On an annual basis, the volume of world trade fell by 25-30% between 1929 and 1932. If you use quarterly data, you can push the peak to trough Great Depression trade decline up to around 35%.
The latest data indicate that the volume of world trade fell by 13% between August and December 2008. We are not only on track, we are ahead of schedule. Everything now depends on the policy response.
One of the alarming features of the current crisis is that way in which the short run protectionist pressures it is giving rise to are being superimposed upon longer run pressures that having been undermining support for globalization for some time — in particular, the feeling that it is harming poorer workers in richer countries. Equally alarming is the fact that all this is happening at the start of a century which will be marked by a shifting geopolitical equilibrium — which is always risky — and by renewed concerns about resource scarcity — which is riskier yet.
An essay just published by Bruegel tries to provide some historical context for all of this. Anyone interested in learning more can read this book.
Simon Johnson is alarmed about the very striking recent spike in Irish CDS spreads.
This article in the Guardian is going to infuriate British readers — not that they have any particular right to be infuriated, while British territories continue to operate as tax havens.
None of this is sustainable in the long run, and we need to start planning for the long run now.
It was always obvious that the crisis would put global economic multilateralism under pressure. But today’s roundup from Eurointelligence makes grim reading. Incredibly, the crisis seems to be threatening economic openness within the European Union itself, as a result of President Sarkozy’s comments on French car companies operating in eastern Europe.
I don’t believe that the future of the European project will depend on what happens in a couple of peripheral economies of marginal significance. Rather, it will depend on the answer to two fundamental questions. How much do the Germans really want the Single Currency? And how much do the French really want the Single Market?
While I remain optimistic, we are only a year into this crisis. By the time we are through with it, the answer could yet turn out to be: ‘not enough’.