer necessary (Barrar, & Gervais, 2006. p 68). Their income diminishes and they have to cut down their expenses. Consequently many enterprises lose clients and they cannot find markets for their products. In fact, the situation reminds a closed circle. Major corporations want to reduce operation costs by outsourcing or off-shoring but at the same time there are consumers for their goods.
We may also draw parallels between this recession and the Great Depression because they have some features in common. In early thirties the countrys major manufactures could not find markets for their products, because vast majority of people could not afford them or did not need them. Economists define it as the crisis of overproduction that inevitably results in the loss of profits (Himmelberg, 2001, p 24). Additionally, during the time of the Great Depression the industry was dominated by large corporations as it is now. It should be mentioned that Franklin Roosevelt attempted to protect the economy of the United States from monopolization and he succeeded. Naturally, there are antimonopoly and anti-trust laws in the US legislation but it is much easier and cheaper to break them. Furthermore, scholars emphasize the impact of demographic explosion in the country. In early twenties and at the beginning of the twenty-first century there was a considerable increase in the population in the country (Shapner, 2007 p 27). The consequences of the Great Depression were much more severe: millions of people lived beyond the poverty line. But current recession has also worsened conditions of living to a great extent.
On the whole, comparative analysis of 2008 economic crisis and the Great Depression may be useful because it enables us to identify the root causes of those problems which American society experiences nowadays. Additionally, this discussion may help to develop strategies for coping with these problems.
Reference List
Barrar. P. Gervais. R (2006) Global outsourcing strategies: an international reference on effective outsourcing relationships. Gower Publishing, Ltd.
Himmelberg. R (2001). The Great Depression and the New Deal. Westport Greenwood Press.
McConnell. Brue S (2005). Economics: Principles, Problems, and Policies. McGraw-Hill Professional.
Roberts. L (2008). The Great Housing Bubble. Monterey Cypress LLC.
Shapner. S (2007). Demographics of the United States. Nova Publishers.