A Tale of Two Depressions
Posted: 2009-06-30 10:48pm
Some people who've been reading my posts & commentary on the current economic crisis think I'm overly pessimistic or crying wolf when I say it's as bad as the Great Depression, with the potential for being far worse if the people in charge continue with their boneheaded policies. There's been countless people writing blogs & so forth on the comparison between now and the 1930's, but the following is the first time I've seen the key measures put together in a series of charts.
There's a whole bunch of charts which I can't format in a post here, so I'll put in a link and excerpt a few key sections and charts.
A Tale of Two Depressions
There's a whole bunch of charts which I can't format in a post here, so I'll put in a link and excerpt a few key sections and charts.
A Tale of Two Depressions
Unfortunately we don't have comparable unemployment figures going back to the 1920's, the methodology has been changed several times in the intervening years and today's numbers can't be compared with those from the Depression. In those days they simply asked people if they wanted to work and if they had a job, if the answers were yes and no, respectively, then person was counted as unemployed. Nowadays it's a lot more complicated & involved (and manipulated), the closest measure we have is the U-6 numbers in the unemployment report.This is an update of the authors' 6 April 2009 column comparing today's global crisis to the Great Depression. 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 update shows that trade and stock markets have shown some improvement without reversing the overall conclusion -- today's crisis is at least as bad as the Great Depression.
Editor’s note: The 6 April 2009 Vox column by Barry Eichengreen and Kevin O’Rourke shattered all Vox readership records, with 30,000 views in less than 48 hours and over 100,000 within the week. The authors will update the charts as new data emerges; this updated column is the first, presenting monthly data up to April 2009. (The updates and much more will eventually appear in a paper the authors are writing a paper for Economic Policy.)
New findings:
* World industrial production continues to track closely the 1930s fall, with no clear signs of ‘green shoots’.
* World stock markets have rebounded a bit since March, and world trade has stabilised, but these are still following paths far below the ones they followed in the Great Depression.
* There are new charts for individual nations’ industrial output. The big-4 EU nations divide north-south; today’s German and British industrial output are closely tracking their rate of fall in the 1930s, while Italy and France are doing much worse.
* The North Americans (US & Canada) continue to see their industrial output fall approximately in line with what happened in the 1929 crisis, with no clear signs of a turn around.
* Japan’s industrial output in February was 25 percentage points lower than at the equivalent stage in the Great Depression. There was however a sharp rebound in March.
Government budget deficits/surplus as a percentage of GDP
Conclusion
To summarise: the world is currently undergoing an economic shock every bit as big as the Great Depression shock of 1929-30. Looking just at the US leads one to overlook how alarming the current situation is even in comparison with 1929-30.
The good news, of course, is that the policy response is very different. The question now is whether that policy response will work. For the answer, stay tuned for our next column.
