Perspective
Conn Carroll /
Yes financial markets are in turmoil right now. But as Dr. Mark Perry of Carpe Diem reminds us, the last 30 years has witnessed an unprecedented gain in U.S. household net worth that is not fundamentally threatened:
According to the Federal Reserve, U.S. household net worth fell by $2 trillion over the last year, from $58 trillion in the second quarter of 2007 to about $56 trillion in the second quarter of 2008 (see chart above). But compared to 2002, U.S. household net worth has increased by almost $17 trillion (from $39.2 trillion to $56 trillion), or by almost 43% in the last six years.
University of Chicago economics professor Gary Becker writes:
Is this the final “Crisis of Global Capitalism”- to borrow the title of a book by George Soros written shortly after the Asian financial crisis of 1997-98? The crisis that kills capitalism has been said to happen during every major recession and financial crisis ever since Karl Marx prophesized the collapse of capitalism in the middle of the 19th century. Although I admit to having greatly underestimated the severity of this financial crisis, I am confident that sizable world economic growth will resume under a mainly capitalist world economy. Consider, for example, that in the decade after Soros’ and others predictions of the collapse of global capitalism following the Asian crisis in the 1990s, both world GDP and world trade experienced unprecedented growth. The South Korean economy, for example, was pummeled during that crisis, but has had significant economic growth ever since. I expect robust world economic growth to resume once we are over the current severe financial difficulties.
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Although it is the most severe financial crisis since the Great Depression of the 1930s, it is a far far smaller crisis, especially in terms of the effects on output and employment. The United States had about 25 percent unemployment during most of the decade from 1931 until 1941, and sharp falls in GDP. Other countries experienced economic difficulties of a similar magnitude. American GDP so far during this crisis has essentially not yet fallen, and unemployment has reached only about 61/2 percent. Both figures are likely to get considerably worse, but they will nowhere approach those of the 1930s.