Is Europe heading for another Great Depression?

It says something when two European Central Bank presidents responsible for directing Eurozone monetary policy for 14 years — Christine Lagarde and Mario Draghi — sound the alarm almost simultaneously over the trajectory of the EU economy. Speaking at a lecture organised by the International Monetary Fund on Friday, current ECB President Lagarde drew parallels between today’s economic environment and factors 100 years ago which resulted in the Great Depression.

“Today, like back then, we are seeing setbacks in global trade integration, at the same time as strides forward in technological progress,” Lagarde said. In the Twenties, the world economy was going through a period of “global fragmentation” following the collapse of Pax Britannica — developments which could be compared to today’s shift from American hegemony to a “multipolar” world order. New “economic nationalism” led to a “rapid unravelling of globalisation” and a steep decline in international trade.

At the same time, wartime innovations spilled over into the production of machinery, such as the internal combustion engine, on a new scale. Today’s leaps forward in digital technology — especially the excitement over the potential for artificial intelligence to boost productivity — echo the great technological advances and uncertainties of a century ago.

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