Two World Depression Metrics Compared

Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley; and formerly Senior Policy Advisor at the International Monetary Fund and a CEPR Research Fellow has collaborated with Kevin H. O’Rourke, Professor of Economics at Trinity College Dublin and CEPR Research Fellow, to write an insightful article comparing the present economic downturn to the Great Depression of the 1930′s.

The two leading economic historians show that the world economy is now plummeting in a Great Depression like manner. Indeed, world industrial production, trade, and stock markets are diving faster now than during 1929-30. No wonder that government leaders around the world are so concerned. Events precipitated by the Great Depression directly contributed to horrible living conditions for billions of people and carried the world into World War Two.

Present world leaders may not fully know how to combat the present financial meltdown but they do know the dangers that it posts to world stability. Unfortunately, some of the hasty actions taken thus far, like trying to save financial institutions that have already failed, may make matters worse. While it very difficult for any leader to do nothing in a crisis situation, I maintain that it is better to do nothing than to quickly put into play a large number of not very well thought out policies and financial programs.

In their study Professors Eichengreen and O’Rourke compare world industrial output, world stock markets, the volume of world trade, central bank discount rates, money supplies, and government budget surpluses, than and now to draw a conclusion as to how the two periods compare. The analysis contains some well laid out charts to assist in the analysis.

As interesting as the article is it would be more beneficial if the learned professors had offered some solutions for the current crisis. To see the conclusions and to view the charts go to World Depressions compared.

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