2008 vs. 1974

Comparing the current economic environment to the early 1930s is dubious. In the 30s there was no social security, no unemployment, no food stamps and no subsidized housing. Federal, state and local government spending was not as a significant factor in the GDP as today. The government’s portion of the GDP helps to bring a more stabilizing factor and unless there is an absolute collapse of the economy we will not see unemployment go above 30% as happened in the 30s.

Since the establishment of social security and unemployment, our definition point should be 1974, the worse economic year since WWII. In 1974 gas shortages, dramatically increasing gas prices and out of control inflation sent the economy into a tailspin. Long lines formed at gas stations and businesses suspended production or closed all together. What happened that year caused the economy and businesses to restructure, and it brought on the collapse of Chrysler and the Chrysler loan guarantees to save the company.

How does 2008 compare to 1974?

S&P – in 1974 a 33% decline, 2008 a 37% decline
Corporate profits – 1974, 16 decline, 2008 a 18% decline
GDP – 1974 a 0.5% decline, 2008 a 1.1% increase
Personal income – 1974 a 0.2% decline, 2008 a 0.8% decline
Unemployment at year end – 1974 was 7.2%, 2008 was 7.2%
Charitable giving – 1974 a 5.4 decline, 2008 a 5.7% decline

On the whole, we are in a slightly worse position as in 1974. As the events of 1974 started to recast various elements of the economy, so too will 2008.