Free Trade Fact of the Day
Conn Carroll /
Today’s Free Trade Fact of the Day Cato Institute’s Center for Trade Policy Studies director Daniel Griswold who shows that the lowering of trade barriers reduces the number of recessions and their length:
According to the NBER, our economy has been in recession a total of 16 months in the past 25 years, or 5.3 percent of the time. In comparison, between 1945 and 1983, the nation suffered through nine recessions totaling 96 months, or 21.1 percent of that time period.4 (See table 1.) In any given month, the country was four times more likely to be in recession in the post-war decades before 1983 than since then. And even if the U.S. economy has already entered a recession in 2008, the expansion that began after the 2001 recession would have lasted six years–making it the fourth-longest expansion since 1945.
The more recent globalized growth also compares favorably with the supposed Golden Age of the late 19th and early 20th centuries, when U.S. manufacturers were protected by high tariffs. The era of protection so admired by skeptics of trade was also a time of dramatic boom and bust cycles. From 1854 to 1944, according to the NBER, the U.S. economy suffered 21 recessions averaging 21 months in length. During that time, despite tremendous growth, the U.S. economy was contracting 41 percent of the time. A depression in the 1870s lasted more than five years. The “Gay Nineties” (1890-99) and the “Roaring Twenties” (1920-29) each witnessed all or parts of four recessions.6 And we should always remember that the Great Depression of the 1930s occurred on the protectionists’ watch.