‘The Great Depression’ versus ‘The Great Recession’. Financial crashes and industrial slumps

Abstract

This article analyzes and compares the performance of the industrial sector during the «Great Depression» of the 1930s and the «Great Recession» that began in 2007 using the best available synthetic indicator, the Index of Industrial Production. The main objective is to update and extend the exercise presented by Barry Eichengreen and Kevin O’Rourke in 2009 and 2010 in the voxEU website. In addition to extending the analysis of the «Great Recession» with the latest monthly figures available for the world as a whole, we have introduced regional and country level analysis, and also a broader view using annual data for periods of around twenty years. The results generally confirm what was observed by Eichengreen and O’Rourke and other authors who have dealt with industrial activity. However, our approach emphasizes two elements that we believe should be incorporated into the debate: the actual development of the industrial sector (especially the manufacturing subsector) in the years preceding each crisis and the stage of development of the prevailing technological paradigm when the productive contraction occurred.