A Comparison of the Effects of 1929 Great Depression With the Effects of 2008 Global Financial Crisis: Policies Pursued in the Developed, Less Developed and Newly Industrializing Countries

Abstract

A comparison of the Great Depression of 1929-39 with the present global financial crisis and global recession that broke out in the last quarter of 2008 will provide useful insights about economic developments in the world and changes and progress in the understanding of economics and implementation of economic policies. There is no doubt that the Great Depression was the deepest depression compared to the previous business cycles and depressions and, thankfully was never paralleled. The 2008 economic crisis, on the other hand, was the worst encountered excepting the former mentioned. At the time of the 1929 Great Depression, however, economic theory, hence economic policy implementation was not too advanced to draw out effective anti-depression policies. In fact, most policies implemented by the USA and European countries actually deepened and lengthened the depression. In contrast, the 2008 economic crisis took place in a highly globalized world and when countries were at a much higher economic and technological level compared to 1929 Great Depression. Economic theory had also progressed sufficiently to guide countries to implement policies that prevent the recession and at least that prevent it to grow further into a deep depression. Within a highly globalized world economy, the financial crisis and recession fast spread throughout the world, the developed, the less developed and newly industrializing countries as well as the emerging markets. But all countries were quick to implement effective measures against it in a milieu of cooperation. Thus, as the crisis was globalized, the response to the crisis was also globalized. A short review of the Great Depression followed again by a short account of the present economic crisis will bring to light the above points more clearly. The first part of the article will cover a review of the 1929-39 Great Depression and the developments since the Great Depression up till the present times. The second part will cover the 2008 Financial Crisis and its effects on the developed countries (DCs), namely USA, Europe and Japan, the effects on the less developed countries (LDCs), newly industrializing countries (NICs) and Balkan, Russia, India and China (BRICs) will be followed before dealing with the after-effects of the crisis and reaching the conclusions.Keywords: Great Depression, global financial crisis, economic policies, policy measures during crisis