THE GREAT DEPRESSION OF 2009-10?

There was an alarming little poll published a few days ago. It was alarming because it appears to indicate that many New Zealanders have yet to grasp the seriousness of the economic crisis the world is now in.

The poll was commissioned by the New Zealand Business Council for Sustainable Development and conducted online by its ShapeNZ website.

Between April 5 and 8 2469 New Zealanders were surveyed on 'the home, tax cuts and the economy'.

While surveys like this have to be treated with caution, the results displayed a remarkable naivety about the nature of this economic crisis.

More than a quarter of New Zealanders who did the survey expect the economy to be growing again within the next year and nearly two-thirds expect growth within two. Another 24 percent didn't expect to see any economic recovery for three years.

There doesn't appear to be any factual basis for this apparent optimism.

This bravado contrasts sharply with the mixed messages coming from the economic experts'.

The New Zealand Institute of Economic Research (NZIER), for instance, expects there to be modest growth in the New Zealand economy in 2009. They anticipate growth will then accelerate in 2010 and 2011.

This somewhat rosy picture contradicts with that of Treasury who said this month that the economy is in a lot worse shape than in predicted it would be in December. It expected GDP to shrink by 0.2 percent in 209 and 0.4 percent in 2010. It also said that the official unemployment would rise to 7.2 percent in 2010.

Some economic commentators though think that the official unemployment rate could rise well above 10 percent.

Perhaps the Minister of Finance Bill English was closer to the mark when he said that Treasury was 'guessing' with its economic predictions.

'No one knows quite what is going to happen,' he said in Parliament last week - although it would be fair to say that English thinks it's going to be really, really bad.

Of course neoliberal politicians, don't want to admit that the game is up. It's better to either just brazen it out or claim the picture is unclear.

Last week two influential economists released a report that provides substantial evidence that the world economy is nose diving into a Depression.

The report, titled 'A Tale of Two Depressions', was written by Barry Eichengreen, Professor of Economics and Political Science at the University of California, and Kevin H. O’Rourke, Professor of Economics at Trinity College Dublin.

Both economists say that this crisis, although it originated in the United States, has swept around the world and 'that events have taken an even uglier turn outside the US, with even larger falls in manufacturing production, exports and equity prices.

They have done a comparison between the peaks of world industrial production in June 1929 and April 2008.

The figures are both startling and chilling. They show that the decline in world industrial production in the last nine months has been at least as severe as in the nine months following the 1929 peak:



Eichengreen and O’Rourke also show that global stock markets are falling faster now than at any time during the Great Depression:



World trade is also falling faster now than in 1929-30:



The authors conclude: ' globally we are tracking or doing even worse than the Great Depression, whether the metric is industrial production, exports or equity valuations...The “Great Recession” label may turn out to be too optimistic. This is a Depression-sized event.'

Perhaps if authoritative reports like this were more widely circulated than our parliamentary 'representatives' would find it more diffcult to keep on stumbling down the same failed 'free market' path.