Last night, Carmen Reinhart and Ken Rogoff published a white paper showing the recovery could have been a whole lot worse.They argue that the U.S. did not experience a normal crisis, but rather a “systemic financial” one.
That’s only happened four other times in our history: 1873, 1892, 1907, and 1929.
So compared with those crises, our recovery looks pretty rosy:
Today in Bloomberg, the pair double down on their argument by taking issue with economists who’ve signed on to Mitt Romney’s campaign and have argued our recovery is different, and worse:
…a few op-ed writers have argued that, in fact, the U.S. is “different” and that international comparisons aren’t relevant because of profound institutional differences from one country to another. Some of these authors, including Kevin Hassett, Glenn Hubbard and John Taylor — who are advisers to the Republican presidential nominee, Mitt Romney — as well as Michael Bordo, who supports the candidate, have stressed that the U.S. is also “different” in that its recoveries from recessions associated with financial crises have been rapid and strong.
we have to take issue with gross misinterpretations of the facts
Since they’re looking at the wrong kinds of benchmark crises, Team Romney ends up using the wrong metrics, they say. Instead of focusing on years to return to normal growth, they’ve fixed on rate of recovery.
But for post- World War II systemic crises around the world, it’s taken about four and a half years to fully recover. In 14 Great Depression episodes around the world (including the U.S.) it took 10 years on average.
Team Romney misses this point:
Taylor, for example, appears to show the recovery from the Great Depression as the strongest in U.S. history, even though it took about a decade to reach the same level of per capita income as at its starting point in 1929.
No doubt, this will likely come off to many as a partisan response to another partisan assertion.
But it seems like it’s impossible to avoid that kind of thing these days.
(Via FT Alphaville)
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