Dan O’Brien has an optimistic piece in today’s IT on why the political effects of the crisis have not been as noxious as the impact of the Great Depression. He lists three reasons: incomes have declined, but from a much higher base; there are no credible political alternatives, such as were offered by communism and fascism in the 1930s; and we are more tolerant and less nationalistic today.
I am surprised that he doesn’t mention a rather obvious fourth candidate: the size of the economic collapse has been much less this time around (except in a few unimportant countries such as our own). The duration has been shorter, also, and I think that is very important: after 1929 some economies continued to contract until 1932 or 1933. And this crucial difference is due to different policy responses: much more aggressive monetary policies, fiscal stimuli, and much more important automatic stabilisers.
The extent to which Europeans have become more tolerant can be exaggerated. In 1928, the Nazis only got 2.6% of the German vote. Contrast this to the 13.9% received by the anti-immigration Dansk Folkeparti in 2007, before our crisis started, or the 5.9% achieved by Geert Wilders’ revolting party in 2006. Since 2008, the political extremes have benefitted, just as Hitler did (the Nazis’ share of the vote jumped to 18.3% in 1930). Wilders’ party received 15.5% of the vote in 2010, while the terrifying Jobbik got 16.7% of the vote in the first round in Hungary. Sarkozy has been actively courting the xenophobic vote in France this summer. There are probably a few other examples around which people could point to.
Severe recessions can still bring out the worst in people, it seeems.