— Many writers and politicians today have been quick to compare the current economy to the Great Depression of the 1930s. President Barack Obama has frequently made this connection, saying things like, “We are going through the worst economic crisis since the Great Depression.”
According to Tulane University economic historian Michael Bernstein, the most striking similarity is the widespread collapse of financial networks. “Banks today are reluctant to loan money to anybody,” he says. “They are sitting on their hands because they have no idea what's coming next. And that's exactly what happened after the stock market collapsed in 1929.”
On the other hand, Bernstein points out, there are several crucial differences between then and now. We’re not going to be seeing bread lines and soup kitchens like we did back then. And unemployment may go up, but there’s no reason to think it will come anywhere near the 25 percent rate seen during the Depression. Also, he says, the key difference is that unlike then, people today know the government is prepared to step in to take care of those who are thrown out of work and to bolster banks that are on the verge of collapsing. These differences, he says, make 2009 very different from 1929.
Amid all the dire-sounding comparisons and political posturing, Washington has scrambled to offer help on the national level. In the short term, however, for small business owners who are struggling to keep their doors open, the best advice may come from those who’ve survived the hard times of the Great Depression.
Lessons from the Great Depression
One who remembers those days is Ella Brennan of New Orleans. While she was only in grade school during the 1930s, she was well aware of what was going on. “You would hear what was going on, banks failing, companies shutting down and factories closing,” she says. “It was a lot like today, and it made people wonder, ‘Oh my God, what does this mean? What's gonna happen?’”
Today, Brennan is the owner of several of New Orleans top restaurants, including the historic Commander’s Palace. She recently moved into a beautiful historic home right next door to the restaurant and offers a well-polished joke about why she moved there. “I used to live two blocks away, but I didn’t like the commute.”
As posh as things are today, Brennan still carries strong memories of the 1930s: “It was a terrible time, but I think it’s like most things in life. It has a lot to do with attitude. I mean, you can bitch and gripe and complain all you want. Or you can make do.”
Making do. Stretching a dollar. Self-reliance. These are all life lessons from the Depression that many of her generation carried with them as adult entrepreneurs. Despite her success, she never fully trusted the prosperity of the decades that have followed. It’s a cautious approach to business that she passed on to her daughter, Ti Martin.
Martin was raised in the food business, and she’s keenly aware of how her mother ran the restaurant. “I grew up with the stories of Mom and her siblings,” she says. “They put all the money back into the business always. They just took out a salary when they could, a meager one at times.”
Martin and her cousin, Lally Brennan, who now run the day-to-day operation of the restaurant, still follow that principle. “We reinvest in this business constantly, even when we absolutely don't have to.”
Surviving the hard times
Another lesson her mother taught her was to never neglect business insurance payments. When Hurricane Katrina hit in 2005, that cautious approach to insurance more than paid off
“Insurance is a good thing,” she says.
Another lesson Brennan took from the Great Depression is the importance of “keeping flexible.” The idea that everyone needs to be able to wear several hats was key for the family early on while they were starting up … and now they continue this approach, extending it to the way they train their staff.
Martin says that despite the highly specialized skills needed to run one of the nation’s top restaurants, they like to have backup plans to cover emergencies. They do this by cross-training their staff so that different people can wear various hats if needed. By training each employee to perform more than one function, the business is better prepared to weather staffing cutbacks (if needed) without sacrificing the quality of the service. And in fact, lately they’ve managed to stay lean in just this manner, as times get tough.
Both mother and daughter say that there’s only so much you can do to prepare for a crisis. The key to survival, they say, is to have the right attitude.
“I think the way you survive is you sit down and you say, ‘Now what are our possibilities? And what are our options? What can we do?’” Brennan says. “Then after you’ve looked at the options, you take the best plan you can find and you get to work. And I think it works for most people.”
And in their own way, the politicians and economists seem to agree. In good times and in hard times, expectations can make or break a plan.
Looking at the big picture, Bernstein agrees. “Expectations are an enormous part of the story.”