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Barclays: The Business of Banking, 1690-1996

Author(s):Ackrill, Margaret
Hannah, Leslie
Reviewer(s):Wardley, Peter

Published by EH.NET (March 2004)

Margaret Ackrill and Leslie Hannah, Barclays: The Business of Banking, 1690-1996. Cambridge: Cambridge University Press, 2001. xxi + 481 pp. $60 or ?40 (hardback), ISBN: 0-521-79035-2

Reviewed for EH.NET by Peter Wardley, University of the West of England, Bristol.

Barclays has long been a banking firm of great significance. Originating in 1690 as a private Quaker partnership located in the city of London’s Lombard Street, by the early twentieth century Barclays had grown to become one of Britain’s “Big Five” corporate High Street Banks and a significant financial actor within the international economy. In the 1930s the Barclays group was the largest banking company in the world, a status reflected in its growing orientation to the world economy. At the end of the Second World War a quarter of the Barclays group assets were held abroad and the bank sustained its commitment to international banking so that by the 1980s it owned more “overseas” branches than the combined total of the U.S.’s banks. Today it remains one of the world’s most important financial corporations. In a business where prudence is valued but risk-taking rewarded, three hundred years’ experience is an asset in itself and one worthy of a celebration asserting acumen and longevity in an uncertain world.

This exemplary study, written in a fluent and confident style by Margaret Ackrill and Leslie Hannah,[1] successfully combines narrative business history, to recount three centuries of Barclays’ growth and development, with both a comprehensive survey of the bank’s responses to its changing economic environment and a rigorous assessment of its performance. As befits an official history of one of Britain’s premier financial institutions, impeccable scholarship is buttressed by production values of the highest quality, copious photographic illustrations are accompanied by numerous tables and figures.

Barclays’ enthusiasm for the project is evident not only in these physical attributes but also in the professional advice and intellectual support given to the authors by the bank’s senior employees and directors. While there is a suggestion that more testing times in the 1990s might have stilled this motivation for a moment, this hesitation passed and the authors have been allowed by their sponsor to tell their story without hindrance. With this publication, the business history of Barclays is not only brought to the end of the twentieth century but its earlier history, expounded previously by senior managers of the bank, in W. Matthews and A.W. Tuke’s History of Barclays Bank Ltd. (1926) and A.W. Tuke and R.J.H Gillman’s Barclays Bank Limited, 1926-1969: Some Recollections (1972), is augmented and subjected to independent academic appraisal.

If the tension between tradition and innovation provides an important duality exhibited by the banking industry, such a relationship is also reflected by this study. While its narrative is persuasive, detailed and entertaining, this strong story line is accompanied by convincing analysis which draws heavily on a carefully defined quantitative assessment of the bank’s long-run performance. One notable feature of Barclays, which fully deserves the close attention of any banking analyst or historian is the “Statistical Appendix.” Behind this rather bland title appears a 65-page summary of Barclays’ financial performance which enumerates its growth, profitability, financial structure and exposure due to bad debts. By providing statistical data for the parent firm and its constituent banks, comparative analysis of Barclays and its competitors and an assessment of the bank’s returns to its owners, an appraisal which includes a trans-Atlantic international perspective, this section alone is a valuable contribution to the literature.

Where the Statistical Appendix provides innovation, or at least a notable extension of practices evident in recently-published histories of British banks, it is accompanied by tradition in the application of more established historical skills: diligent search for and careful analysis of archival sources. These are particularly evident in the introductory review of the worldview and behavior of the Quaker private bankers who populated the “cousinhood,” the network of interconnected dissenting families that provided the bank’s access to capital and commercial intelligence. For two hundred years the Quaker community, broadly defined, played a vital role in Barclays’ pre-history.

By the beginning of the nineteenth century, personal investments by Quakers in industry and infrastructure were conducted alongside their banking activities, with each venture providing additional security for the next. In this environment the “Lombard Street bank” thrived to become Britain’s most profitable, Barclay, Bevan, Tritton & Co. Its owners not only avoided the fate of business associates and relatives ruined by the Overend, Gurney crash in 1866 but took full advantage of the many business opportunities this provided. Eventually, in the face of growing competition from developing joint stock banks, the county banks owned by the cousinhood, in the East and the North East of England, were recognized as the potential buildings blocks which would allow further expansion. In 1896 a new company, Barclay & Co., was created by the merger of twelve banks, with the lion’s share of a third of the capital and deposits coming from the Lombard Street firm, and the foundations were laid for what quickly became one of Britain’s “Big Five” national networks of branch banks.

The new bank, which continued to expand by internal growth and merger through the Edwardian period and the First World War, required a formal corporate structure and standard procedures to knit together the growing branch network under the supervision of its head office. Although this was a common development shared by each of England’s large High Street Banks, Barclays differed from its rivals in major respects. Great store was placed on the retention of previously established practices and it was deliberate policy to foster traditional loyalties. Local boards were assembled from its constituent banks and these were often seen to act with rather more independence than was permitted to the local managers of the banks who were its competitors. Here the cousinhood played an important role, though its continuing influence was more obvious to the public in its manifestation on the board of directors.

However, far from being amateurs, and with banking literally in their families’ blood, the gentleman players who sat on the Barclays’ board not only performed on a par with the professionals who ran the other joint stock banks but they also proved adept at accelerating the promotion of young managers of promise who might supplement their acknowledged financial and organizational talents. As the bank’s strategy saw an expansion in the scale and scope of its activities, its corporate structure has been successfully adapted and repeatedly recast to meet the challenges of a global business.

