According to the GDP estimates of Noel G. Butlin, Australia in the early 1890s suffered a depression in the aftermath of the collapse of its huge property and financial asset bubble:
Angus Maddison’s Estimates of Australian Real GDP from Butlin (millions of 1990 international Geary-Khamis dollars)The moderate recession began in 1890, there was a brief recovery in 1891, but a full-blown depression from 1892 (that is, a period of real GNP/GDP contraction of 10% or more), which continued into 1893. From 1891 to 1893, GDP fell by a shocking 17.11%. From its height in 1889, it plunged by 13.82% by 1893.
Year | GDP | Growth Rate
1888 | $14,685
1889 | $15,953 | 8.64%
1890 | $15,402 | -3.45%
1891 | $16,586 | 7.69%
1892 | $14,547 | -12.29%
1893 | $13,748 | -5.49%
1894 | $14,217 | 3.41%
1895 | $13,418 | -5.62%
1896 | $14,437 | 7.59%
1897 | $13,638 | -5.53%
1898 | $15,760 | 15.56%
1899 | $15,760 | 0%
1900 | $16,697 | 5.95%
(Maddison 2006: 452).
How does this compare with Australia’s experience of the Great Depression in the 1930s?
Let’s see:
Angus Maddison’s Estimates of Australian Real GDP from Butlin (millions of 1990 international Geary-Khamis dollars)It appears that a recession already began in Australia in 1928 (this was bad timing), and then the Australian economy was hit by the effects of global Great Depression in 1929. From 1928 to 1930, the Australian economy contracted by 7.30%. There was a brief recovery in 1931, but a further recession in 1932.
Year | GDP | Growth Rate
1927 | $34,716
1928 | $34,164 | -1.59%
1929 | $33,834 | -0.96%
1930 | $32,181 | -4.88%
1931 | $32,720 | 1.67%
1932 | $31,878 | -2.57%
1933 | $33,696 | 5.70%
1934 | $34,991 | 3.84%
1935 | $36,424 | 4.09%
1936 | $38,160 | 4.76%
1937 | $40,336 | 5.70%
1938 | $40,639 | 0.75%
(Maddison 2006: 452).
These data can be compared:
(1) from 1891 to 1893, under a free banking system, Australian GDP fell by 17.11%. From 1889, it plunged by 13.82% by 1893 (despite the recovery in 1891).The conclusion is clear as can be: the Australian debt deflationary depression in the early 1890s under a free banking system was worse than its Great Depression of the 1930s!
(2) from 1928 to 1930 the Australian economy contracted by 7.30%. Even if one looks at the overall fall from 1927 GDP to 1932 GDP, that fall was 8.17%. Therefore the title of my post is a bit misleading: for the real output contraction of the 1930s did not technically qualify as a depression, just a very severe recession (see here for formal definitions of the terms “recession” and “depression”).
So much for the superiority of free banking.
APPENDIX: WHY SHOULD BUTLIN’S ESTIMATES BE PREFERRED?
Let me repeat Angus Maddison’s assessment of Bryan Haig’s (2001) revised figures of Australian GDP for 1860–1911, and why Butlin’s are very probably better. Angus Maddison points out the following:
(1) for 1860–1911 Haig has no quantitative measure of 70% of GDP (Maddison 2006: 453);All in all, I do not see any reason to think Haig’s estimates are to be preferred.
(2) Haig described the estimating procedure he used in but five pages, but Butlin provided his in 200 pages (Maddison 2006: 453);
(3) Butlin provided data for more states than Haig did: Haig used data from Victoria and New South Wales to fill in gaps for overall Australian estimates (Maddison 2006: 453).
(4) one of Haig’s fundamental objections to Butlin’s estimates was that they conflicted with traditional interpretations of Australian economic history: but this is just an unreasonable a priori objection. As Maddison says in reply to this, “it is up to those who disagree with Butlin to prove him wrong” (Maddison 2006: 451).
BIBLIOGRAPHY
Butlin, Noel G. 1962. Australian Domestic Product, Investment and Foreign Borrowing 1861–1938/39, Cambridge University Press, Cambridge.
Haig, Bryan. 2001. “New Estimates of Australian GDP: 1861-1948/49,” Australian Economic History Review 41.1 (March): 1-34.
Maddison, Angus. 2006. The World Economy: Volume 1: A Millennial Perspective and Volume 2: Historical Statistics, OECD Publishing, Paris.
