Barry Eichengreen and I have a short piece on Vox comparing the two global depressions that began in 1929 and 2008. Hopefully this one will not last as long as the one 80 years ago.
Barry Eichengreen and I have a short piece on Vox comparing the two global depressions that began in 1929 and 2008. Hopefully this one will not last as long as the one 80 years ago.
6 replies on “1929 vs 2008”
Great comparisons, Kevin.
You show that world trade and world stock markets have collapsed much more quickly now than in 1929. Could this presage a quicker, “V-shaped” recovery also?
Does globalization speed up everything?
Let’s hope so, given Ireland’s dependence on a quick global recovery, relevant not least (as we have noted) for the structural vs. cyclical deficit debate.
I don’t see how the sharpness of a collapse determines any particular style of recovery. That all depands on what the government does. The 1920-21 recessions in the US was marked by a collapse in GDP and prices sharper than that of 1929. Presidents Wilson and later Harding were clever enough not to do anything – in fact Harding slashed government spending.
The same cannot be said of the policymakers during the 1929 and 2009 recessions. We might be in for a long one.
I like Doug Irwin’s argument that the reason trade is collapsing so much faster now is that more of it involves manufactured goods now than then.
My view is that we will get out of this depression more quickly than last time if governments do the right thing, which they definitely didn’t do last time — as we show, they are at least moving in the right direction now. The question is, are they moving far and fast enough?
I really hope it’s V-shaped recovery too, provided no bubbles are re-inflated but my head tells me otherwise, latest prediction from George Soros
http://www.reuters.com/article/ousiv/idUSTRE53537D20090406
Krugman discusses the VoxEU piece in his blog. Let’s hope they’re right about lessons having been learnt…
Having got somewhat alarmed at the trade graph in that article, I had a stab at estimating relative trade intensities “now” and “then”:
http://ronanlyons.wordpress.com/2009/04/22/protectionist-backlash-or-falling-consumer-demand-is-the-world-in-danger-of-deglobalization/
Cheered me up a little – my intuition is that disaggregated supply chains mean collapsing trade now is consumer-driven rather than government/policy/tariff-driven.