The Anatomy of a Trade Collapse: The UK, 1929-33
A recent literature explores the nature and causes of the collapse in international trade during 2008 and 2009. The decline was particularly great for automobiles and industrial supplies; it occurred largely along the intensive margin; quantities fell by more than prices; and prices fell less for differentiated products. Do these stylised facts apply to trade collapses more generally? This paper uses detailed, commodity specific information on UK imports between 1929 and 1933, to see to what extent the trade collapses of the Great Depression and Great Recession resembled each other. It also compares the free trading trade collapse of 1929-31 with the protectionist collapse of 1931-3, to see to what extent protection, and gradual recovery from the Great Depression, mattered for UK trade patterns. Deflation was a feature of the 1930s trade collapse, and after 1931 protectionism made the UK's trade collapse geographically unbalanced. Many other features of the two trade collapses are remarkably similar, however. Both took place along the intensive rather than the extensive margin; the same types of goods were particularly badly hit in both instances; and prices of differentiated durable manufactured goods barely fell on either occasion.
O’Rourke gratefully acknowledges the financial support of the ERC, under the European Union’s Seventh Framework Programme (FP7/2007-2013), ERC grant agreement no. 249546; the Oxford History Faculty’s Sanderson Fund; and the John Fell OUP Research Fund. We also thank the staff of the Bodleian Library for their assistance. We are especially grateful to Marina Chuchko and Anna Schwarz for their hard work in typing in the data. We received many helpful comments from participants at the conference on “Labour Markets and Living Standards in Britain, 1870-1960”, held in honour of Tim Hatton at the University of Essex on June 26-27, 2017, and we thank both the participants and organisers. The usual disclaimer applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.