The Recovery Myth by: Paul Rosenberg
Sun Jun 28, 2009 at 15:45
For all the talk of "green shoots", even the oxymoronic "jobless recovery" is almost certainly mythical, according to those with broader time horizons. For example, Martin Wolf, author of a mid-month (June 16) Financial Times article "The recession tracks the Great Depression". It begins:
Green shoots are bursting out. Or so we are told. But before concluding that the recession will soon be over, we must ask what history tells us. It is one of the guides we have to our present predicament. Fortunately, we do have the data. Unfortunately, the story they tell is an unhappy one.
Here's the four-part graph accompanying his article:
http://www.openleft.com/diary/13959/the-recovery-mythWolf draws directly on the work of Barry Eichengreen and Kevin H. O'Rourke, whose June 4 article at Voxeu.org, "A Tale of Two Depressions", carried this into note:
This is an update of the authors' 6 April 2009 column comparing today's global crisis to the Great Depression. World industrial production, trade, and stock markets are diving faster now than during 1929-30. Fortunately, the policy response to date is much better. The update shows that trade and stock markets have shown some improvement without reversing the overall conclusion -- today's crisis is at least as bad as the Great Depression.
The problem, of course, is that no politicians are talking this frankly about how bad it is, and since they aren't talking frankly, they aren't laying the groundwork for continuing and expanding the sort of robust policy response that's needed.
Regarding Eichengreen and O'Rourke's work, Wolf writes:
The bad news is that this recession fully matches the early part of the Great Depression. The good news is that the worst can still be averted.
First, global industrial output tracks the decline in industrial output during the Great Depression horrifyingly closely. Within Europe, the decline in the industrial output of France and Italy has been worse than at this point in the 1930s, while that of the UK and Germany is much the same. The declines in the US and Canada are also close to those in the 1930s. But Japan's industrial collapse has been far worse than in the 1930s, despite a very recent recovery.
Second, the collapse in the volume of world trade has been far worse than during the first year of the Great Depression. Indeed, the decline in world trade in the first year is equal to that in the first two years of the Great Depression. This is not because of protection, but because of collapsing demand for manufactures.
Third, despite the recent bounce, the decline in world stock markets is far bigger than in the corresponding period of the Great Depression.
The two authors sum up starkly: "Globally we are tracking or doing even worse than the Great Depression ... This is a Depression-sized event."
And that is the great unspoken truth that has Versailles whistling past the graveyard. .......(more)
The complete piece is at:
http://www.openleft.com/diary/13959/the-recovery-myth
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