NPR had a story recently on the plight of the workers taking the immediate hit and the general economy that gets hit right along with them. Are furloughs a way for states to staunch the bleeding? Are they effective? Maybe not. Interestingly, two of the academics interviewed (John Sullivan – SFSU and David Levine – UC Berkeley ) are themselves being furlough: faculty from both the University of California and the California State University systems have been furloughed.

I’ll post here how I’m coping. I still believe (despite the silence of the blog) that we are experiencing an experience much like our grandparents did. It is relative: we don’t have the soup lines. But then again, we do have the soup kitchens who are suffering from the effects of the recession even more than the rest of us. For those angels live on the “leftovers” (sometimes literally) of those who are doing well, or well enough. What happens when that bedrock of support collapses? The support for the supporters is diminished.

I don’t want to push the Great Depression analogy too far, but what’s surprising when you go back to primary sources from 1930 is the optimism.  I don’t mean to imply that everyone thinks things are just swell.  But while you know that they are facing the worst economic decade of the twentieth century, they don’t.  They’re expecting something more like the recession that followed World War I.  People are cutting back, but they’re still spending, particularly because companies are slashing prices to move inventory.  It was the long grind of the years that followed, and the catastrophe of the second banking crisis, that scarred them permanently.  And this shows up in the economics stats and the stock market, which did not, as we like to imagine, simply decline in a straight line.

Harvard Economic professor Robert Barro on lessons from the Great Depression. He’s interviewed by the website, The Browser.

B: I thought that the Great Depression was the ultimate cautionary tale on the dangers of protectionism. That’s not the case?

RB: No I think what is much clearer is the role of the financial system and the credit implosion, both in the 1930s and today. The rest of the stuff may just be a sideshow, it may not be that important. There’s a strong tendency for the economy to recover on its own, as long as it’s not subject to further new shocks, so a likely scenario is that that is what will happen today as well. And then the Obama administration will say that it’s because of our policy that things recovered, and there won’t be any way to prove whether that’s right or wrong.

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The inescapable bad news is that a serious recession is inevitable given the damage to the financial sector and the degree to which business and the public have been traumatized. But this does not mean we must spiral to depths rivaling the ’30s. The risks are there, all right, in unexploded financial land mines (those toxic assets) and the unprecedented debt of American families and businesses, though so far, we’ve avoided some of the mistakes of 1929. But much more must be done.

“It’s huge,” said Martha Olney, an economics professor at the University of California, Berkeley, who specializes in the Great Depression, consumerism and indebtedness. The rapid reversal is even more remarkable, she said, because in recessions consumers usually save less money. Not this time. “It implies a re-emergence of thrift as a value,” she said.