Are we in another Great Depression?
If you look at the figures for the world, rather than just the US, the answer is yes - or at least the patterns we see resemble the start of the Great Depression. Barry Eichengreen and Kevin O’Rourke have the graphs. The one below compares falls in world industrial output starting in June 1929 and April 2008. They have other graphs showing that global decreases in stock prices and trade are even starker than the Great Depression. However (and this is where the political economy comes in), they also show that the policy response to the crisis has been sharper - discount rates have been cut more rapidly, the money supply has expanded more, and governments seem much more willing to engage in deficit spending.
Comments
Very interesting article. I agree that we need to look at the global context, not just one country. I think it would also have been interesting for the authors to discuss trends in some measure of the global unemployment rate, since we often hear (for the U.S.) that unemployment is not as bad as during the Great Depression. I wonder how it compares if we look at the global economy.
Posted by: Phil | April 8, 2009 10:56 AM