carey_jim

Wrong Great Depression Lessons Will Haunt Equities in 2009

I'm still in the middle of my personal own analysis of our current economic problems but my first conclusions are more optimistic than yours.

We are now facing similar dislocations that were faced during the 1930s because of technological advances, and not only because of inevitable human folly and mismanagement.

In the thirties, such technological innovations as mass electrification of factories, refrigeration, the use of trucks for distribution of goods, telephone service for the entire country, radios for the entire population, the electrification and mechanization of farms (electric milking machines) and many other revolutionary technological devices made work much more efficient, depressing prices, and made large numbers of unskilled workers unnecessary.

People think that the 40 hour work week was a great social advance when it was established in the United States by the Roosevelt administration in 1938, but it was really a social and economic necessity because there was not enough work during the Great Depression and work had become much more efficient.

The 40 hour week was a way of allowing workers to continue working, 'part-time' without thinking of themselves as part-time workers.

When we remember that there were basically no fringe benefits (pensions, health care, vacations, etc.) attached to jobs in the 1930s, we can understand that there was no downside to reducing the work week from 60 hours (typically workers worked 10 hours a day six days a week) to 40. In fact, businesses welcomed the 40 hour work week because they could hire more people and have a happier work force.

It is interesting in this regard to remember that Roosevelt said that one of his great regrets was that he was unable to reduce the work week to four days instead of five.

I think we are facing the same kind of problems with our modern technological innovations which center around communications and the ending of the brick and mortar stage of doing business.

There will be dislocations but I don't think we need to be as pessimistic as you seem to be about solutions. I don't have time to explore some interesting solutions now but I'll do so in the future.

The bottom line for Seeking Alpha is that new investment opportunities (and vehicles) might arise in surprising places and some older ones might either die out completely or become highly unprofitable.