Barry Eichengreen, an expert on the Great Depression, and Kevin O'Rourke, take
issue with the notion that the current downturn is less severe than the Great
Depression. While the slump in the US is not as bad, that mis-states the global
picture.
Note that many economists expect the US to suffer less than the big exporters,
namely China, Germany, Japan. The reason is that the economic adjustment
required of surplus nations is greater than that of debtors.
Similarly, in the Great Depression, the US, then a major exporter, was harder
hit than the over-consuming importers such as Britain, who defaulted on their
debts.
The one bit of cheer is that this time around, government action is more
aggressive, but it remains to be seen whether it is sufficient.
= = =
Often cited comparisons which look only at the US find that today's crisis
is milder than the Great Depression.
In this column, two leading economic historians show that the world economy is
now plummeting as it did in the Great Depression; indeed, world industrial
production, trade and stock markets are diving faster now than during 1929-30.
Fortunately, the policy response to date is much better.
The parallels between the Great Depression of the 1930s and our current Great
Recession have been widely remarked upon. Paul Krugman has compared the fall in
US industrial production from its mid-1929 and late-2007 peaks, showing that it
has been milder this time. On this basis he refers to the current situation,
with characteristic black humour, as only "half a Great Depression." The "Four
Bad Bears" graph comparing the Dow in 1929-30 and S&P 500 in 2008-9 has
similarly had wide circulation (Short 2009). It shows the US stock market since
late 2007 falling just about as fast as in 1929-30.
~~~See full report with simple charts at link:
http://www.nakedcapitalism.com/2009/04/world-economy-falling-faster-than-in.html
