What Will Cause a Great Depression?

Posted by | February 03, 2009 | Uncategorized | 3 Comments

Politics, Protectionism and Patriotism.

[despite popular outrage that British workers should have to find work in Europe, as recently as the 80s, this phenomenon was commonplace enough to be the subject of the sitcom above, about migrant UK builders in Germany]

The is alarming evidence building that co-ordinated efforts to ward off a depression could fail because of a political climate which will demand suicidal protectionism.

Here is what looks like a reasonable blog post attacking UK anti-protectionist politician, Peter Mandelson, someone who is certainly worth attacking, but not for these reasons. What I am about to argue seems ridiculous, that the attitude expressed in an innocuous blog post which is entirely representative of the popular mood, is terrifyingly dangerous, points to a political climate which will cause a depression wherever it takes hold and leads to fascism when unchecked. The problem is that this meme will spread through nice enough people.

During the Great Depression American manufacturing slumped causing misery among workers and creating the the political environment for the introduction of the highest import duties in US history. A chain reaction of protectionism spread throughout the world, global industrial production fell 36% in three years and world trade dropped by 62%.

People who know this, such as Britain’s Euro-politician, Peter Mandelson, are panicking. A series of wildcat strikes in the UK against workers from another EU country is feeding populist anger that British jobs should be for British people. This is a reaction which provably leads to less jobs for British people if the trade of workers and capital throughout Europe is stymied. On the other hand, to tell British workers that they should get jobs in Europe and stop being racist (as Mandelson, who is nothing if not a schemer and political animal, and therefore should know better) is politically useless and will deepen that anger, even if it is a fact.

People who try and teach the facts of evolution to religious people often show a similar naivety, thinking that reason is a weapon against a belief held for emotional reasons. We are on a dangerous path that leads to a depression, because of the way people feel when they are suffering, when the root causes are not immediately visible and there is an understandable denial that their previous lifestyle was an unsustainable fiction.

People are currently angry, and human beings are naturally tribal. It is much more likely that a country of angry people will cripple itself attacking trade with other tribes, than accept than suddenly join hands with those of another and accept lower status, working for them. For the UK in particular, the recent past has been forgotten. Migrant British workers were the subject of a popular sitcom, Auf Wiedersehen Pet, as recently as the 80s. The previous reality of British builders working in barracks in Germany was been replaced by migrant Poles coming to a booming UK and living of the fumes of fraudulently leveraged banking and fictitious housing asset prices. With jobs disappearing in Britain, people are less happy about European workers.

The solution to this protectionist climate is to create a scapegoat other than racism. This is obviously playing with fire, but channeling rage against the banking industry may actually be an alternative which has some constructive benefits. Anti-usury legislation, transparency and accountability with risks of over regulation would be preferable to racism and destruction in trade.

If Britain goes down the route of protectionism it may only hurt the UK, but if it shows an inexorable trend capable of spreading worldwide, then a political solution capable of channeling people’s anger and convincing people to avoid protectionism needs to be found. The facts will not speak for themselves in politics, as many scientists know.


  • Josh says:

    David, your post is especially thought-provoking since our recent Presidential election brought a “man of color” into the Oval Office.

    Bread and Circus, my friend. Bread and Circus.

  • I’m doing a on the cause of the great depression and your blog is really alot of help, but I am looking for even more detailed info. I found this article cause of the great depression but I’m not sure I believe the ‘official’ story… I’m trying to find the REAL cause of the great depression, if you have any tips of some other additional sources for info please let me know.thank you

  • You could have a wonderful technique of placing elements into perspective.