- New Directions in Modern Economics series
Chapter 7: Policies versus Self-Adjustment
1. A NEW GREAT DEPRESSION? The present slump seems to be more severe than any of the past recessionary experiences that have occurred since World War II. The interaction between financial and real aspects on a world scale has certainly contributed to this result. It is quite natural to make a comparison with the Great Depression. This remains the most severe recession on record in many industrialized countries. In order to compare the current crisis with the Great Depression, it is useful to consider initial conditions, transmission and policy responses, as suggested by the IMF (2009). Some points are worth stressing. Firstly, the intensity of the production fall in the two crises has been very similar. Ten months after the peak, production fell by 12 per cent in both episodes. The difference afterwards was, however, dramatic: in fact, it fell for 35 months in the former, while it has shown signs of relief in the present situation. Secondly, unemployment rose to 25 per cent in the period 1929–33, while it has stayed around 10 per cent in the period 2007–09. Finally, while losses on household assets were about 3 per cent in the previous episode, in the current crises they have reached 17 per cent (see also Alumnia et al., 2009). Beyond statistical differences, it is important to stress two aspects. Firstly, although the epicentre of the crisis was in both cases the United States, the international situation was very different. Secondly, the policy responses during the two...
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.