Depression and Protection: the Early Thirties and the Early Eighties Compared

Depression is the breeding-ground for protection. Thus, in addition to the production lost through unemployment and idle capacity, there is a further loss from the less efficient use of the world’s scarce resources. Nor is this all. For the protective barriers flung up and strengthened when times are bad may well remain in position when good times have returned — good times that would be better if these impediments to the freer flow of goods and services could be removed. This was what happened in the aftermath of the Great Depression of the early thirties when the gradual chipping away of protective policies proved to be a slow and arduous exercise. The recession of the early 1980s has obviously some similar features. Again the pressure for increased protection intensified and had succeeded, by 1984, to the point where a substantial proportion of world trade — perhaps half in the case of Britain — was affected by quota arrangements of one kind or another. Nor was this pressure then exhausted. On the contrary there was good reason to fear that the move away from freer world trade would continue. Thus the similarity with the experience of the thirties is clear enough, but there are also important differences, for a number of the determining factors are different, including the scale of the depression itself.