The Great Depression in Europe: Selected Comparative Data on GDP

I have assembled data on real GDP loss during the Great depression in Western Europe for 12 nations: Austria, Germany, France, Netherlands, Switzerland, Belgium, Norway, Sweden, UK, Italy, Finland, and Denmark. Countries not listed are Portugal, Spain and Ireland.

We can rank the real output loss in Western European nations from the most severe to the least severe, as follows:

Nation | Real GDP loss | Years of Contraction
Austria | 22.45% | 1929–1933
Germany | 16.11% | 1929–1932
France | 14.65% | 1930–1932
Netherlands | 9.46% | 1930–1934
Switzerland | 8.02% | 1930–1932
Belgium | 7.89% | 1929–1932
Norway | 7.75% | 1931
Sweden | 6.20% | 1931–1932
UK | 5.80% | 1930–1931
Italy | 5.47% | 1930–1931
Finland | 3.97% | 1930–1932
Denmark | 2.62% | 1932

From this we can see that Austria and Germany had the most severe depressions in the data, with France not far behind.

The Netherlands, Switzerland, Belgium, Norway, Sweden and UK had real output losses ranging from 9.46 to 5.8%

Most surprising is how comparatively mild the Great Depression was in Finland and Denmark. I have not investigated why this is.

What is most interesting is that, of all nations in the data, Austria had the worst depression: it lost 22.45% of real GDP from 1929–1933. Also, as can be seen from the data below, its recovery was so poor it was almost stagnation.

In these years the country was run by the Austro-fascist Engelbert Dollfuss, who became Chancellor of Austria in May 1932. In March 1933, Dollfuss effectively abolished democracy, and established an authoritarian regime, but was assassinated in July 25, 1934 and replaced by another dictator called Kurt Schuschnigg, who was Chancellor from July 1934 to the Anschluss in March 1938. While Dollfuss engaged in some limited interventions in the economy, mostly he seems to have pursued deflationary austerity.

Hans-Hermann Hoppe tells us, quite shamelessly, that Mises was a close adviser of Dollfuss:

“Engelbert Dollfuss [sc. was] ... the Austrian Chancellor who tried to prevent the Nazis from taking over Austria. During this period Mises was chief economist for the Austrian Chamber of Commerce. Before Dollfuss was murdered for his politics, Mises was one of his closest advisers.”
Hans-Hermann Hoppe, “The Meaning of the Mises Papers,” Mises.org, April 1997

We can obtain some background on the type of policies implemented by the Austro-fascists:

“In tackling the economic crisis the Dollfuss-Schuschnigg dictatorship pursued harsh deflationary policies designed to balance the budget and stabilize the currency. The government’s program featured severe spending cuts, high interest rates, and frozen wages. …. In a sense the Christian Corporative regime demonstrated the viability of the Austrian state, but it did so at the cost of alienating a majority of the Austrian people. On the eve of Anschluss a third of the population was still out of work, while those fortunate enough to have jobs were bringing home paychecks considerably smaller than before the Great War” (Bukey 2000: 17).

“Beginning in in 1931, [Austrian] unemployment grew rapidly, reaching a peak in 1933–6, with between 24 and 26 per cent of the labour force out of work .... When, in 1937 and 1938, there was a modest recovery, unemployment never dropped below the 20 per cent value. This had a devastating effect on the legitimacy of the Austrian system .... As the Austrian government sustained its reluctance to apply Keynesian policies, the economic recovery never entered a serious tale-off phase in the second half of the 1930s. Linked to an exhausted determination of the Austrian government to resist the pressures from Germany, the economic crisis of the 1930s should be seen as an additional reason why the Austrian society was receptive to the annexation by Germany in March 1938” (Gerlich and Campbell 2000: 55).

I have also found some data on unemployment in Austria here (which appears to come indirectly from Maddison [1982]):

Austrian Unemployment (% of Total Labour Force)
Year | Unemployment Rate
1929 | 5.5%
1930 | 7.0%
1931 | 9.7%
1932 | 13.7%
1933 | 16.3%
1934 | 16.1%
1935 | 15.2%
1936 | 15.2%
1937 | 13.7%
1938 | 8.1%

Unemployment soared to 16.3% by 1933 and stayed virtually the same for a further three years. All in all, the unemployment data shows no serious decrease until 1938, the year Austria was integrated into the interventionist economy of Nazi Germany, after which unemployment fell rapidly (it fell to 3.2% by 1939 [Kirk 2002: 68]).

So the only nation where a major Austrian economist was giving some kind of policy advice (and I assume it was liquidationism) had one of the worst depressions (possibly the worst) in Western Europe and an unsuccessful recovery. Things were so bad that the Austrian population to some degree became sympathetic to the German annexation in 1938.

Certain lessons suggest themselves from this data, but I doubt whether Austrians have either the wit or intelligence to learn them.

