Just heard the argument that Sweden and Britain recovered from the great depression before USA. And the argument was that they were more interventionalistic and they went off the gold standard earlier. I would like some comments on this as I cant seem to find any articles on this subject.
Okay so just a quick disclaimer I do not know much about the history of either of these places however I think I have at least a workable answer.
Going off of the gold standard might have helped Britain, as it was basically already in a slump before the great depression because the pound was hopelessly overvalued. As for Sweden, it was in many ways riding off of the back of Germany. As Germany went into its war boom exports to Germany from Sweden skyrocketed. Also, who cares when they went off the gold standard? The U.S went off in 1933....
Hm, interesting. If i remember correctly, public expenditure barely reached 15 percent of GDP throughout the 30s, whereas it reached above 20 percent in US (http://www.usgovernmentspending.com/us_20th_century_chart.html). Then, of course, these numbers are probably not 100% correct.
Swedens forsake of the gold standard 1931 also led to a pretty heavy devaluation, wich helped increased the export very much, maybe that could cause a chimera recovery? "Devaluation is like peeing in your pants - it warms good in the beginning, but then it gets unpleasant".
The Keynesian response would be that unemployment of resources was worse in the United States than it was in Europe. Do you have any information on what unemployment was in Sweden during the 30's? I know the worst it got in America was somewhere around 25%. These are official government statistics of course.
Swedens forsake of the gold standard 1931 also led to a pretty heavy devaluation, wich helped increased the export very much, maybe that could cause a chimera recovery?
I don't see how devaluation can cause a recovery. As on economist put it, "Devaluation is the exportation of purchasing power", and I think that's very true. The Swedish government was essentially subsidizing exports at the expense of domestic industries of Sweden, who's operating costs would rise as the krona would now purchase less on the international market. Devaluation will also lead to a rise in domestic prices as demand for goods and services in the devaluating country increases and industry becomes more export-oriented.
"I don't see how devaluation can cause a recovery."
Devaluation leads to an effective decrease in wages and therefore it can instigate a bizarre type of recovery by imitating the readjustment period where wages decrease and the economy is brought back to full employment.
I will give you more information but here is a hugely important one:
The U.S. experienced a 1920's boom of 43% real GDP growth
The U.K. experienced 1920's stagnation, experiencing 15% real GDP growth.
So the U.S. had further to fall.
(Can't figure out how the quote-function works...)
The largest unemployment rate in modern history for Sweden is 25%, wich the country reached in the depression of early 1920. Throughout the 20's we had an unemployment rate of about 10-12%. It then increased about 10 percentage during The Great Depression, to slightly over 20%, 22% at the top one or two months maybe. This is according to the national accounts wich are used in the history classes here, and again, this kind of old data isn't super-reliable.
I guess you're right. But in the short run, maybe it can seem like a recovery, even if it's false, due to the rais in "aggregate demand"? And it also might undermine the labour costs for businesses because the wages don't adjust for inflation that quick.
Maybe it would be valuable to look att the structur of the economy as well, for example the primary sector of GDP. From what I have understand the people dependent on the primary sector got hit the most.
Furthermore. The argument is that Sweden was the first nation to fully recover from the great depression in 1934 since it followed the path of deficit spending. And I read that the New Deal was inspired by the successfull policies from Sweden!
Swedens deficit where only slightly above 1% of GDP throughout the whole 30's I think (hard to find data). According to the following documents, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2007/pdf/hist.pdf, US had a deficit about 4,0% -32 and 6,9% -36.
As far I know, the swedish minister of finance during the Great Depression were inspired by Keynes and Karl Marx, at least Wigforrs (minister of finance 1932 and further - he was mainly a marxist theorist. 1930 were the times when social engineering started in Sweden and gradually grew to a living hell... Economic freedom was no longer a mean of wealth creation, and the disrespect for economic liberty also took root in the disrespect for the "social" liberty. The socialdemocrats started forced sterilization on the people 1934.
nofx:Just heard the argument that Sweden and Britain recovered from the great depression before USA. And the argument was that they were more interventionalistic and they went off the gold standard earlier. I would like some comments on this as I cant seem to find any articles on this subject.
Johan Norberg has written extensively on Swedish economic policy...however I'm not sure if all of his works have been published in English. You might look into it.
Johannes:(Can't figure out how the quote-function works...)
Most countries abandoned the gold standard and devalued their currencies in the early to mid '30's.
Is it just a coincidence that this trade war occurred less than a decade before you-know-what?
"Just heard the argument that Sweden and Britain recovered from the great depression before USA. And the argument was that they were more interventionalistic and they went off the gold standard earlier. I would like some comments on this as I cant seem to find any articles on this subject."
Search and you shall find - check out Murphy's The Gold Standard and the Great Depression, which explicitly goes into the dating question. And as for Sweden, it was a lot more free-market oriented than it's given credit for.
Mises Wiki | Economic Resources and Books (search engine)
Thank you. Im from Scandinavia so swedish is fine for me.
I haven't read it myself but the book "Hur Sverige blev rikt" ("How Sweden got rich") by Johan Myhrman contains a chapter about The Great Depression and argues with facts that it was not due to any intervention-policy. I have read a summary of the book and it really seems like it's worth reading.