Great Depression Two and Recession

Introduction

In April 2009, six months long after the fall of Lehman Brothers, when everything seemed possible to happen in the financial system and real economy, two economic historians, many articles published statistical and historical comparison of the Great Depression to the current crisis. His analysis was more pessimistic than had hitherto appeared: what are happening are all the dimensions of depression and the Great Recession label may fall short (Barker, 98).

How is it based? In most of the work on the Great Depression, Great Recession collated the U.S. in the thirties with the first decade of the century, but the Great Depression and was a global phenomenon (only saved from itself the Soviet Union, which had a different political and economic system), as is the current crisis. If you studied what was happened in the whole planet, "generally are in a similar situation, if not worse than the Great Depression, whether the metric is industrial production, exports or if the value of shares. We are facing an event that has all the dimensions of a depression."

It was published only been two years since the origin of the crazy mortgage problems, and the Great Depression lasted over a decade, so it took more time perspective. And that policy responses century (very low interest rates, subsidies for big banks fall and not to generate panic among its customers, plans to stimulate the real economy) seemed to be working and have been more appropriate and faster than those introduced by President Hoover and Treasury Secretary Andrew Mellon, between 1929 and 1932, dominated by the laissez-faire. What would today Galbraith of austerity policies being implemented to overcome this devilish situation?

This continues among analysts play of similarities and differences between the two major contractions in the history of capitalism. Although you have to watch a lot of unqualified analogical thinking, the last comparison that has become fashionable is between 1937 and 2011. In 1937, seven years before the crash of the New York Stock Exchange and four since President Roosevelt began to implement a Keynesian economic policy which he called New Deal, based on increasing public investment, financial reforms, a greater balance of power between employers and unions, and the generation of jobs and social protection to the poor.

United States

Great Britain

France

Germany

Industrial production

-46%

-23%

-24%

-41%

Wholesale prices

-32%

-33%

-34%

-29%

Foreign trade

-70%

-60%

-54%

-61%

Unemployment

607%

129%

214%

232%

Recovery from Crisis

The economist Christina Rohmer, who was chief economic advisers of President Obama, tells what happened: "The recovery in the four years after Franklin Delano Roosevelt took possession in 1933 was incredibly fast. The real annual GDP growth was 9% on average. Unemployment fell from 25% to 14%. Apart from the World War II, the U.S. has never experienced such fast growth. However, this growth was stopped by a second big drop in 1937 - 1938, when unemployment rose again to 19%. The fundamental cause of this second recession was an unfortunate and largely involuntary shift to a contractionary fiscal and monetary policy. [Spending cuts and tax increases] reduced the deficit to about 2.5% of GDP, putting ...