Not such a Great Depression

We're used to hearing that the current Greek depression is the longest and deepest since World War II, aren't we? And that the worst depression in history was the US's Great Depression?

Via the FT's Tony Tassell comes this chart:

Looks like the fall of the Iron Curtain, the collapse of the Soviet Union and the first Gulf War did far more damage. Not to mention the numerous wars and crises in Africa. The current Greek depression just about makes it on to the bottom of this chart, and the other recent EU disasters don't even figure. 

I can't imagine what it is like to live through a GDP collapse of nearly 80%. But there are people alive today in Georgia and Iraq who remember that dreadful time all too well. And the appalling collapse suffered by Latvia in 1990-3 made their 2009 recession seem mild by comparison, even though it was the deepest of any country in the EU at that time. 

Nor are these all depressions of the past. Halfway up this chart is Syria, which has suffered a GDP collapse of 50% in the last five years - and we aren't talking about that, though we notice the refugees streaming into Turkey, Egypt and (of all places) Greece, and we don't know what to do about them. 

Now look at this chart:

Yes, that's right. Greece's depression is of a similar depth to the US in the 1930s, and on present trend will last longer. Recent developments may mean it deepens further, too. It may even catch up with Syria.

The next time someone claims the "mother of all depressions" was the US in the 1930s, will someone please show them Tony Tassell's chart?



  1. to be fair I doubt if anyone would include those counties in their thinking. Most would struggle to qualify for first world status.

    1. What an outrageous remark. I struggle to see why a 25% GDP fall in a rich Western country is the mother or all depressions, but an 80% fall in GDP in a much poorer country is shrugged off as unimportant. If that is what you mean by "to be fair" then I don't want to be fair.

  2. I doubt that any recession in the big chart shown first will have been due to the failure of the central bank in regulating the banking environment.

    Greece is unique, in that its crisis was entirely created by poor supervison of the ECB, its central bank, allowing big unbalances to develop before the crisis. So deficit and debt were not monitored, and the current accounts were left to develop enormous deficits. All fuelled by unregulated short term capital flows. That was on the way up to the year 2008, when unsustainable GDP growth was only fuelled by debt.

    So on the way down then, since 2008, instead of the ECB admitting joined responsiblity for its failed supervision, the ECB becomes the enforcer of a deflationary adjustment, which leads to the current disaster.

    The insistence of an internal devaluation through cutting budget deficits viciously (the IMF programme) has led to the current slump.

    So we have the Central Bank ECB, and the IMF/EU solely responsible for the worst recession in a western democracy ever! It already looks like 50% longer than the US Great Depression, and we have not bottomed out yet, as IMF/EU still insist on further austerity!

    Phantastic result and a credit to the European idea!.

    The only way to get a worse recession seems to be either to be a tinpot African country with a war, or some hopelessly uncompetitive ex-Soviet Union country with a change of system from communism to capitalism. Brilliant!

    Your second chart shows nicely, that the the ECB is even more incapable of dealing with a recession in Greece than

    1. Matt, I'm afraid your statement is nearly as outrageous as the first comment. The fact is that whatever sins the ECB may have committed, the consequences have been nowhere near as bad for Greece as disorderly regime change would be, especially if accompanied by war. I remind you too that a "sudden stop" such as Greece experienced is all too familiar in emerging markets, as is the buildup of unsustainable debt. Indeed it is the fact that these are associated with emerging markets, not rich Western countries, that encouraged policy makers to ignore the growing imbalances in the Eurozone. Greece may be unique among developed nations, but it is certainly not unique in the world.

  3. oh gee-Greece is suffering a Great Depression like the US in the 1930s - that's all. Big deal. We can all go home now. Who cares. A huge spike in suicides, HIV rates, what? What a charming post.

    1. And you have missed the point, too. Did you notice Syria on that list? That is CURRENTLY in a far worse depression than Greece. Does it get the air time the Greek depression does? No. Why? Because it's not a rich Western country.

    2. Well, neither's Greece now.

    3. Sorry but how can Syria, a war zone for the last 4 years, be compared economically to Greece? Other then ironically that is (well, at least you guys are not Syria yet). Of course, the comparison itself is telling, having to find a country that's being practically reduced to ruins to show that it could still get worse.

      PS. On the chart, Qatar's dates have a typo.

    4. I don't think war should be used to justify misuse of statistics.

    5. Justify no, go some way in explaining them probably yes. For example, how can you compare the damage to the economy that the ever changing hands and mostly destroyed oil refineries in Syria have with the effect that the perfectly working oil refineries in the outskirts of Athens have to the Greek economy? It's an absurd comparison.

      Syria's devastation is on a completely different level, the level of what Serbia went through in the 90's. Comparing it to what Greece is going through is selling them both short.

    6. Serbia's GDP fall was actually worse than Syria's is at the moment, see chart.

      It is precisely BECAUSE the supply-side destruction was (and is) so much worse in Serbia, Syria and the others that I make the comparison. I'm sick of the Western-centric view (or even US-centric view, with "mother of all depressions" comments). And I'm also sick of pretending that war is somehow different. Depression and war are both political decisions that have terrible consequences for people's lives.

  4. Considering only those taking place in a peace period? How meaningful to compare a GDP reduction caused by a war to one caused by political decisions?

    1. But wars are political decisions. And what is happening to Greece would in days gone by have been regarded as a war. It's just that these days, Western countries have new weapons. Using military force to blockade key supply routes would be a siege. But forcing closure of the banks by cutting off liquidity has the same effect, and yet is regarded as "peace"?

