Thursday, June 16, 2005
The coming trade war and global depression
By Henry C K Liu
Many historians have suggested that the 1929 stock market crash was not the cause of the Great Depression. If anything, the 1929 crash was the technical reflection of the inevitable fate of an overblown bubble economy. Yet stock market crashes can recover within a relatively short time with the help of effective government monetary measures, as demonstrated by the crashes of 1987 (23% drop, recovered in nine months), 1998 (36% drop, recovered in three months) and 2002 (37% drop, recovered in two months).
There was no quick recovery after the 1929 crash. Structurally, what made the Great Depression last for more than a decade from 1929 until the US entry into World War II in 1941 were the 1930 Smoot-Hawley tariffs, which put world trade into a tailspin from which it did not recover until the war began. While the US economy finally recovered through war mobilization after the Japanese attack on Pearl Harbor, Hawaii, on December 7, 1941, most of the world's market economies sank deeper into war-torn distress and did not fully recover until the Korean War boom in 1951. (more)
Worthwhile quote:
. . . . In the fifth WTO ministerial conference held in Cancun, Mexico, in September 2003, the richer countries rejected the demands of poorer nations for radical reform of agricultural subsidies that have decimated Third World agriculture. Failure to get the Doha Round back on track after the collapse of Cancun runs the danger of a global resurgence of protectionism, with the US leading the way. Larry Elliott reported on October 13, 2003, in The Guardian on the failed 2003 Cancun ministerial meeting: "The language of globalization is all about democracy, free trade and sharing the benefits of technological advance. The reality is about rule by elites, mercantilism and selfishness." Elliot noted that the process is full of paradoxes: why is it that in a world where human capital is supposed to be the new wealth of nations, labor is treated with such contempt?
[yeah! why zzat??]
By Henry C K Liu
Many historians have suggested that the 1929 stock market crash was not the cause of the Great Depression. If anything, the 1929 crash was the technical reflection of the inevitable fate of an overblown bubble economy. Yet stock market crashes can recover within a relatively short time with the help of effective government monetary measures, as demonstrated by the crashes of 1987 (23% drop, recovered in nine months), 1998 (36% drop, recovered in three months) and 2002 (37% drop, recovered in two months).
There was no quick recovery after the 1929 crash. Structurally, what made the Great Depression last for more than a decade from 1929 until the US entry into World War II in 1941 were the 1930 Smoot-Hawley tariffs, which put world trade into a tailspin from which it did not recover until the war began. While the US economy finally recovered through war mobilization after the Japanese attack on Pearl Harbor, Hawaii, on December 7, 1941, most of the world's market economies sank deeper into war-torn distress and did not fully recover until the Korean War boom in 1951. (more)
Worthwhile quote:
. . . . In the fifth WTO ministerial conference held in Cancun, Mexico, in September 2003, the richer countries rejected the demands of poorer nations for radical reform of agricultural subsidies that have decimated Third World agriculture. Failure to get the Doha Round back on track after the collapse of Cancun runs the danger of a global resurgence of protectionism, with the US leading the way. Larry Elliott reported on October 13, 2003, in The Guardian on the failed 2003 Cancun ministerial meeting: "The language of globalization is all about democracy, free trade and sharing the benefits of technological advance. The reality is about rule by elites, mercantilism and selfishness." Elliot noted that the process is full of paradoxes: why is it that in a world where human capital is supposed to be the new wealth of nations, labor is treated with such contempt?
[yeah! why zzat??]
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