2020 vs. 1930s: How Do We Compare?
My rich dad and my poor dad were in elementary school at the start of the Great Depression. That experience affected the course of their lives forever. One dad became very rich from the lessons he learned during the depression. The other remained poor and financially timid for the rest of his life.
My poor dad’s father—my grandfather—lost everything in the Great Depression. He lost his business and priceless beachfront real estate on the island of Maui, Hawaii. My grandfather was an entrepreneur, so he did not have a steady paycheck to protect the family. When my grandfather’s business failed, my dad’s family lost everything. The Great Depression was a terrible experience for my dad.
The financial hardship of the Great Depression caused my poor dad to embrace the ideas of having job security, saving money, buying a house, staying out of debt, and securing a government pension. He did not want to be an entrepreneur. He wanted the security of a government job. He did not believe in investing, because he saw my grandfather lose everything in the stock market and in real estate. My dad held on to those values all his life. For my poor dad, security was more important than wealth. His memories of the last depression stayed with him all his life.
My rich dad’s family struggled financially even before the Great Depression. His father was ill for years and passed away shortly after the depression started. Early in life, my rich dad became the man of the house and the sole provider of income. As he was a young man without an education and with few job prospects, the Great Depression forced my rich dad to become an entrepreneur as a teenager. He took over the family store and grew the business.
Although his family struggled, my rich dad did not ask for government support. He did not ask for welfare. The depression caused my rich dad to grow up faster, and he learned to do well financially. The lessons of the depression turned him into a rich man.
The Great Depression terrified the American people. Their financial insecurity led to the Great Society, the genesis of many of the social programs we have today, including the unfunded liabilities of entitlement programs that are bankrupting America today.
I am reminded of what Henry Ford said about the Great Depression of the 1930s and I paraphrase: He was afraid that it might not last long enough because his countrymen would not have had the time to learn from it.
Today, businesses are closing, unemployment is soaring all over the world, housing values are dropping, and savings are being depleted.
Rates of Wealth
In Rich Dad Poor Dad, rich dad’s lesson #1 is, “The rich do not work for money.” When I ask, “What was rich dad’s lesson #1?” most readers do not recall this lesson. I believe this is because they have been programmed to “Go to school and find a job.” They have not been trained to be a person who owns the production. In other words, our educational system trains students to be poor and middle class rather than capitalists.
Small wonder we have millions of people who, like my poor dad are dependent upon the government to provide them with a job, paycheck, and pension. People unable, unfortunately, to help themselves.
In 1970, my poor dad ran for lieutenant governor of the State of Hawaii against his boss, the governor, a Democrat. After my father lost the election, the governor vowed my dad, a Ph.D. in education, would never work in state government again. My dad died a poor man, unemployed, willing to work but unable to find a job.
Small wonder we have class warfare erupting on the streets of America and around the world.
Small wonder that Senator Bernie Sanders, during his run for the U.S. presidency, stated: “There is something profoundly wrong when the top one-tenth of one percent owns almost as much wealth as the bottom 90 percent.”
Simply put, our global financial crisis begins in our schools. The United States spends billions on teacher education, yet the gap between rich and poor grows worse.
Every business in the world, big or small, is trying to reduce overhead. One of the quickest and easiest ways to do this is to reduce payroll liability by laying off employees.
In April of this year, the Bureau of Labor and Statistics reported the unemployment rate had increased from 4.4% to 14.7%, the largest one month increase in history, and the highest rate in the history of official government data (started in 1948).
However, that unemployment statistic does not count the unemployed people who haven’t looked for a job in 30 days, or those working part-time jobs while waiting for full-time work. When you add those people into the official number, the real unemployment rate was 22.8%
It is estimated that unemployment hit 24.9% during the Great Depression.
At this rate, we will be there soon.
Our school systems have not prepared students for where we are today. The biggest mistake most people make is that they believe the next 20 years will be like the past 20 years. Many believe we will soon get through this rough patch in the economy and everything will be OK again.
Like it or not, we are going through the most dramatic change in human history. The clichés, tectonic plates are moving and our tomorrows will not be our yesterdays, are words of wisdom worth heeding. The question is: Will our current educational system change with our evolution, or will it lead us to our extinction?
Education is more important than ever before, but the pressing question is: What kind of education?
Without real financial education, it is understandable why many people believe the best way to pay fewer taxes is to work less—or not work at all.
Without real financial education, most people do not realize the Federal Reserve Bank and the U.S. Tax Department are related, created in the same year, 1913.
Without real financial education, it is understandable why people believe in taxing the rich as a solution to their personal financial problems.
I am not hoping for a depression. Far from it. No one in his or her right mind wants another Great Depression. Step one in preparing for another depression is to know your history, check the facts, look into the future, and make your own decision. Then decide if you choose to follow my poor dad’s depression formula or my rich dad’s. Today, as times get bad, I keep in mind that my rich dad got richer and my poor dad remained poor, both influenced by the same depression.
Editor, Rich Dad Poor Dad Daily