The Great Depression was marked by protectionist trade policies, competitive devaluation, and the breakdown of the multilateral trading system. Despite skirmishes, the world has largely avoided this fate, thus far. A return to protectionism, competitive devaluation, and contraction in global trade is one of the bigger mispriced risks in the world today.
“Between 1929 and 1932 global trade value in current U.S. dollars fell by 50 percent.”
“The demise of the gold standard splintered into currency blocs. Those that maintained a linkage to gold – the gold block countries of France, Belgium, Switzerland, and the Netherlands – applied surtaxes (‘exchange-dumping duties’) against countries devaluing their currencies.”
“Dozens of countries raised their tariffs after 1929, the Smoot-Hawley Tariff of 1930 in the United States being only the most prominent of the newly imposed restrictions on commerce.”
“Discriminatory measures were also used to favor trade with certain countries, as tariffs were supplemented by import quotas and licenses to favor particular sources of imports.”
“Trade blocs, currency blocs and the reorientation of world trade in the 1930s” (Eichengreen and Irwin)
“The Slide to Protectionism in the Great Depression: Who Succumbed and Why?” (Eichengreen and Irwin)
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