To return to the broader issue here, a detailed analysis of the monetary and fiscal policies in each country is an enormous research task, but I will attempt gradually to fill it out in updates to this post. At present, I have some analysis on Norway (see below).

1. Italy

Real GDP in Italy, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 121 182 |
1929 | 125 180 | 3.29%
1930 | 119 014 | -4.92%
1931 | 118 323 | -0.58%
1932 | 122 140 | 3.22%
1933 | 121 317 | -0.67%
1934 | 121 826 | 0.41%
1935 | 133 559 | 9.63%
1936 | 133 792 | 0.17%
1937 | 142 954 | 6.84%
1938 | 143 981 | 0.71%
1939 | 154 470 | 7.28%
1940 | 155 424 | 0.61%
1941 | 153 517 | -1.22%
1942 | 151 610 | -1.24%
1943 | 137 307 | -9.43%
1944 | 111 562 | -18.74%
1945 | 87 342 | -21.70%
(Maddison 2003: 50).

From 1930 to 1931 the real GDP loss was 5.47%.

2. Austria

Real GDP in Austria, 1928–1938
* in millions of international Geary-Khamis dollars
1928 | 24 295 | 4.64%
1929 | 24 647 | 1.44%
1930 | 23 967 | -2.75%
1931 | 22 044 | -8.02%
1932 | 19 769 | -10.32%
1933 | 19 113 | -3.31%
1934 | 19 277 | 0.85%
1935 | 19 652 | 1.94%
1936 | 20 238 | 2.98%
1937 | 21 317 | 5.33%
1938 | 24 037 | 12.75%
1939 | 27 250 | 13.36%
1940 | 26 547 | -2.57%
1941 | 28 446 | 7.15%
1942 | 27 016 | -5.02%
1943 | 27 672 | 2.42%
1944 | 28 376 | 2.54%
1945 | 11 726 | -58.67%
(Maddison 2003: 50).

During Austria’s deflationary depression from 1929 to 1933, real output fell by 22.45%.

3. Switzerland

Real GDP in Switzerland, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 24 609 |
1929 | 25 466 | 3.48%
1930 | 25 301 | -0.64%
1931 | 24 246 | -4.16%
1932 | 23 422 | -3.39%
1933 | 24 593 | 4.99%
1934 | 24 642 | 0.19%
1935 | 24 543 | -0.40%
1936 | 24 626 | 0.33%
1937 | 25 796 | 4.75%
1938 | 26 785 | 3.83%
1939 | 26 752 | -0.12%
1940 | 27 032 | 1.04%
1941 | 26 851 | -0.66%
1942 | 26 175 | -2.51%
1943 | 25 944 | -0.88%
1944 | 26 571 | 2.41%
1945 | 34 202 | 28.71%
(Maddison 2003: 51).

The real output loss from 1930 to 1932 was 8.02%.

4. Germany

Real GDP in Germany, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 263 367 | 4.37%
1929 | 262 284 | -0.41%
1930 | 258 602 | -1.40%
1931 | 238 893 | -7.62%
1932 | 220 916 | -7.52%
1933 | 234 778 | 6.27%
1934 | 256 220 | 9.13%
1935 | 275 496 | 7.52%
1936 | 299 753 | 8.80%
1937 | 317 783 | 6.01%
1938 | 342 351 | 7.73%
1939 | 374 577 | 9.41%
1940 | 377 284 | 0.72%
1941 | 401 174 | 6.33%
1942 | 406 582 | 1.34%
1943 | 414 696 | 1.99%
1944 | 425 041 | 2.49%
1945 | 302 457 | -28.84%
(Maddison 2003: 50).

The real output loss from 1929 to 1932 was 16.11%, extended over four years of depression.

5. France

Real GDP in France, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 181 912 |
1929 | 194 193 | 6.75%
1930 | 188 558 | -2.90%
1931 | 177 288 | -5.97%
1932 | 165 729 | -6.51%
1933 | 177 577 | 7.14%
1934 | 175 843 | -0.97%
1935 | 171 364 | -2.54%
1936 | 177 866 | 3.79%
1937 | 188 125 | 5.76%
1938 | 187 402 | -0.38%
1939 | 200 840 | 7.17%
1940 | 165 729 | -17.48%
1941 | 131 052 | -20.92%
1942 | 117 470 | -10.36%
1943 | 111 546 | -5.04%
1944 | 94 207 | -15.54%
1945 | 102 154 | 8.43%
(Maddison 2003: 50).

The real output loss from 1930 to 1932 was 14.65%.

