The Great Depression

by Stephen Longrigg

This book examines the nature and the causes of the 1929 depression, tracing its background and the broad conditions from which the depression emerged. As an infl uence on economic activity, Robbins sees World War I, and the political changes that followed it, as a series of shifts in the fundamental conditions of demand and supply, to which economic activity had to adapt. Th e needs of the war had called a huge apparatus of mechanical equipment into being, which the resumption of peace rendered in large part superfl uous. The war also disrupted world markets, and its settlement created conditions that aggravated this disruption. Th us, the struggle that was to end nationalist friction in fact gave nationalism new scope. The depression of 1929 and beyond dwarfed all preceding economic disruptions, both in magnitude and in intensity. In 1929 the index of security prices in the United States was in the neighborhood of 200-210; in 1932 it had fallen to 30-40. Commodity prices in general fell by 30 to 40 percent, and in some commodity markets the drop was even more catastrophic. Production in the chief manufacturing countries of the world from 30 to 50 percent, and the value of world trade in 1932 was a third of what it was three years before. Worldwide, something like 30 million people were unemployed. There have been many economic downturns in modern economic history, but never anything to compare with the years of the Great Depression. Few books have conveyed that period with greater clarity and precision than this masterpiece by Lionel Robbins. Murray Weidenbaum's masterful new introduction adds to its contemporary value.

Genres: Economics, History, Nonfiction

264 pages, Paperback

First published January 1, 1934

Reviews

[Sean Rosenthal · Rating 3 out of 5]

Interesting Quote:

"Nobody wishes for bankruptcies. Nobody likes liquidation as such. If bankruptcy and liquidation can be avoided by sound financing nobody would be against such measures. All that is contended is that when the extent of mal-investment and overindebtedness has passed a certain limit, measures which postpone liquidation only tend to make matters worse."

-Lionel Robbins, the Great Depression

[Russ Lemley · Rating 4 out of 5]

Written in 1934, Robbins provides a calm, cogent, and rational discussion about how the Great Depression came about and why it continued to persist up to the time he published his book. Robbins see two Western policymakers commit two great sins: errors in monetary policy and economic policy.

As we're all taught in school, the Depression began after the Crash of October 1929. The crash was a natural consequence of loose monetary policy that began in England in around 1925. The US Federal Reserve agreed to adopt a similar policy to support their English friends. This policy created the conditions of a boom, which was most easily reflected on the goings on on Wall Street. But with every boom comes the bust, and boy did it ever.

Unfortunately, policymakers did not learn their lesson. After the crash, the Fed sought to reflate the money supply in the vain hope of stimulating the economy. Meanwhile, Hoover sought to keep wages high, preventing labor markets to recover. Industries developed pooling agreements to maintain pricing power, preventing consumers to spend less on needed and other goods. And countries increasingly imposed tariffs, presumably to protect domestic industries. However, all these tariffs accomplished were to force domestic consumers to pay more for goods than they otherwise would without them.

This is a balanced, thoughtful, and engaging exploration of a dark period in modern economic history. I recommend it to anyone who are students of history, economics, or both.

[Bryan Cobo · Rating 5 out of 5]

Muchos trabajos sobre la depresión suelen obviar lo que sucede fuera de estados unidos a la hora de buscar las causas de la misma. Robbins amplia tanto la perspectiva geográfica como cronológica y se vale de la coyuntura para explicar la teoría de ciclos austriaca.

Un libro recomendado tanto para los que buscan algo de historia económica como para quienes estén empezando en la teoría económica austriaca.