  5. Grigori Avramidi23 July 2015 at 10:09

    Living in the US, it seems the war in Syria gets more media coverage (over the years) than the Greek crisis. The latter is only covered when bailout negotiations make for ``spectacular'' news. The public is concerned with the extent to which the US is (or is not) involved in Syria, while it is not so concerned with Greece, and the media coverage reflects that. People are aware that 200,000-300,000 have died (!) in Syria and millions are refugees, while Greece is viewed as ``merely'' a financial crisis. I suspect that the media in most middle eastern countries is much more concerned with Syria than with Greece as well. It makes sense (to me) that the public in the EU should be concerned with the way the Greek crisis is (or is not) resolved since this has big potential implications for the future of the Eurozone and to a lesser extent the EU. As the GDP chart shows, the breakup of the Soviet Union was a terrible catastrophe for many of its member countries. Surely a potential breakup of the Eurozone should worry its citizens. The European media reflects this. There have been terrible humanitarian crises that get little media attention from the ``Western world'' (as anecdotal evidence I give my general awareness of this, together with my inability to give you the details of a specific one), usually when we in the West have no stake in the country that is affected. This is neither just nor fair, but I do think that it is an explanation.

    Is part of your point that we do not talk much about the economic aspect of the Syrian war, even though it has been much more economically destructive than the Greek debt crisis? If yes, I think this is because (1) on an emotional level, the terrible human cost in humans killed and displaced tells us more than an economic number (GDP fall), and (2) the way to solve the Syrian economic crisis is to (somehow!) end the war (then the GDP will start going up). I have no idea how to do that, but the problem seems clear and the solution is not an economic one. It is not at all clear (to me) how to end the Greek debt crisis anytime in the foreseeable future. Looking from the outside it is easy for (some of) us to say that it makes economic sense for the Greeks to take the risk of leaving the Euro/EU. It is much harder for someone living in Greece now to accept the uncertainty that comes with that, especially if that someone doubts the competence of their government and the response of the EU after the split.

    I see your point that, to someone living through one of these traumatic depressions, it doesn't much matter whether the depression is caused by an invading army or bad fiscal policy (and if the army is nearby the first is definitely worse). But, while we condemn an aggressive war, we usually do not condemn bad fiscal policy that is (almost) forced upon a country. The fact that this can have some (of course not all) effects that are just as bad as a destructive war is shocking to me, and I think it is shocking to many others who are not so familiar with economics. Are there many instances of bad economic policy forced on poor countries by the West (the IMF? or other international lenders?) with similarly disastrous effects? If yes, how do these cases compare to what is happening with Greece and where would they fit in the chart above (or below)?

    A remarkable fact is that many of the traumatic events of the last 65 years did not make this list. Where are the coups in Latin America, the Cuban revolution and subsequent embargo, or the wars in Korea, Vietnam and Afghanistan? Were these economically less destructive than the (first stage of the) Greek depression? Finally, what caused the massive depressions suffered by the former Soviet countries after the breakup of the USSR? Are the reasons political or economic (or is it impossible to separate the two)? Did any of the former Soviet countries do OK (avoid complete disaster) in the nineties? What made this breakup so destructive?

    1. This is a very interesting view. We in Europe talk much more about Greece than we do about Syria. But it seems that the US view is coloured by US involvement in what is in reality a brutal civil war, so the economic effects go unnoticed. That rather supports those who say that "depression caused by war doesn't count". But it's not reasonable. As far as people are concerned, starvation is starvation whether caused by bombing, sanctions or bad fiscal policy.

      I think your last questions are very telling indeed. There is so much information that we do not have. This could be a good PhD subject I think.

      The economic collapses after the breakup of the Soviet Union were of the same order as those we see in countries that lose wars. It is my view that the Cold War was the last and greatest of the 20th century World Wars, and the Soviet Union and its allies disastrously lost that war. Because it was a war fought out mainly in the economic sphere, the destruction it caused was mainly economic - though a lot of people still died or fled.

      We must start seeing economic and financial wars as real wars. Death is the same, whether it is from bombing or starvation.

  6. Any idea what happened in Qatar between 1986 and what I suppose is meant to be 1990 and Kuwait between 1979 and 1982? They seem to be outliers on a list which is otherwise dominated by war and the fall of Communism (and well known cases of fiscal or monetary policy disaster such as Greece and Zimbabwe). Perhaps I'm not that informed on the region as I like to think but all I can draw on is the decline of the oil price during those periods. While that was certainly important and dramatic, it couldn't explain such a decline by itself, could it?

    1. Kuwait supported Iraq in the Iran-Iraq War, which was costly. But I think the real problem was the collapse of the Souk-al-Manakh stock market bubble in 1982.

      Qatar's economy is totally dependent on oil exports. The 1986-90 recession is due to the 1986 oil price collapse. But it's a very rich country: a 50% fall in GDP doesn't translate into human misery on the same scale as a 50% fall in GDP in Syria.

  7. Frances few people look at 2nd or 3rd world countries when comparing depressions for good reason. It is comparing apples with oranges.
    I think I have read as many articles on depressions as the next man or woman and I do not recall it at all.

    How many depressions in the third world countries were imposed on them deliberately?
    The great difference between the USA and Greece is the USA muddled into its depression whereas the imposed fiscal policy was the reason for Greece and given the 'new' agreement it will now remain there after a somewhat tepid recovery.

    As I said you are comparing apples with oranges.

    I am not having a go at you by the way as I am 'advertising this down under.


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