2010 Oxford Business & Economics Conference Program
ISBN : 978-0-9742114-1-9
Waiting for the Next Edison to Rescue the Global Economy – A Look at Economic Crises
Through Economic History
Dr. Jean-Luc Grosso
McDavid Professor of Business Administration
University of South Carolina Sumter
Sumter, South Carolina, United States
(803) 938-3859
jlgrosso@mailbox.sc.edu
Dr. Teresa L. Smith
Julian T. Buxton Professor of Business Administration
University of South Carolina Sumter
Sumter, South Carolina, United States
(803) 938-3710
tlsmith0@mailbox.sc.edu
Sheryl Grosso
University of South Carolina Sumter
Sumter, South Carolina, United States
(803) 938-3741
slgrosso@mailbox.sc.edu
June 28-29, 2010
St. Hugh’s College, Oxford University, Oxford, UK
1
2010 Oxford Business & Economics Conference Program
ISBN : 978-0-9742114-1-9
Waiting for the Next Edison to Rescue the Global Economy – A Look at Economic Crises
Through Economic History
Jean-Luc E. Grosso, University of South Carolina Sumter, Sumter, SC, USA,
jlgrosso@mailbox.sc.edu
Teresa L. Smith, University of South Carolina Sumter, Sumter, SC, USA,
tlsmith0@mailbox.sc.edu
Sheryl S. Grosso, University of South Carolina Sumter, Sumter, SC, USA,
slgrosso@mailbox.sc.edu
ABSTRACT
Someone said once that failure to learn from the past will lead to repeating history over
and over. Is that bad? In most cases it can be, but in some others it may not be such a horrible
mistake. Two years ago the world entered a severe recession. We are still feeling its effects, and
may be for a while longer, but Governments around the world have put in place policies to revert
those economic trends. However, most of those actions have revived a familiar figure: facing
pressure to keep jobs at home, leaders around the world have edged closer to protectionism.
The recently approved U.S. federal stimulus package includes “Buy America” provisions,
though in watered down form. These provisions put restrictions on stimulus money that can be
spent abroad and have elicited protest from the EU and other major trading partners. Western
European countries have refused to come to the rescue of troubled Eastern neighbors, some of
whom (Hungary, in particular) need EU aid to stave off financial collapse. British Prime Minister
Gordon Brown has infamously called for the creation of “British jobs for British workers,” and
for every blatantly protectionist remark that receives press attention, there seem to be plenty
more subtle legislative tacks that fly under the radar. Dominique Strauss-Kahn, managing
June 28-29, 2010
St. Hugh’s College, Oxford University, Oxford, UK
2
2010 Oxford Business & Economics Conference Program
ISBN : 978-0-9742114-1-9
director of the IMF, recently warned governments against protectionism “through the back door”
as they seek to prime their economies in the midst of the global economic downturn. Indeed,
many European governments have granted subsidies for domestic producers, and favor financial
institutions that make domestic loans.
These inklings of protectionist sentiment have yet to degenerate into full-blown
xenophobia or spiraling trade wars, but the germ of these pandemics are all too present. To those
who are familiar with the post-mortem of the 1930s, these recent developments carry eerie
similarities to those times. That period in history shows how disastrous protectionism can be,
even when championed as a necessity to combat the worst of economic times. The SmootHawley Tariff of 1930 imposed steep trade barriers to goods coming into the U.S., which
prompted retaliation from Europe and other trading partners. Some economists point to these
trade barriers as key catalysts of the Great Depression, and even, to some extent, World War II.
Almost all agree that the resulting plummet in international trade contributed to the depth and
length of the Great Depression itself.
To be fair to policy makers, protectionism wasn’t just born in the 1930s. As seen
throughout history economic downturns are always followed by periods of protectionism. The
fall of the Roman Empire and Pax Romana was followed by what is probably the most severe
recession the world has ever known. Historians have called it “Dark Ages”, but we could have
called it the Very Great Depression, since it basically was a centuries-long economic downturn.
