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economic history |

What was the Great Divergence? Why did China fail? |

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Until a few years ago, people always talked about the Great Divergence and the consequences it had to most of the countries, a divergence that followed the Crash of 1929, which nowadays is still in our minds due to the impact it caused. But this crisis is not so far from what we are living today: the actual crisis, a crisis which most of economists associate with the 1929 Crash.

The current crisis has different characteristics and same origin from the now known as the Crash of 1929. Beginning with similarities, we could say both of these crises begun at the United States, as they equally came on after years of prosperity; as the 29th had previously the roaring twenties, and the current one had the beginning of this century. In addition, most of economists focus the causes on the speculative financial sector, and, specially, the spectacular growth of credits, causing people who couldn’t pay to buy without measure. This made many people to begun having debts, many companies were closed, and unemployment grew markedly.

Furthermore, the stock exchange is and was an important factor to enter the crisis too, although it had more importance at the 29th crisis than the one we find actually.

Besides all this similarities, we can also find several differences. Thanks to the last crisis, we have learnt some errors which haven´t occurred today. When the Crash of 1929 started, many people went to the bank’s doors asking for all their money, but, obviously,there wasn’t enough money because it has had previously given, so the bank returned what they could until it run out, so that bank doors closed. None of that is happening actually, because deposits are insured, precisely thanks to 1929 lessons.

Moreover, United States pointed foreign countries as guilty, and their reaction was to place tariffs on imports. Americans wanted to fix the situation by protectionism. Actually there isn’t...