The Great Depression Analogy
Whenever today’s economic crisis is discussed, analogies to the Great Depression are never far away, with the year 1929 almost always taken as a reference point. But two completely different pathologies were manifest in the Great Depression; each called for different diagnoses – and different cures.
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PRINCETON – Whenever today’s economic crisis is discussed, analogies to the Great Depression are never far away. In its latest “World Economic Outlook,” the IMF examines the analogy explicitly, in terms not only of the collapse of financial confidence, but also of the rapid decline in global trade and industrial activity. In general, history, rather than economic theory, seems to offer a guide to interpreting wildly surprising and inherently unpredictable events.