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A favourite social enterprise, Room to Read, is spotlighted in today’s in Financial Times, ‘Life & Arts’ section. See http://www.ft.com/cms/s/0/22810582-dae2-11de-933d-00144feabdc0.html

Suddenly, the word ‘sustainable’ is everywhere. Take a look, for example, at The Economist‘s ‘The World in 2010’, where even Russian President Dmitry Medvedev uses it (page 59). Then in today’s Financial Times, which I read here in Vienna over breakfast, there is a front page mention of Spain’s new ‘sustainable economy’ bill. The references are pretty much all to the need for a more sustainable economy, but there’s an opportunity to open the debate out – and to recover the full meaning of the world ‘sustainable’, among other things embracing the triple bottom line agenda that The Economist also covered recently.

November frieze Pink tram Hundertwasser facade 1 Hundertwasser facade 2 We two And again … Cafe floor Hundertwasser’s flag for New Zealand Condensation trail Sitting Bull Hunched eagles Hunched eagles, 2 Escher moment Franz-Joseph’s horse kicks Moon Cafe Mozart Illuminations St Stephen’s Cathedral and Moon

One of the best days I have had for ages, walking around Vienna with Elaine, visiting the Hundertwasser Haus and Museum, and the Impressionism exhibition at the Albertina. I first came across his eco-posters when a group of Swedish scientists and officials came to London in the late 1980s, to lobby the UK government on acidic emissions from sources like the old CEGB, and gave me one of his posters, ‘Save the Rain’. Also came across Walton Ford, in Pancha Tantra, whose images blew me away. Wonderful traveling on the trams. Later, we had Turkish coffee and apfelstrudel at The Café Mozart and a delightful light supper at the vegetarian Wrenkh Restaurant.

In our 2009 report The Phoenix Economy, we argued that the ‘recession’ could well go much deeper – and last much longer – than most people believed. Not a popular line of thinking, but I was interested to see the following from D.K. Matai of ATCA a few days back.

They will say, “Nobody saw it coming”.  Who could have predicted it…  It is worth noting that the 1932 stock market crash is deemed to be the worst in the 20th century and not the one in 1929.  By mid-1930, the market was up 30% from the trough of the 1929 crash.  However, by the summer of 1932, the Dow reached a low of just 11% of its high in 1929, or a loss of roughly 89%, trading more than 50% below the low it had reached on October 29th, 1929.  

If one had $1000 on September 3rd 1929, it would have gone down to $108 by July 8th, 1932 — end of the worst crash — or an 89.2% loss.  To recover from such a loss, one would have to watch one’s portfolio go up by 825%! All this happened despite assurances from prominent government and business leaders of-the-time that the worst was behind.  

Here is a news headline that may sound familiar:

• September 1929: “There is no cause to worry. The high tide of prosperity will continue.” – Andrew W Mellon, US Secretary of the Treasury

After the stock market crash in October 1929, the Dow Jones Industrial Average (DJIA) partially recovered in November-December 1929 and early 1930.

Reassuring headlines such as the following became increasingly common:

• May 1, 1930:  “I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States – that is, prosperity!” – US President Hoover

• August 29, 1930: “American labour may now look to the future with confidence.” – James J Davis, US Secretary of Labour

• October 16, 1930:  “Looking to the future I see in the further acceleration of science continuous jobs for our workers. Science will cure unemployment.” – Charles M Schwab.

On July 8th, 1932 the Dow reached its lowest level of the 20th century and did not return to pre-1929 levels until 23rd November, 1954.  The full impact was not felt until the next year.  By 1933, the Great Depression was very real and it would take more than 22 years before the market would regain what had been lost.

So severe was the impact of the 1929-1932 crash, that by spring of 1933, when President Roosevelt (FDR) took the oath of office, unemployment in the US had risen from 8 to 15 million — roughly 1/3rd of the non-farm workforce — and the GDP had decreased by more than 45% from $103.8 billion to $55.7 billion.

Although the depression was worldwide, no other country except Germany reached so high a percentage of unemployment as the US. The poor were hit the hardest. By 1932, New York’s Harlem district had an unemployment rate of 50% and property owned or managed by African Americans fell from 30% to 5% in 1935. Farmers in the Midwest were doubly hit by economic downturns and the Dust Bowl. Schools, with budgets shrinking, shortened both the school day and the school year.  The breadth and depth of the crisis made it the Great Depression.

FDR, after assuming the presidency, promoted a wide variety of federally funded programs aimed at restoring the American economy, helping relieve the suffering of the unemployed, and reforming the system so that such a severe crisis could never happen again.  After the crash in 1932:

1. The Securities and Exchange Commission (SEC) was established;

2. The US Congress passed the Glass-Steagall Act mandating a separation between commercial banks, which take deposits and extend loans, and investment banks, which underwrite, issue, and distribute stocks, bonds and other securities;

3. The Federal Deposit Insurance Corporation (FDIC) was established to insure individual bank accounts for up to $100,000; and

4. The Works Projects Administration (WPA), the largest New Deal agency, was set up employing millions to carry out public works projects.

However, while FDR’s New Deal did help restore the GDP to its 1929 level and did introduce basic banking and welfare reforms, FDR refused to run up the government deficits that ending the depression required. Only when the federal government imposed rationing, recruited 6 million defence workers (including women and African Americans), drafted 6 million soldiers, and ran massive deficits to fight World War II did the Great Depression finally end.

The extent of the economic devastation of the 1930s went far beyond the imagination of anyone in the financial markets or governments across the world.

Having studied a fair amount of history over the years, I am aware that it rarely repeats itself – but, as someone once put it, by God it rhymes! So anyone who thinks that we are now free of the downturn would be well advised to take a look at what happened last time around – and keep a very close eye on the runes.

The Economist has done another piece on the triple bottom line, which is nice, but they invert the 3Ps. Having come up with the TBL concept in 1994, I launched the 3Ps in 1995 as ‘People, Planet, Profit’. The Economist, by contrast, goes for “profit, people and planet” – which makes sense if you are them.