Lucy Nicholson / Courtesy Reuters The going got tough: A sign advertising bankruptcy in California, Sept 2012.

The Second Great Depression

Why the Economic Crisis Is Worse Than You Think

In This Review

After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead
by Alan S. Blinder
The Penguin Press HC, 2013
496 pp. $29.95

After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead BY ALAN S. BLINDER. Penguin Press, 2013, 476 pp. $29.95.

Alan Blinder is only the most recent in a series of prominent economists who have produced analytic accounts of the U.S. economic downturn. His crisp narrative lays out the policy options that were available at each stage of the crisis, and his analysis is infused with a deep understanding of macroeconomics. Overall, it is the best general volume on the subject that has been published to date.

Despite its many virtues, however, the book paints an overly optimistic portrait of the state of the U.S. economy. “More than four years after Lehman Brothers went under,” Blinder writes, “policy makers are still nursing a frail economy back to health.” But the U.S. economy is worse than “frail,” and there are few signs that it is being nursed “back to health.” Most economists claim at least one silver lining in the economic downturn: that it was not as bad as the Great Depression. Up until recently, I agreed; I even took to calling the episode “the Lesser Depression.” I now suspect that I was wrong. Compare the ongoing crisis to the Great Depression, and there is hardly anything “lesser” about it. The European economy today stands in a worse position compared to 2007 than it did in 1935 compared to 1929, when the Great Depression began. And it looks as if the U.S. economy, when all is said and done, will have faced certainly one lost decade, and perhaps even two.

The U.S. economy has enjoyed a recovery only in the sense that conditions have not gotten worse. Blinder notes that the unemployment rate jumped to ten percent at the height of the crisis and is now hovering around eight percent, nearly halfway back to economic health. But this assessment is misleading. In the middle of the last decade, the percentage of American adults who were employed was roughly 63 percent. That