by Dale Schlundt
How do credit and loans work, both in personal and professional contexts? Should I borrow to buy a car? Why do educators wait until they're young adults go into debt, to teach them how to stay out of debt? To draw the rather expansive fabric of this topic together, the larger question is, "Why do students have to learn through their own costly experiences when we have so many viable historical ones from which we can take these lessons?" These are questions that students should be asking, although they may be unaware that they even need to ask them.
If we are going to teach history, my cause lies in making it relevant in terms of it becoming useful in a students' forthcoming adult lives. In other words, give the history being taught "value" — the same value which one refers to when mentioning the potential contributions of a new employee or any recently acquired asset in a company for that matter.
Yet, history does not give itself this value alone. Without the individual deriving a message from it, history in itself is useless. Students of history have to create the very aspect we want to take away from it. Issues such as those mentioned above that create this value should not only be incorporated into history lectures to enhance our pedagogical strategies, such as assisting students in remembering the events, but also to teach practical life lessons.
To put a more specific focus on this topic for the purpose of teaching, I ask the question, "What does the recent housing crisis have to do with the Great Depression of 1929?" When reviewing the depression and the terrible streak of poverty eternally associated with the crises of the early 20th century, the endless aspects we can learn from the mistakes of the past are incredibly transparent.
Although not necessarily a new comparison, I refer to our recent housing crisis. The main flaw in our era's housing market downfall and in this respect differing from the depression of the 1930's is the feature of variable interest rate loans. As David Wheelock, an economist for the Federal Reserve Bank of St. Louis, eloquently describes the housing market crash of the Great Depression as a trailing result, in the 21st century irresponsible mortgage loans were an initial contributing catalyst.
Variable interest rate loans, which so many young to middle aged adults grabbed as their financial advisors confidently assured them that it was the best course of action for new home buyers. This best course of action held true — that is, until those seemingly great interest rates did what all variables do: change. As in the 1920's just prior to The Depression, with the spread of consumerism and the increasing desire to own material items, the term deja vu comes to mind and seems justifiably appropriate. It is realistic to state that the ideology of our society has not changed to any large extent, despite the potential lessons of the past that have been ignored by and lost to society.
Who doesn't want that new boat, brand new car, or oversized house that is just not an economically sound purchase? The issue was and continues to be, what are the long term costs of those decisions?
Yet once again, much like in the 1930's, the instant that banks are pressured, the consumer that receives the short end of the stick. As Bruce Watson states in an article for Daily Finance, during the first five years of the Great Depression, close to three quarters of a million individuals no longer had ownership of their property. The large majority of foreclosures the author was referring to were on family farms, individuals borrowing to try and carve out a living on their property.
While forecloses on both rural and urban properties were not due to the same specific reasons as variable interest rates in the 21st century, despite the contrasts between the two era's housing crashes, which Watson highlights, I see the remarkable similarities. When one simply studies each crisis through a comparative lens, the differences seem to assume minimal significance when analyzing the broader trend of the consumer going into financial ruin due to their reliance or perhaps trust in bank loans.
That is the significance of this comparison that I express to my students. Specifics will always vary between economic dowturns, but the ever-deepening hole of debt is the trend we see individuals fall victim to throughout history. Of course, I should note that property loss was only one element of a much larger picture during the Great Depression, including widespread hunger and much worse. Regardless, the comparison is an essential lesson that gives educators an opportunity to teach U.S history with the added lesson that makes it relevant to today. Fortunately, these opportunities are without end and readily available to those who have a passion for making history part of our students' reality.
Historians who study oral history realize that the many individuals who experienced the Great Depression and took in the lessons from it have now passed. As their numbers continue to dwindle, the lessons they are able to offer the generations of today pass with them, unknown to young adults who could benefit the most.
The concept behind this article is not to give students a pessimistic outlook on life or business, nor is it to scare them from participating in such. My passion is to give them a deeper understanding of what they study. In this instance, perhaps through a multidisciplinary view being only loosely related to the study history at times, history can help these students may participate wisely in our economy using the ever fading lessons the past has to give. The view we take on history has the potential to become our strongest asset.
Dale Schlundt holds a Master's Degree in Adult Education with a concentration in American History from the University of Texas at San Antonio and is currently an Adjunct Professor for Palo Alto College. Dale's new book Education Decoded (A Collection of My Writings) is now available on Amazon in paper back as well as Kindle Edition.