It has been almost 80 years since we, as a country, have faced such a challenging economic environment. As history is prone to repeating itself, the causes of our current crisis share some similarities to the former. In the 1920’s banks and lenders, speculating that the market would continue to rise, knowingly lent money to investors for the purpose of purchasing stocks. This in turn kept rates low and pushed stock value higher, an odd and damaging version of the “house on sand” metaphor. Similarly, bankers fueled the current crisis by building on a foundation of weak credit, although this time, literally, for houses. By offering unsound amounts of credit to would-be real estate buyers, lenders created a situation that wreaked havoc upon our economy at the first signs of a downturn.
But while the Wall Street shot callers may have been ignoring lessons of past as they got us into this current era of economic distress, we can certainly can benefit from history’s insight as we try to cope with the after-effects. Challenge builds character, and the struggles of the Great Depression, from the personal to the collective, built a wealth of knowledge and understanding we can draw upon as we understand how to best survive. Beloved Chicago native and author, historian, actor, and broadcaster Studs Terkel lived through the Great Depression, and his sharp perspective yielded what I think to be some valuable insights into what living through the worst economic period in American history taught him.
The lessons of the Great Depression? Don’t blame yourself. Turn to others. Take part in the community. The big boys are not that bright…Hope dies last – ‘la esperanza muere ultima’ Without hope, you can’t make it. And so long as we have that hope, we’ll be okay. Once you become active helping others, you feel alive. You don’t feel, ‘It’s my fault’. You become a different person. And others are changed too.
Terkel, who lived a long, fruitful life, died last October, just as the current economic collapse was beginning to gain momentum. His words clearly still resonate though, perhaps more now than ever. By taking a closer look at Terkel’s lessons of the Great Depression, we see valuable parallels that, I think, offer some answers and insight into our own present struggles.
Don’t Blame Yourself (But Don’t Be Afraid of Self-Improvement)
First and foremost, “don’t blame yourself.” You certainly cannot blame yourself for the state of the economy and you had no control over the derivatives market or the auto industry. You only have control over your own life, income and expenses. You can’t blame yourself for the decrease in values in the housing markets or falling unemployment. If you have recently lost your job, are being foreclosed upon, or feel like your life is spinning out of control because of unmanageable debt, it is neither helpful nor fair to beat yourself up over it. There are many forces at work directly affecting your life that are out of your control.
But (and this is very important) this does not mean that you are incapable of having control over your finances. This is a challenging time, but is also an opportunity for self-improvement. To begin, you must ask yourself a few questions and be prepared to give honest answers. Have you used your credit wisely? Were you talked into “can’t-miss” deals that ended up failing? Did you make decisions based on an expanding economy that made no sense as the economy changed (as it always will)? It is important to examine what was done wrong and how to fix it going forward and assure that it doesn’t happen in the future. Being excessively hard on yourself can be harmful, but using tough times as an opportunity for self-improvement by critically examining your lifestyle and financial choices can be both helpful and necessary.
Turn to Your Community
“Turn to others. Take part in the community.” While this is good advice for all times, it is especially relevant and vital during times of economic hardship. For those struggling financially, remember that you are not alone. No one wants to admit they are having financial troubles, in fact more people than you think put on a happy face and fake it. Of course you don’t need to tell everyone your problems, but being part of the community means being open and willing to accept support. This makes it easier for friends, family and professionals to help you get back to where you want to be. Remember, businesses, social services, religion, and family can all be sources of support.
You Don’t Want to Follow the Jones’
Terkel next reminds us that, “the big boys are not that bright.” Anyone who has witnessed the collapse of AIG, Lehman Brothers, and dozens of other Wall Street investment houses knows that this certainly still rings true. One of the most interesting stories I heard was from Michael Lewis, the author of “Liar’s Poker: Rising Through the Wreckage on Wall Street”. He said that once the investment houses started turning these huge profits, even though they knew something was wrong, they couldn’t stop – because the investment house down the block or higher in the building was turning those kinds of profits. If you couldn’t give the returns the other boys were giving, your investors would go to them. In fact, money market managers were going to companies and demanding a certain return or threatening to cash in their investments, so companies started cooking the books, or insisting upon unrealistic profits without worrying about the day of reckoning.
So what does this say about us as individuals and what can we learn from this era of irresponsibility and unrealistic returns? For one, if it looks and sounds too good to be true, it most likely is. (This isn’t as easy as it sounds . Just look at how many really intelligent, sophisticated people Bernard Madoff was able to scam). Also, seriously consider making decisions based on what you need, not what your neighbor has. One of the most important lessons from this recession is that the Jones’ just might not be as well off as they appear to be on the surface. Base your financial decisions on what will be healthiest for you, not on what others are doing.
Hope Prevails Above All
“Hope dies last… Without hope you can’t make it. And so long as we have that hope, we’ll be okay.” Several people who lost their saving to Bernie Madoff committed suicide, and the housing market collapse has claimed at least two local real estate agents. While the emotional toll of losing a life’s worth of work or facing utter financial failure is certainly traumatizing, there is always, always hope. All clichés aside, hope is the basis for all progress, and improvement is only possible if you can manage to keep a strong faith in yourself and the possibility of better times. (Think Trump)
Look at your skill set and think creatively. More millionaires are created during a bad economy than at any other time. Surround yourself with the people who support you and help you with solutions. And don’t dismiss people who are not telling you what you want to hear. Make sure you are open to listening to ideas that are outside of your comfort zone – and explore them.
The Need for a Strong Foundation
By almost every standard possible, the Great Depression dwarfs the struggles our nation currently faces. Our parents and grandparents survived though, and with the values and lessons of the past fresh in their minds they ushered in one of the most fruitful eras in American history. Both individually and collectively, we possess the potential to come out of these challenging times stronger than ever, but we have to apply the lessons of the past and learn from our mistakes in order to build a strong foundation.
© Copyright Erica Crohn Minchella, 2009
