The 1929 crash, today's auto workers and refrigerator builders

“What’s the difference between a recession and a depression?â€� asked the guy who called in to the radio program where I was the featured guest, having just published my first book, about the 1929 stock market crash and its consequences.    

“If your neighbor loses his job, that’s a recession. If you lose your job, that’s a depression,â€� said I.  

That flip and surely not original answer, given nearly 30 years ago, is today newly reflective of a major problem facing the American economy: We mostly feel only our own pain, and when confronted with others’ pain shrug our shoulders, believing that we, still employed, will be OK.   

For that book I corresponded with a couple of hundred people who had witnessed the crash at close hand. Many wondered what would happen to this country when their generation, which had lived through the Depression, was gone. They felt that younger generations, having only experienced good times, did not understand the need to prepare for the inevitable rainy days. That fear has been exacerbated by our new callousness, which I see as linked to being oblivious to our interconnectedness.  

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Why should we care if the workers in the automotive plants might get tossed out on their ears? Their industry is inefficient, refuses to change, yet is arrogant enough for its unions to have at first refused to consider givebacks and for its CEOs to fly to Washington in individual corporate jets to beg for billion-dollar bailouts. The unions and the CEOs were a bit less arrogant recently, before Congress, which was good to see. But aren’t those autoworkers (and CEOs) terribly overpaid?  

We should care — not solely because of John Donne’s plea, “Never send to know for whom the bell tolls; it tolls for thee,â€� although stressing our common humanity is a salutary idea — but because we and the autoworkers are caught up in the same economic system, so what affects them today will affect us tomorrow.  

We will be impacted by laid-off autoworkers’ diminished ability to consume goods and services that the rest of us make or sell; by their inability to earn enough income, which is likely to make them depend on welfare stipends whose costs the rest of us will pay; by the lowered prices they will obtain for their homes, which will eventually lower the sales prices of all residential real estate in the country — and so on.  

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Our economic interconnectedness became clearer to me a few years ago when I visited Greenville, Mich., in pursuit of a story about the forthcoming shutdown of the largest refrigerator plant in the United States.  Its operations were to be moved to Mexico by its Scandinavian multinational corporate owners.  

Thirty miles east of Grand Rapids, Greenville is a middle-sized town where the plant had been making refrigerators since the early days of the 20th century.  The plant employed several thousand people and consumed the products of a half-dozen feeder plants, located nearby, that employed an equally large number of workers.  A third batch of workers operated trucks that hauled the completed refrigerators to destinations around the country, mostly to Sears stores.  

A four-county area was going to be badly affected by the plant closing. A year before the date of the shuttering, prices for area homes were dropping because so many were for sale, their plant-worker owners afraid that once they were laid off they would be unable to keep up their mortgage payments. Currently making $18 to $20 an hour plus benefits, they knew that the best non-plant jobs available for their skill-sets paid $11 an hour plus less-good benefits  — that is, a $20,000 to $25,000 annual salary.  

County offices were predicting fewer taxes collected and fewer municipal services offered. Teachers were notified that they might be furloughed, and city halls were told not to hire replacements for retiring employees. Clothing stores were coasting on their inventories — the woman who outfitted boys and girls for proms and weddings already saw parents skimping on gowns and tuxedos. Restaurants were serving smaller portions or lowering prices. The famous donut store on Main Street had expanded the “baker’s dozenâ€� deal to 18 for the price of 12, just to keep the morning regulars coming in before starting their 7 a.m. shifts. The owner had already notified the landlord that he would likely not renew his lease.   

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Two groups were benefiting from the looming plant closure. One, families from Grand Rapids, now more able to afford a home in Greenville from which they could commute. It was unclear whether Greenville’s small-town charm would survive the plant’s closing, though, or whether the quality of the schools that the commuters liked would continue when school budgets were cut due to a shortfall in taxes caused by the plant’s closing.  

Two, the U.S. armed forces. Regular Army quotas were being met, and National Guard units were filling up as high school graduates became convinced that a guaranteed government paycheck was worth the risk of dying in Iraq or Afghanistan.  

The plant’s owners admitted that, given the cost of building a new plant, they weren’t going to save much money by moving operations across the Texas border to a new city already full of similarly moved plants, even though there were plenty of semi-skilled Mexicans willing to work for $5 an hour with far fewer benefits.  

They would save money by not having to meet some moderately costly environmental and safety standards that the United States imposes on U.S.-made products, but that it is unable to insist on for products made in Mexico because of the North American Free Trade Agreement (NAFTA).   

And the new plant would pay far fewer taxes to the United States, possibly none.  Still, corporate headquarters said that the Mexico move was a temporary measure, and that when ocean shipping costs came down far enough, the refrigerators would be made in China and be shipped to the United States.   

Multiply the Greenville effect by several hundred-fold, and you’ll approximate the effect that shutting down America’s automotive industry would have.

Salisbury resident Tom Shachtman has written more than two dozen books and many television documentaries.