Looking Back to the Future: The U.S. Economy

In late October 1929, the Boston Stock Exchange collapsed, losing more than 25% of its value in just two days of frantic trading. This fallout, in parallel with market crashes in New York and other major cities, caused a collapse in businesses across New England and set the stage for the devastating Great Depression. The manufacturing industry — anchored locally in Lowell, Lawrence, and Fall River — was particularly hard hit, with factory closings and massive layoffs that would have been unthinkable just a decade before.

Indeed, in the decade before the crash, the economy was booming. Tax rates were slashed dramatically, dropping to less than 25%, ordinary Americans were buying public shares for as little as 10% down, and protective tariffs aimed at supporting factories and jobs were nearly 50% on average for many American products. So what went wrong — and more importantly, what have we learned since then? Are today’s business leaders and policy makers considering history as they navigate quixotic tariff policy, sticky inflation, stubborn interest rates, and high housing costs? For our collective sakes, let’s hope they’re reading a few new books.   

“Those who forget history are doomed to repeat it,” goes the familiar saying. With that in mind, I’m hoping everyone will read 1929, the unforgettable upcoming book by CNBC’s Aaron Ross Sorkin. Often, the best books about historical events center their telling around larger-than-life characters that capture the zeitgeist of time and place. Sorkin, a veteran journalist, proves masterful at this and he meticulously chronicles the events, people, and market forces that led to the Crash through the engaging story of Charles (“Sunshine Charlie”) Mitchell, who transformed National City Company from a sleepy bank into a financial juggernaut fueled by everyday investors placing market bets. Mitchell, also a member of the Federal Reserve Bank, controlled, manipulated, and managed the public markets with a small cadre of wealthy friends and tycoons. Retail investors were told that stocks always went up and the outlook was ever sunny — until it all came crashing down.  

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As you will learn from this engaging book, the nation that emerged from the Roaring Twenties would never be the same.  

In fact, in the decades that followed, a new national consensus emerged, based on risk sharing and policies aimed at doing the greatest good for the greatest number of people. New Deal reforms like Social Security were born. Our broad historical social pact, which has spanned generations, now is in peril, as government pushes more of the escalating healthcare, education, and housing costs to individual families, argues Consumer Protection Bureau Founder and law professor and Pat McCoy, author of the insightful new book: Sharing Risk: The Path To Economic Well-Being for All. With more than half of Americans lacking a living income and millions of families with nothing in the bank, we need McCoy’s common-sense ideas for renewing our commitment to each other now more than ever.

Indeed, we could start by revisiting what the Founders wanted most of all: a nation based on equality, not dynastic wealth and privilege. Unfortunately, this goal is slipping too, according to tax law scholar Ray Madoff, author of the thought-provoking new book: The Second Estate: How The Tax Code Made an American Aristocracy. From Pierre Dupont in Roaring 20’s to Gates and Bezos now, every age has oligarchs who fear death and hate taxes. Over the last few decades, their ability to channel that animus to avoid the US tax system altogether has increased steadily. By avoiding W-2 income, borrowing against stock and real estate investments, and manipulating rules designed to promote charitable giving, the uber wealthy pay little to no taxes — ever. If you care at all about income inequality or fairness, you’ll want to read this book.

“History doesn’t repeat itself, but it often rhymes,” Mark Twain is reputed to have said. For leaders considering what lies ahead, they might start by looking back.

Read in the Boston Business Journal

Larry Gennari is a business lawyer and chief curator of Authors & Innovators, an annual business book and ideas festival. Watch recent interviews with authors here. Gennari also teaches Project Entrepreneur, a business fundamentals bootcamp for returning citizens, at BC Law School.