I spent some time yesterday talking a normally sensible friend off of a ledge. He was afraid that we’re heading into another depression--1929 style. 

If you’re hearing the same kind of panic from hysterical friends, it’s important to remind them how very different things are now from then. First of all there’s trade. My old boss at The Wall Street Journal--a guy who was a lot smarter in these matters than anyone I’ve known since--believed that the Great Depression began because of trade barriers. In 1930, Congress passed a terrible law called Smoot-Hawley, which hiked tariffs on 20,000 imported goods and led to a worldwide trade war that froze international commerce. The world economy collapsed. 

Today, our economy is relatively open. Our shirts are from Malaysia or El Salvador, our TVs are from Korea, our cars are from Japan. In a world of open trade, the stuff we buy is made by the cheapest, most efficient maker. And an efficient market is a resilient market, one that can withstand bumps and grinds, like the ones were going through now. 

Another difference between now and then is how much more productive we are. Because of the computer revolution, we can make a lot more stuff for a fraction of the cost that we used to. Also because of computers and GPS systems, farmers today can do things with planting and irrigation that go a long way to making pictures of those 1930s dust bowls virtually impossible to repeat. So unless the protectionistas get the upper hand, or someone figures out how to shut down the Internet, don’t get too panicky. 

We’re going through some hard times. But you can get off of that ledge.