Jun 292010

Paul Krugman says we are now entering a 3rd depression.   We may indeed be entering one, but I question his counting method (to say nothing of his ideology).  Here‘s how he explains how he’s keeping score:

As far as I can tell, there were only two eras in economic history that were widely described as “depressions” at the time: the years of deflation and instability that followed the Panic of 1873 and the years of mass unemployment that followed the financial crisis of 1929-31.

What I question is why he didn’t include the depression of the 1890s in his count.    I don’t know if the word depression was used at the time, but people certainly realized they were in the middle of bad times that had begun with a panic in 1893,  just as a panic had resulted in a depression 20 years earlier. Surely Dr. Krugman has heard of Coxey’s army and the violent strikes of 1894.   The bad times were the subject of political debates at the time.   This depression is now considered the worst one prior to the 1930s.

I have a special interest in the 1890s depression because there is some family history about it.    My grandfather was just a kid then, but he used to tell me how his father, a small-town law enforcement officer, was charged with the duty of keeping hobos out of town.   There were a lot of homeless men riding the rails then, trying to pick up meals, odd jobs, and loose chickens wherever they could.    When I was little I would be surprised at how my grandfather, who I knew could ill afford it, would give away $5 to the traveling vagrant who would come into our yard and merely ask for it.  I remember asking for an explanation for such generosity, and that he had an answer, but I don’t remember what the answer was.  I do remember what he did and the tone of respect for the man who had asked.  Maybe it happened only one time that I knew of, but I got the idea that it would easily happen for any other hobo who asked.   I’ve since wondered if it had anything to do with the men his father, whom he greatly admired and with whom he was in conflict long after he was dead, would chase out of town in the 1890s.)

Come to think of it, I don’t know why Krugman didn’t count the depression of the late 1830s, either.    But if the word depression was only first used in the 1870s,  I don’t know why it wouldn’t have been used in the 1890s, too.

Maybe Krugman has an explanation but didn’t want to get bogged down with it in his article.   I’m just saying I’m not believing his scorekeeping without further evidence.