It is an iconic image of the Great Depression, a glimpse of a bankrupt world.
Photographed by Dorothea Lange, Migrant Mother depicts the plight of 32-year-old Florence Owens Thompson in 1936 America. The portrait was part of a series on “destitute pea pickers in California.”
With a furrowed brow and a child resting on each shoulder, the mother of seven looks to have aged prematurely by back-breaking work and worry. Hope has gone out of her eyes.
Yet 84 years later, the specter of the Great Depression has been evoked by economists as the Covid-19 disease devastates vast parts of the globe, suffocating economic activity.
Hope again is in short supply, just like the crucial medical equipment needed to fight a silent enemy that is turning hospitals into battlegrounds.
“The first quarter of 2020 may be seen later as the start of a new worldwide economic recession caused by the rampant Covid-19 pandemic,” He Weiwen, of the influential Chongyang Institute for Financial Studies at Renmin University, said.
“Governments across the globe have announced severe measures to check its spread, from social distancing practices to lockdowns and quarantines,” he continued.
“[But] with factories, shops, restaurants and theme parks closed and most airline flights suspended, the [global] economy has been falling off a cliff,” He wrote in a commentary for China-US Focus, an academic website.
Encrypted in the warning signs are the numbers. Released this week, they show that the global economy could sink into its deepest peace-time recession since the 1930s.
JPMorgan Chase, the investment bank, has forecasted that dwindling output risks wiping out US$5.5 trillion, or almost 8% of GDP, by the end of 2021, while Citigroup expects a hit of about $5 trillion. Deutsche Bank has warned that the “lingering costs and scarring effects” will put a $1 trillion hole in the economies of the United States and the European Union in the next two years.
Earlier this month, the Asian Development Bank predicted that the rapid spread of the new coronavirus strain could slice nearly $4.1 trillion off the global economy. To add to a toxic mix, more than one billion workers are at risk of losing their jobs or facing massive pay cuts, the International Labor Organization reported.
“Today we are confronted with a crisis like no other,” Kristalina Georgieva, the managing director of the International Monetary Fund, said ahead of next week’s Virtual IMF and World Bank Spring Meeting.
“Just three months ago, we expected positive per capita income growth in over 160 of our member countries in 2020. Today, that number has been turned on its head: we now project that over 170 countries will experience negative per capita income growth this year … Never in the history of the IMF have we witnessed the world economy coming to a standstill,” she added.
But will it compare to the Great Depression? After the Wall Street crash in 1929 which wiped out millions of investors, the worst economic downturn in the history of the industrialized world dragged on for nearly 10 years.
At the depth of the slump in 1933, up to 15 million, or one in four, Americans were unemployed. By then, nearly half the country’s banks had failed.
Globally, the jobless queues lengthened as protectionism took root, triggering a surge in nationalism across Europe and culminating in World War II.
Already unemployment is rising in the US, Europe and China. Countries across the planet have been forced to lock down populations after closing factories, shops, restaurants and entertainment centers in a move to stop the spread of Covid-19.
Business activity has barely registered a heartbeat. In the opening weeks of March, the US economy shed more than 700,000 jobs, ending a decade of continuous employment growth. Since then, that figure has jumped by 16 million, according to official data.
“Overall, it could be a very bad year for the [US] economy. There are things we can do to open up the economy, but I don’t see [it] returning to a more normal state until there’s much greater confidence … that opening up the economy won’t restart the crisis,” Ben Bernanke, the former chairman of the US Federal Reserve during the 2008 Financial Crisis, said at an online event presented by the Brookings Institution, an independent think tank based in Washington.
“It is a tough and scary period,” Bernanke, the author of Essays on the Great Depression, added.
Coping with the economic trauma and getting people back to work in a move to stabilize businesses across a range of sectors will take time. For now, the worldwide landscape is shrouded in a deluge of depressing data.
More than 1.6 million people across the planet have been infected by Covid-19 with the death toll hovering near 96,000. In Europe, Italy, Spain, France and the United Kingdom have been ravaged by the virus, while the US has reported more than 468,000 cases of infection with the death toll surging past 16,600.
The word lockdown has become part of the lexicon of life as global governments inject $8 trillion into the system to prop up creaking economies.
“Today’s recession, caused by Covid-19, may lead to a substantive debt crisis. If that happens, an L-shaped trajectory for the world economy could appear, meaning a feeble post-recession recovery and the beginning of a depression lasting for years,” He, of Renmin University, said.
“The world economy has largely followed a debt-driven model since the 2008 crisis. Globally, the total debt of non-financial companies exceeds $200 trillion. To avoid a repeat of the Great Depression, the G20 [or the Group of 20 leading economies] and other multilateral institutions should play a more effective role in coordinating global efforts to support the fragile economy,” he added.
“The lesson of protectionism in the Great Depression should not be forgotten. When the US lifted tariffs across the board on imports under the Smoot-Hawley Act in 1930, the United Kingdom, France, Spain and Canada quickly fought back with equal countermeasures, leading to a 50% plunge in world trade [which] further aggravated the depression,” He pointed out.
If that happens, harrowing images, with shades of Lange’s Migrant Mother from 1936, will start flooding social media sites. Only this time, it will be a 21st-century human tragedy.