In this paper, I offer some preliminary comparisons between the trade collapses of the Great Depression and Great Recession. The commodity composition of the two trade collapses was quite similar, but the latter collapse was much sharper due to the spread of manufacturing across the globe during the intervening period. The increasing importance of manufacturing also meant that the trade collapse was more geographically balanced in the later episode. Protectionism was much more severe during the 1930s than after 2008, and in the UK case at least helped to skew the direction of trade away from multilateralism and towards Empire. This had dangerous political consequences.
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The latter calculation excludes Soviet bloc countries.
The Conservatives were the traditional protectionist party in Britain: To that extent, today’s Tory Brexiteers are merely reverting to type.
Madsen (2001) is an exception.
Estevadeordal and others (2003) estimate a gravity trade model using pooled data for 1913, 1928 and 1938. They find large negative coefficients on average tariffs, although these are often statistically insignificant at conventional levels. They also find that world trade could have been about 50 percent higher in the 1930s than it actually was if world tariffs had stayed at their 1913 levels. However, their counterfactual does not address the issue of what the impact was of the increase in protection after 1929 on world trade between 1929 and 1932. Similarly, Jacks and others (2011) do not address the issue of what caused the trade collapse of 1929–1933, although they find that for the entire 1921–1939 period, rising trade costs fully offset the impact of GDP growth on world trade flows.
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Revised version of a paper prepared for IMF-BNM-IMFER Conference on Globalization in the Aftermath of the Crisis and the IMF Economic Review. The research on which this paper is based was in part funded by the European Research Council under the European Union’s Seventh Framework Programme (FP7/2007–2013)/ERC Grant Agreement No. 249546. The paper draws on many collaborations, and I am extremely grateful to my co-authors: Miguel Almunia, Agustín Bénétrix, Roberto Bonfatti, Alan de Bromhead, Barry Eichengreen, Alan Fernihough, Ronald Findlay, William Hynes, David Jacks, Markus Lampe, Gisela Rua, and Jeffrey Williamson. The usual disclaimer applies.