Razeen Sally and Fredrik Erixon have an excellent op-ed in the Wall Street Journal where they argue that the global economy has not (yet) been wrecked by a turn to the policies of the 1930s, but that disaster is on the way because of a return to the slightly different protectionist policies of the 1970s: 

"In the '70s, governments increased domestic interventions—fiscal-stimulus packages, subsidies to certain sectors, labor-market and capital-market restrictions—in response to oil-price hikes and other external shocks. This spilled over into protectionism, mainly through nontariff barriers such as discriminatory subsidies, "buy local" government-procurement initiatives, "voluntary export restraints" and "orderly market arrangements."

Of course, the devastating consequences of tit-for-tat protectionism are well known.  Yet the protectionism that emerged in the 1970s was devastating too.  Sally and Erixon argue that wrong-headed policies during this decade led to protracted growth well into the 1980s:

This so-called managed trade or new protectionism lasted well into the 1980s, affecting about half of international trade. Global trade dipped after decades of solid growth—volumes actually shrank in 1976 and 1983, with anemic growth well under 5% between 1981 and 1987. This deepened and prolonged economic stagnation; global GDP growth was under 3% in 1974-5 and 1980-83. This kind of creeping protectionism, manifested in complex regulatory barriers and emerging slowly, insidiously, from bigger, more arbitrary government at home, is the big danger now.

The reason why the 1970s provide better clues for the current crisis is, as Erixon and Sally argue, because governments are trying to have it both ways: much higher levels of government intervention at home, and free movement of goods, services and capital abroad.  But, of course, that is impossible.  Radically expanding government can only become a trade barrier in itself, and this is why the policy respnse to the current crisis has turned an initial shock into a prolonged crisis:

Global cross-border lending by banks fell by $4.8 trillion in the last nine months of 2008, the sharpest fall on record. Inevitable national re-regulation of financial markets threatens to fragment global finance, with extremely worrying consequences for cross-border flows of trade, investment and people. Manufacturing subsidies—90% of which have gone to the automobile industry since the beginning of the crisis in September 2008—are also intended to boost production and employment at home, potentially threatening overseas production and employment.

The immediate challenge is to realise that increased domestic intervention is part of the problem and, for G20 and all other countries to agree that combating protectionism necessarily involves stemming the growth of government and the trade-restricting policies that have accompanied it.

Over the longer term, Sally and Erixon argue that,

There remains a strong case for further market-based reforms, including liberalization of international trade and investment. Reduction of what are still relatively high barriers to trade, foreign investment and the cross-border movement of people holds out the promise of higher growth, significant poverty reduction and improvements in human welfare. The biggest challenge is to push forward with trade-related domestic reforms such as labor-market and public-sector liberalization where progress to date has been too slow. These reforms, relating to the domestic business climate, affect foreign as well as domestic trade, and foreign as well as domestic investment.

They conclude with a point that cannot be over-emphasised: "Limits to government intervention and a well-functioning market economy at home are prerequisites to open markets and economic globalization abroad."