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| The Worst Peacetime Numbers of Any Major Nation in Recorded History... |
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Friday, April 6th, 2001
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How bad is America�s trade crisis? The true scale of the crisis can be summed up in one stunning sentence: at an estimated 4.5 percent of national output in 2000, America�s latest current account deficit was the largest peacetime deficit suffered by any major nation in recorded economic history. This is the conclusion I come to after an exhaustive survey of the economic records of the seven largest economies. Besides the United States, these economies are the United Kingdom, Japan, Germany, France, Italy, and Canada. Click on each nation to view its trade history.
To be sure there have been occasions in the past when other nations have suffered even larger deficits--but the circumstances involved will give pause to anyone who cares about America�s present plight. Take, for instance, the worst ever deficit among any of the big seven nations in the last half century: this was 11.2 percent incurred by Japan in 1946. True, that is a lot higher than America�s performance last year--but World War II had just ended and, with the possible exception of Germany, Japan had just suffered the worst war damage of any advanced nation in history. Much of Japanese industry was in ruins and much of the rest of it was running at only a fraction of capacity because of shortages of crucial parts and materials. Moreover many of the parts and materials that Japanese industry did buy that year had to be imported from the United States--and these of course dramatically ballooned Japan's deficit. All in all, with a per-capita income lower than that of many sub-Saharan African nations, the Japanese economy in 1946 was a true basket case.
It is notable that there is no other recorded occasion on which Japan incurred as large a deficit as the America�s 2000 deficit. It is possible that Japan�s deficit in 1945--the year the United States dropped the nuclear bombs on Hiroshima and Nagasaki--was worse but the figures have been never been published.
Apart from Japan in 1946, other occasions when major nations have exceeded America�s latest deficit level included 1940 through 1945 for the United Kingdom. In those years, the U.K.�s deficits averaged more than 6 percent as it imported vast quantities of American armaments and raw materials to fight World War II. The U.K. also suffered a deficit of 5.1 percent in 1918, the exhausting last year of World War I.
Then there is the case of Italy which ran huge deficits during World War I and for six years afterwards. It also exceeded 4.5 percent in World War II and for two years afterwards.
Just to complete the picture, it should be mentioned that numbers for Germany in the crucial period of World War II and its immediate aftermath have never been published. Moreover numbers are not available for Germany from 1914 through 1924--the period of World War I and its disastrous aftermath (a period that included the catastrophic hyper-inflation Weimar Republic of 1923) .
With these caveats, however, it is clear that the United States is into uncharted waters. Not only is it incurring huge deficits at a time of peace but at a time when, if we are to believe the GDP growth numbers, the nation has been enjoying unprecedented prosperity. One last point: up to 1970, there were only eleven recorded occasions in the twentieth century when the United States incurred a trade deficit. And on only one of these occasions--at the height of World War II in 1943--did the deficit reach 1 percent.
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Contact Eamonn Fingleton |
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