Global Economic Crisis Deja Vu? Why 2013 Looks Like 1934

Watching the markets in Shanghai
Watching the markets in Shanghai
Jean-Marc Vittori

PARIS — Five years after the collapse of Lehman Brothers, it seems that we are passing through an unprecedented layer of thick fog. We see one country suddenly accelerating while its neighbor suffers a “sudden stop.” But this isn’t the first time. The world was consumed by the same sort of uncertainty five years after another crash: the one in Wall Street in 1929. Is it 1934 all over again?

At first glance, of course, everything has changed. The world is now infinitely more open and much richer than it was back then. And information technologies have turned the world into a village. We are supposed to have learned a lot from the Great Depression that followed Black Thursday. Central banks, in particular, have led monetary policies that have not stifled the economy, contrary to their predecessors in the 1930s.

Global growth resumed in 2009 after one year of decline, whereas it had decreased for more than three years in the early 1930s, just like the stock market, according to an article written by economists Barry Eichengreen and Kevin O’Rourke. The France of 2013 is also very different from 1934. The standard of living is five times higher. Even though there are political scandals, they are nothing like the Stavisky Affair and the deadly riots that followed.

On an economic level, the countries’ situations are strikingly similar. Let’s first consider their monetary situations.

Today, as in the 1930s, the United Kingdom and the United States seem to be getting back on their feet ahead of continental Europe. But the United Kingdom had been the first country to devalue its currency relative to gold in 1931, by 24%. The pound sterling suffered once again at the end of 2008, and its euro value today is still a quarter less than it was before Lehman’s bankruptcy.

In the 1930s, the United States followed suit in currency devaluation two years later. But Americans did things differently by carrying out a selective “internal devaluation.” In some industrial sectors such as automobile manufacturing, wage costs (salaries and future retirements) decreased significantly.

Meanwhile, the European countries are hanging onto their single currency, just as they hung on to the “gold bloc” in the 1930s. Their economies will suffer in the longer term. The exception is Germany, which was not part of the 1930s gold bloc and performed internal devaluation in the 2000s, before the crash, for its own specific reason (the compensation of the country’s reunification bill).

A time of rigor

The second similarity to the 1930s is budgetary. After the 1929 crash, as in 2009, most heads of state let deficits run their course — or let “automatic fiscal stabilizers work,” as we say today. Then they wanted to tighten things up. In 1932, Franklin Roosevelt was elected president of the United States on the promise to rebalance public accounts by reducing expenses by 25%. Once in the White House, he maintained the deficit at a high level, as the U.S. has these last few years.

But in Europe, it was a time of rigor. In 1931, German Chancellor Heinrich Brüning suddenly reduced public spending. In 1934, French Prime Minister Gaston Doumergue made cuts in public sector wages and pensions. Prime Minister Pierre Laval made even more important cuts in the same sectors the following year. He also increased taxes. History repeats itself. Last year, the French government reduced the “structural” budget deficit like it hadn’t since the beginning of the crisis and announced new saving measures for 2014.

Learning from the past

It would be easy to make sarcastic comments about the various governments’ inability to learn from the past. Amid such extreme tensions, they are stuck in a maze of contradictory coercions — between electors, lobbies and creditors, between competiting and confusing analyses. The first lesson is that it is very complicated to understand such an important crisis five years after its symbolic start, just as it is very complicated for a captain to know his location during a storm.

The second lesson is perhaps the importance of looking at the past’s future — in other words, what happened after 1934? Five years later, war broke out. Before that, America fell into recession by increasing taxes, thinking that it was in the clear. Another five years later, it is 1944. The conflict is devastating, killing millions, reducing activity by half in France compared to what it was in 1929. Twenty years later, it is 1954. The American recession is just a distant nightmare. European markets are booming. French production has already increased by a third compared to 1929.

In the 21st century, war should not break out. If Europe sometimes seems too divided, it is important to remember that it is much more united than it was 80 years ago. The real lesson here is elsewhere. A deep crisis lasts a long time. If it sometimes leads to the worst, it can also allow us to build a better world.

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7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.

But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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