Arnold Kling  

Top Ten Economic Contractions?

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What are the ten most important episodes of economic contraction to study? Some obvious ones:

1. The Great Depression in the U.S.
2. The Great Depression in Europe
3. The Japanese slump of the 1990's and beyond
4. The oil shock of 1973-75

What about other countries and other time periods? Should the British slump that followed Churchill's restoration of pre-war gold parity be included, separately from the Great Depression?


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COMMENTS (14 to date)
Scott Wentland writes:

It's not a sexy answer, but how about any "run of the mill" recession? Shouldn't we try to understand those before we obsess over the once in a 100 years outliers?

I think this is true in a lot of places except macroeconomics. It's common to just throw out the outliers, but in macro, those are the data points that actually get all the attention.

Floccina writes:

Why not the depression of 1920. It might be just as enlightening to study depressions that turned around quickly.

Also how about the long depression of 1891 and the the Panic of 1837.

Daniel Kuehn writes:

I would add 1920-21 to contrast with demand-side recessions that get a lot of press.

There's a lot of talk about benign vs. malign inflation, but less about benign deflation - for that perhaps 1873. It was important as a historical event and also affords the opportunity to talk about benign deflations.

I think "jobless recoveries" are still an important topic that merits a lot of thought. 1992 might be quintessential for that.

Peter St. Onge writes:

I'd vote for the Panic of 1837 as the closest dry-run to a Wile E. Coyote on the current debt/inflation gig. Next go-round the Fed plays Second Bank of US, Tea Party plays Jacksonian Democrats, GMU econ plays Kitchen Cabinet.

Amaturus writes:

The hyperinflation spell in Germany during the early Weimar Republic.

A dude writes:

Will be ridiculed by many, but Soviet Union's collapse was predicated by many of the same demographic and extensive (as opposed to intensive) resource utilization factors. Basically it relied on extensive growth in labor, land, and energy resources. What the growth stopped the society collapsed. The back end of the boomer wave is similar in magnitude, similar oil dependency in the US.

A dude writes:

Sorry for double post...

What the growth stopped the society collapsed = WHEN the growth (in these factors) stopped...

Other parallels -- Russia's domination of its vassal states (and claim on their resources) is similar to the US domination of post-WW2 Europe and Japan. Afghanistan.

MichaelM writes:

I say the Panic of 1825 in Britain and the subsequent depression is incredibly important, perhaps the most so when compared to how much attention it actually gets. Include the general economic instability worldwide (The Panic of 1819 in the US, for instance) and you've got what I believe to be the proto-typical model for modern debt-driven boom bust cycles.

D. F. Linton writes:

How about the depression that did not happen after WWII. Any macro explanation that involves aggregate demand and any hint of a government spending multiplier must do more than wave its hands at this case.

Doc Merlin writes:

How about the Black Death between 1348 and 1350? I think that beats anything modern by a long shot.

Peter writes:

@Doc Merlin

I was thinking about that but then thought about it a second time based on the criteria "economic contraction to study". While it had a massive effect on productivity I'm not quite sure if it was interesting from an economic perspective. It didn't break the guilds nor (and I am not an expert) have any major economic impact short of simply shifting the S/D curve left by a huge absolute number while leaving the equilibrium the same.

Peter St. Onge writes:

@Peter, Marlin:

Another way to look at the plague is as a symptom, not a cause. Other words, plague was a constant threat over centuries, reason it broke out in 1340's was due to overall economic decline, as a result of advancing statism in the era.

It's a bit like looking at the Barbarian Invasions in isolation from Rome's economic decline.

Brian Clendinen writes:

How about Taiwanies growth for a generation? Itwas highly command and control yet it grew like crazy. Never quite understood how a non-democratic government that from what I know regulated everything in business, paid for all schooling including college but had quotes on degree types, and was highly protectionist could grow like crazy for so long.

South Sea Bubble of 1720 had international ramifications.

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