and Angus Maddison, Statistics on World Population, GDP and Per Capita GDP, 12006 AD (March update)Full figure and legend (20K)But, did the limited availability of bank credit slow the recovery? Between 1933 and 1937 the US economy grew by more than 8% a year. There was also a reasonable recovery of investment in the 1930s. (See Figure 3) A pair of survey by the National Industrial Conference Board found only limited evidence of borrowing difficulties.9 In 1932 (when the problem was presumably at its peak), 86% of the responding industrial firms indicated either no borrowing experience or no difficulty in obtaining bank credit. It could be, of course, that the large number of respondents reporting no recourse to bank credit reflected the depressed circumstances of the time (no demand meaning no investment plans).10 Alternatively, many firms may have been intent on deleveraging as a way of reducing their vulnerability to financial disturbances (analogous to the argument sometimes made nowadays that the slow growth of bank lending reflects not the weakness of the banks but the reluctance of firms and households to borrow).11Figure 3.US capital spending as a percentage of GDP. Source: Historical Statistics of the United States: Millennium Edition online, Table Ca74-90Full figure and legend (18K)In the 1932 survey, the firms reporting difficulty in borrowing were disproportionately small.12 Since, in normal circumstances, these small firms and start-ups are disproportionately the source of innovation, this observation does not bode well for productivity growth. But the 1930s were not normal circumstances; I return to this below.In the aftermath of the recent crisis, OECD (2010) estimates that two-thirds of the fall in potential output will reflect a higher cost of capital, which will reduce the capital/labor ratio. However, it assumes that the increase in the cost of capital will be 150 basis points, which seems like a large number. The Institute of International Finance (2010), in analyzing the impact of more stringent capital and liquidity requirements, assumes very large increases in bank lending rates and concludes that these could reduce global GDP by as much as 3% between 2010 and 2015.13 Other analysts, such as the Bank for International Settlements, dispute not just the magnitude but the existence of these effects, putting the upper bound in terms of cumulative growth impact at less than 1%.14 One suspects that if there are long-term effects from more limited credit availability, these will come from the stricter application of existing regulations at the national level more than from new capital standards promulgated in Basel. And one suspects that the major impact will be on more credit-intensive activities and sectors rather than the growth of the economy as a whole.Top of pagePUBLIC DEBTAnother plausible channel through which crises can lead to slower growth is by leaving an overhang of public debt. Reinhart and Rogoff's (2009) stylized fact, based on experience in 13 post-World War II financial crises, is that the real value of public debt roughly doubles in the 3 years following onset.15 The increase is due to a combination of lower tax revenues, reflecting output losses, and increases