"How Useful Are Comparisons of Present Debt Problems With the 1930s?"

My assignment for this Conference on the Crisis ln Finance, as I understand is, is in the first instance to bring to bear the debt experience of the Great Depression of 1929/1940. I summarize first the record as shown in a Twentieth Century Fund report, which I prepared in 1938 for the Fund's Committee on Debt Adjustment. This report already contained a good deal of hindsight, since it was written five years after the end of the recession of 1929/33. But the process of reconstruction is also relevant to present-day problems. In particular, the New Deal reforms in the debt field set the pattern of law and financial customs within which the forces of finance have been operating in recent decades. Parallels and contrasts between the debt situations of 1928/1930 and the 1988-90 are next examined. After some institutional analysis, quantitative examination of changes through time (1966/1989) is undertaken, using a set of tables [reproduced in the ANNEX] on the balance-sheet history of households and of non-financial corporations. In the light of all this experience, I make a quick excursion into the field of financial reform. It is not my business on this occasion to spell out the policy alternatives. But we must ask whether basic reform may not be needed to keep debt problems from plaguing us year after year- and also whether attempts at reform may themselves bring the crisis to a head! It turns out that the issue of reform in a crisis-context hinges on whether the United States can quickly set in motion a major new industry to act as an economic "locomotive". I claim that this is feasible- the "new industry" being restoration and restructuring of the U.S. infrastructure. To get it in motion calls for a revival of fiscal policy along radical new lines.