It was a period based on agriculture, with absolutely no inclination for trade. Eventually
medieval Europe emerged but the early 14th century crisis led to its demise and to the emergence
of what some authors have called Europe’s second logistic. This era is better known for its
June 28-29, 2010
St. Hugh’s College, Oxford University, Oxford, UK
3
2010 Oxford Business & Economics Conference Program
ISBN : 978-0-9742114-1-9
mercantile way of thinking, and for protectionist government policies. Economic and political
mismanagement opened the door for Adam Smith and the other Classic economists, and a new
era associated with the Industrial Revolution and free trade. The Great Depression of the late 19 th
century stopped this trend setting in motion a mutually destructive spiral of rampant
protectionism, which eventually led to WWI.
Today, economists predict that the global economy should be on a solid path to recovery
by the second half of 2010. This is good news, but does it mean the world is going to be as it was
before the downturn, that is an opened global market? Long-time opponents of free trade and
globalization are pointing to the contagious nature of this economic crisis as proof of the ills of
globalization and cause for more inward-looking policies. As seen before, talk of so-called ‘deglobalization’ seems to be gaining more adherents in intellectual the arena, and most talk about
how this recession is proof of globalization’s failures misses the point. However, history has
shown that turning back globalization now only stands to make things worse. Should we be
worried? Yes and no. Yes, protectionism can hurt the global markets, but, and again, a look at
history should help us feel better.
It also appears that economic downturns and innovation are also related. Some of the
greatest companies were created out of recessions. The Great Depression of 1929-39 gave birth
to Fortune magazine, Monopoly, Scotch Tape, the fluorescent light bulb and Hewlett Packard.
Diet Coke was launched during the economic downturn in the early 1980s. Innovations were also
not foreign to the “Dark Ages” and to the Nation-States during periods of exacerbated economic
nationalism and imperialism: there is hope.
June 28-29, 2010
St. Hugh’s College, Oxford University, Oxford, UK
4
2010 Oxford Business & Economics Conference Program
ISBN : 978-0-9742114-1-9
The purpose of this paper is to investigate the impact of economic downturns throughout
history and consequences of those downturns on international trade and innovation. The analysis
will show that in the short run protectionism is a consequence of recession or bad economic
times, but in the long-run, the boosting effect of entrepreneurs on the product-life cycle, mainly
in the innovation/start-up phase, more than overcome the negative impact of protectionism.
REFERENCES
Asimov, I. (1989). Asimov's Chronology of Science and Discovery. Harper & Row.
Cameron, R., & Neal, L. (2003). A Concise Economic History of the World. Oxford
University Press.
Chamberlin, J. E. (2007). Horse: How the Horse Has Shaped Civilizations. Moscow: Olma
Media Group.
De Bono, E. (1974). Eureka! An Illustrated History of Inventions from the Wheel to the
Computer. Thames & Hudson.
Finger, S. (2001). Origins of Neuroscience: A History of Explorations Into Brain Function.
England: Oxford University Press.
Goldman, Russell (2009). Small Business Entrepreneurs Triumph After Layoffs, accessed
October 3, 2009, [available at http://abcnews.go.com/print?id=7658112].
Gowlett, John (1992). Ascent to Civilization. McGraw-Hill.
Heussner, Ki Mae (2009). Eureka! Recession Sparks Inventive Spirit, accessed October 3,
2009, [available at http://abcnews.go.com/print?id=7699950].
Koppel, Tom (2007). Ebb and Flow: Tides and Life on Our Once and Future Planet. Dundurn
Press Ltd..
June 28-29, 2010
St. Hugh’s College, Oxford University, Oxford, UK
5
2010 Oxford Business & Economics Conference Program
ISBN : 978-0-9742114-1-9
Platt, Richard (2003). Eureka!: Great Inventions and How They Happened. Kingfisher.
Schafer, Edward H. (1963). The Golden Peaches of Samarkand: A Study of T'ang Exotics.
California: University of California Press.
Whitelaw, Ian (2007). A Measure of All Things: The Story of Man and Measurement.
Macmillan.
Whitewright, Julian (2009). The Mediterranean Lateen Sail in Late Antiquity. The
International Journal of Nautical Archaeology, 38 (1), 97–104.
June 28-29, 2010
St. Hugh’s College, Oxford University, Oxford, UK
6