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The '80s and the '20s: We can profit by being cautious, not cringing

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MANY older readers who remember the Great Depression still tend to fear a repeat of those days. Whenever the economic outlook gets a bit hairier, one can be sure there will be a letter in the mail about the '30s. I don't happen to believe that events ever repeat themselves exactly, but I do wish the generations that have matured since the 1920s had some of that folk memory to make them a bit more cautious.

In two recent issues of the weekly Smith Barney, Harris Upham Portfolio Strategist, political commentator Kevin Phillips has written about the similarities and dissimilarities between the 1980s and, not the '30s, when things were slowly being put together again, but the 1920s. Mr. Phillips notes President Reagan's admiration for the political culture of the '20s -- in the person of Calvin Coolidge and the policies of governmental nonintervention in business. Business was also fashionable in the '20s, and he sees a parallel there with today's yuppies, who find personal economic achievement more important than involvement in the social goals of the 1960s and early '70s.

As in the 1920s, the nation also has an uneven prosperity. Then, the prosperity was concentrated in the Middle Atlantic states, the Great Lakes (automobiles), and the Pacific Coast. Today, it's more a matter of both coasts doing well, while the farm states, the ``rust belt'' area of the Midwest, and the energy-driven Southwest are having severe slumps.

Finally, he notes that the 1920s were the decade of multiple tax cuts -- five of them. He concedes that the parallel is imperfect, but the question is how much of the 1986 tax reform ``represents a future source of real strength for the economy and what part represents a repeat of the late 1920s go-go mentality.''


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