Before I get to the ongoing calamity, the economic impact of a nation-wide viral epidemic in horses in 1872 is worth considering (italics mine):
During the late 19th century, the American economy relied on horses the way it depends on gas today. Horses unloaded cargo from ports, transported goods from city to city, worked the farms, supported the army, and served as the emergency vehicles of choice. Without them, the American workforce would have ground to a halt.
And that’s exactly what happened in 1872, when an estimated 99 percent of all horses in America contracted equine influenza. The highly contagious strain started in Canada and spread through New England to the South in a matter of months, leaving horses across the country too weak to stand and coughing uncontrollably.
Street buggies stopped running, paralyzing commerce in the cities. Railroads were stymied because trains run on coal — coal that was hauled out of mines by horses. And as the horse flu spread, U.S. military troops had to go into battle on foot (they were fighting Apache Indians at the time).
More tragically, a fire in Boston raged for three days because there were no horses to carry water. The flames destroyed more than 700 buildings, causing an estimated $73.5 million in damages and killing at least 20 people.
The “Great Epizootic,” as it was called, spiraled out of control in less than a year. At the height of the panic, as many as 20,000 businesses failed, a third of all railroads went bankrupt, and unemployment spiked to almost 15 percent. The economy took nearly a decade to recover. Ironically, nearly all of the horses recuperated by the following spring.
When a society’s means of transportation and industrial power is disabled, there’s no stimulus that will right it: a big enough hammer can smash anything. Unfortunately, in 1873, there wasn’t really a technological solution to the ‘horse problem’–cars weren’t in use yet.
Tragically, we face an economic crisis of our own making, and which I don’t think we’re even capable of recognizing:
For over a year the one point that I and others have been trying make is that the polite fiction that masters of the universe of Wall Street and their defenders in the media and Congress have been trying maintain, that this is liquidity crisis not an insolvency crisis, is utter horseshit. They made bad leveraged bets and lost immense amounts of money, and now they, and their buddies Geithner and Summers, want taxpayers to bail them out so they can go on living their opulent life styles while some of my neighbors wonder if their next food stamp check is going to show up.
I’ve made that point too: there’s no way any economy can lose two to three trillion dollars and not suffer (yes, the houses still exist, but that’s trillions of dollars of goods and labor that just went up in smoke because these properties were overpriced).
We don’t need a stimulus, we need a reconstruction.