FOREWORD

The Great Depression is an evergreen topic, and it’s gotten a particular boost from the events of the Great Recession. If nothing else, the disdain that practitioners of modern economic management often exhibit for the officialdom of the 1930s may now be leavened with some empathy. Noting all exceptions, and there weren’t many, the best people in the world of finance and economics were blindsided by the Recession, and the recovery has been long and frustrating. The lessons of the Depression did serve modern policy makers well, however, in designing remediations. Flooding the world with new liquidity would have been anathema to the managers of the 1930s.

I understand the Great Depression as a world phenomenon, with roots in World War I and its sequelae. The United States enjoyed the most successful economy, but signs of overheating were rife. By the time of the stock market crash, it was due for a major, possibly a nasty, correction. But it was the global Crash that turned an American correction into a Great Depression.

My perspective throughout the book is an American one, filtering the international events through American eyes, while keeping the important European events always in sight.

Part One is devoted to a description of American daily living in the 1920s. Radical changes were afoot in every aspect of life, many of them driven by new technology, especially the automobile and AC electricity. It was both a heady and a frightening time, with population migrations from south to north and from rural areas to cities. There were deep changes in the workplace and in relations between men and women. Electricity-enabled mass communications created “flash-crowd” mass events long before the internet.

Part Two lays out the industrial structure of America and details its underlying economic performance. The 1920s was a time when employers first grappled with the implications of mass production and their relations with employees, and there were the first fumbling attempts by big business to sort out its relations with government. The remarkable boom in financial markets unbalanced ethical compasses and set the sector up for a fall.

Part Three concentrates on the Crash in America. It happened in the first year of the presidency of the supremely gifted Herbert Hoover, a man who had never failed at anything. I examine the astonishing speed of the downturn, the impact on common people, the minimal attempts at remediation, and the consequences of the collapse. Two concluding sections chart the ruin of Samuel Insull and Ivar Kreuger.

Part Four takes a global perspective. It sketches a history of the gold standard, and the monetary pax Britannica that kept it on keel for so long. The central issue was how to reconstruct the international trading system, amid the poisonous atmosphere of mistrust and dishonesty that was the heritage of the war and the Treaty of Versailles. The major powers—the United States, Great Britain, France, and Germany—each had quite different views on issues of war debts and reparations, on reconstructing the gold standard, and on the desirability of inflation or deflation.

Part Five returns to America and analyzes the initial recovery under Roosevelt, the 1937 downturn, and the subsequent recovery. I review a large swath of the current scholarship on the New Deal to appraise where it helped and where it got in the way. I also show that it wasn’t World War II that ended the Depression, for it was already over before the war started.

The book ends with Part Six, a compact analysis of the underlying forces that brought on the world Depression, and the important microdevelopments that gave the American experience its own exceptional flavor.