6. Netherlands

Real GDP in Netherlands, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 43 921 |
1929 | 44 270 | 0.79%
1930 | 44 170 | -0.22%
1931 | 41 475 | -6.10%
1932 | 40 901 | -1.38%
1933 | 40 826 | -0.18%
1934 | 40 078 | -1.83%
1935 | 41 575 | 3.73%
1936 | 44 195 | 6.30%
1937 | 46 716 | 5.70%
1938 | 45 593 | -2.40%
1939 | 48 687 | 6.78%
1940 | 42 898 | -11.89%
1941 | 40 627 | -5.29%
1942 | 37 133 | -8.60%
1943 | 36 235 | -2.41%
1944 | 24 306 | -32.92%
1945 | 24 880 | 2.36%
(Maddison 2003: 51).

The real output loss from 1930 to 1934 was 9.46%.

7. Belgium

Real GDP in Belgium, 1927–1945
* in millions of international Geary-Khamis dollars
1927 | 38 913 |
1928 | 40 951 | 5.23%
1929 | 40 595 | -0.86%
1930 | 40 207 | -0.95%
1931 | 39 496 | -1.76%
1932 | 37 717 | -4.50%
1933 | 38 525 | 2.14%
1934 | 38 202 | -0.83%
1935 | 40 563 | 6.18%
1936 | 40 854 | 0.71%
1937 | 41 404 | 1.34%
1938 | 40 466 | -2.26%
1939 | 43 216 | 6.79%
1940 | 38 072 | -11.90%
1941 | 36 067 | -5.26%
1942 | 32 962 | -8.60%
1943 | 32 198 | -2.31%
1944 | 34 094 | 5.88%
1945 | 36 132 | 5.97%
(Maddison 2003: 50).

From 1929 to 1932, there was a real output loss of 7.89%.

8. Denmark

Real GDP in Denmark, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 16 735 |
1929 | 17 855 | 6.69%
1930 | 18 917 | 5.94%
1931 | 19 127 | 1.11%
1932 | 18 625 | -2.62%
1933 | 19 220 | 3.19%
1934 | 19 804 | 3.03%
1935 | 20 247 | 2.23%
1936 | 20 749 | 2.47%
1937 | 21 251 | 2.41%
1938 | 21 765 | 2.41%
1939 | 22 803 | 4.76%
1940 | 19 606 | -14.0%
1941 | 17 668 | -9.88%
1942 | 18 065 | 2.24%
1943 | 20 061 | 11.04%
1944 | 22 161 | 10.46%
1945 | 20 493 | -7.52%
(Maddison 2003: 50).

Denmark’s real GDP loss was just 2.62% in 1932.

9. Norway

Real GDP in Norway, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 8 879
1929 | 9 705 | 9.30%
1930 | 10 421 | 7.37%
1931 | 9 613 | -7.75%
1932 | 10 255 | 6.67%
1933 | 10 500 | 2.38%
1934 | 10 837 | 3.20%
1935 | 11 302 | 4.29%
1936 | 11 993 | 6.11%
1937 | 12 422 | 3.57%
1938 | 12 734 | 2.51%
1939 | 13 339 | 4.75%
1940 | 12 152 | -8.89%
1941 | 12 446 | 2.41%
1942 | 11 963 | -3.88%
1943 | 11 724 | -1.99%
1944 | 11 112 | -5.22%
1945 | 12 452 | 12.05%
(Maddison 2003: 51).

In 1931 there was a real output loss of 7.75%.

Now Norway abandoned the gold standard in 1931 and implemented a loose and stimulative monetary policy, helping banks and apparently preventing financial collapse. A severe and prolonged deflation was avoided and moderate inflation resulted. This must have averted a debt deflationary collapse (though I do not know to what extent excessive private debt was an issue in the Norwegian economy). The end to the gold standard also allowed a currency depreciation, which stimulated export-led growth and import substitution.

Ole Colbjørnsen and the economist Ragnar Frisch proposed a strongly Keynesian policy to revive the Norwegian economy around 1933-1934, but I do not know to what extent it was actually implemented.

Some quick research seems to indicate that from 1935 under Johan Nygaardsvold the Norwegian government engaged in some mild Keynesian fiscal stimulus, though other economists deny this.

Apparently, the Nygaardsvold government did implement welfare measures and the economy revived from export-led growth (to a considerable extent driven by German demand for Norwegian goods) after 1935.

Although government spending rose, it appears to have been covered by tax increases. One suggestion has been that tax policy took in a certain amount of money that was not being spent on capital goods investment or consumption, and hence that government spending was stimulative to some degree, but other scholars dispute this:

“There was a significant growth in the public sector. However, this increase was levelled out by higher taxes. Thus, in this respect, the net effect on demand was neutral. On the other hand, the marginal propensities to consume and save differed from the public to the private sector. Empirical evidence from Norway reflects that the marginal propensity to consume was higher in the public sector than in the private. Thus, [ceteris paribus] ... the relative growth in the public sector had a positive impact on demand. Nevertheless, due to budget discipline and moderate multiplier effects the fiscal policy in Norway under the Labour Party rule in the 1930s was neutral. In sum, fiscal policy seems to have played a minor, if any, role for the relative good performance of the Nordic economies during the 1930s.”

Ola Honningdal Grytten, “Why was the Great Depression not so Great in the Nordic Countries? Economic Policy and Unemployment,” p. 18.

Moreover, the data indicates that Norway had a serious unemployment problem right up to the war:

Unemployment in Norway
Year | Unemployment Rate
1927 | 8.9%
1928 | 7.9%
1929 | 7.0%
1930 | 7.0%
1931 | 10.2%
1932 | 10.6%
1933 | 10.8%
1934 | 10.3%
1935 | 9.9%
1936 | 8.7%
1937 | 7.3%
1938 | 6.8%
1939 | 5.7%
Ola Honningdal Grytten, “Why was the Great Depression not so Great in the Nordic Countries? Economic Policy and Unemployment,” p. 13.

So overall one would have to say that government intervention added recovery to some extent (via monetary policy and banking stabilisation), but also international trade helped. Fiscal stimulus was either too mild or just neutral: it needed to be much larger.

10. Sweden

Real GDP in Sweden, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 22 293 |
1929 | 23 651 | 6.09%
1930 | 24 138 | 2.05%
1931 | 23 268 | -3.60%
1932 | 22 641 | -2.69%
1933 | 23 076 | 1.92%
1934 | 24 834 | 7.61%
1935 | 26 418 | 6.37%
1936 | 27 949 | 5.79%
1937 | 29 272 | 4.73%
1938 | 29 759 | 1.66%
1939 | 31 813 | 6.90%
1940 | 30 873 | -2.95%
1941 | 31 395 | 1.69%
1942 | 33 309 | 6.09%
1943 | 34 789 | 4.44%
1944 | 35 972 | 3.40%
1945 | 36 947 | 2.71%
(Maddison 2003: 51).

From 1931 to 1932, there was a real output loss of 6.20%.

11. Finland

Real GDP in Finland, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 9 194 |
1929 | 9 302 | 1.17%
1930 | 9 194 | -1.16%
1931 | 8 970 | -2.43%
1932 | 8 932 | -0.42%
1933 | 9 526 | 6.65%
1934 | 10 606 | 11.33%
1935 | 11 059 | 4.27%
1936 | 11 807 | 6.76%
1937 | 12 478 | 5.68%
1938 | 13 123 | 5.16%
1939 | 12 561 | -4.28%
1940 | 11 909 | -5.19%
1941 | 12 299 | 3.27%
1942 | 12 337 | 0.30%
1943 | 13 756 | 11.50%
1944 | 13 762 | 0.04%
1945 | 12 963 | -5.80%
(Maddison 2003: 50).

Real GDP loss from 1930 to 1932 was 3.97%.

12. United Kingdom

Real GDP in the UK, 1928–1945
* in millions of international Geary-Khamis dollars
1928 | 244 160 |
1929 | 251 348 | 2.94%
1930 | 249 551 | -0.71%
1931 | 236 747 | -5.13%
1932 | 238 544 | 0.75%
1933 | 245 507 | 2.91%
1934 | 261 680 | 6.58%
1935 | 271 788 | 3.86%
1936 | 284 142 | 4.54%
1937 | 294 025 | 3.47%
1938 | 297 619 | 1.22%
1939 | 300 539 | 0.98%
1940 | 330 638 | 10.01%
1941 | 360 737 | 9.10%
1942 | 369 721 | 2.49%
1943 | 377 807 | 2.18%
1944 | 362 983 | -3.92%
1945 | 347 035 | -4.39%
(Maddison 2003: 51).

Real GDP loss from 1930 to 1931 was 5.80%.


BIBLIOGRAPHY

Bukey, E. B. 2000. Hitler’s Austria: Popular Sentiment in the Nazi Era, 1938–1945. University of North Carolina Press, Chapel Hill, North Carolina.

Gerlich, P. and D. Campbell, 2000. “Austria: From Compromise to Authoritarianism,” in D. Berg-Schlosser and J. Mitchell (eds). The Conditions of Democracy in Europe, 1919–39: Systematic Case Studies. Macmillan, Basingstoke. 40–58.

Grytten, Ola Honningdal. “Why was the Great Depression not so Great in the Nordic Countries? Economic Policy and Unemployment,” online.

Kirk, Tim. 2002. Nazism and the Working Class in Austria: Industrial Unrest and Political Dissent in the National Community. Cambridge University Press, Cambridge.

Maddison, Angus. 1982. Phases of Capitalist Development. Oxford University Press, Oxford.

Maddison, Angus. 2003. The World Economy: Historical Statistics. OECD Publishing, Paris.