Growth in the interwar years was accompanied by major technological change, a theme which had been relatively neglected in the previous literature, and this aspect of banking has continued to be an important theme of more recent banking history. Ackrill and Hannah provide proper consideration of technical change, which has arrived over the last four decades in the form of new technology, often associated with computers and new products sold to different and often novel personal and business niche markets. Slower to mechanize than its competitors in the interwar years, thereafter Barclays was often an innovator, as it was in 1967 with automated teller machines (ATMs) and in 1966 with its highly profitable VISA Credit Card. In 1961Barclays was the first British bank to operate its own computer, an EMIDEC 1100.

With technological innovation came significant changes in labor processes and the organization of work. Although women had been employed for the duration of the First World War, gender became a major issue for British banks in the 1920s as female employees proved more adept than men when machine banking was introduced, though a glass ceiling was to prevent their elevation to managerial posts for the next fifty years. Barclays’ discriminatory employment policy was not atypical, though recruitment difficulties had pushed upwards the salaries of its female employees, and it was not until the impact of the Sex Discrimination Act of 1975 was felt that the bank confronted this issue.

By the 1970s financial innovations became more urgent as competitive forces increased. Concurrently, the rapidly evolving building societies expanded their range of financial services, while foreign banks entered “The City,” lured by the promise of London’s deregulatory “Big Bang” of 1986. Barclays confirmed its universalist stance in this Brave New Financial World, expanding its “merchant,” or industrial, banking in the 1980s, and investing heavily in BZW (Barclays de Zoete Wedd). However, although the changes introduced in the 1970s and 1980s shared some similarities with measures introduced in the U.S., Ackrill and Hannah (p. 214) insist that it would be an oversimplification to apply the term “deregulation”: “the British reforms are more accurately described as creating a more pro-competitive, market-orientated, comprehensive (and expensive) set of regulations to replace a more informal, restrictive, voluntary, partial (and cheap) regulatory culture.” Overall, technological innovation in banking has proved to be a much more important driver than changes in the regulatory regime.

Barclays contributes to a revisionist strand which has recently added renewed vigor to the historiography of British banking. Until recently the London-based financial sector, especially in the form of the “Big Five” banks, was a popular target selected by some historians seeking convenient scapegoats upon which to heap the economic sins of what they saw as a slothful and indolent British economy. However, recent reinterpretations, which have examined closely both the motives of bankers and the documents which record their activities, indicate clearly that generally British banks conducted their business in a manner which was informed, coherent and profitable. Ackrill and Hannah’s Barclays adheres to this view. With regard to British banking, and in more than one context, they reject outright the analogy of deckchair rearrangement on the stricken S.S. Titanic: and in any case, apart from there being no correspondence here between the two, the interwar British banking industry had no need of the drastic measures required in Germany and the United States.[2]

However, Ackrill and Hannah’s approach is not Panglossian; they identify opportunities shunned and highlight episodes when perhaps the bank sacrificed profits because its reaction was slower than it might have been. Furthermore, as the authors emphasize, the distinctive approach to the question of structure and strategy adopted by Barclays, with its geographically-based local boards that continued to reflect the heritage of its various component parts, demonstrates that there was more than one managerial response to growth through amalgamation.

More generally, their study conforms to a pattern: historians who have assessed banking performance in the light of archival sources have tended to appreciate more clearly the opportunities and pitfalls which faced British banks. Although this behavior on the part of these historians might be regarded as a form of institutional capture, at least in those cases where a close relationship could be demonstrated between researcher and institution, the evidence mustered recently against the proposition suggests strongly rejection of the hypothesis that banks failed the British economy or, more particularly, failed British industry.

[1] While this book was being written Margaret Ackrill and Leslie Hannah were employed by the London School of Economics and Political Science; both have been long associated with the LSE’s Business History Unit.

[2] The fate of the Titanic and the performance of British banks, nor that of the modern British economy, have nothing in common. Given the calamitous collapse of the United States banking system in the early 1930s, if financial historians have to invoke a maritime disaster, then surely the tragic loss in 1915 of the Great Lakes passenger ship the S.S. Eastland, which capsized due to mismanagement at the cost of 844 lives while secured at its berth in Chicago, is a much a more appropriate analogy than the sinking of a state-of-the-art vessel by elemental natural forces in international waters.

Peter Wardley has written several articles on the emergence and consolidation of large corporations; for details see his “The Emergence of ‘Big Business,’ 1890-1921′, ReFRESH (Summer 2001) vol. 30, pp. 4-8 []. For British interwar banking, see his article, “The Commercial Banking Industry and Its Part in the Emergence and Consolidation of the Corporate Economy in Britain before 1940,” Journal of Industrial History (October 2000) vol. 3, no.1, pp. 71-96; and, an ISTOS conference paper on “Perceptions of Innovation, Receptions of Change: Responses to the Introduction of Machine Banking and Mechanization in Interwar British Retail Banking” (UPF, Barcelona 2003). []

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):Europe
Time Period(s):20th Century: WWII and post-WWII

A History of the Federal Reserve, Vol. I: 1913-51

Author(s):Meltzer, Allan H.
Reviewer(s):Wood, John H.

Published by EH.NET (June 2003)

Allan H. Meltzer, A History of the Federal Reserve, Vol. I: 1913-51. Chicago: University of Chicago Press, 2003. xiii + 800 pp. $75 (hardcover), ISBN: 0-226-51999-6.

Reviewed for EH.NET by John H. Wood, Department of Economics, Wake Forest University.

Allan Meltzer has given us a thorough history of the Federal Reserve’s monetary policy from its founding in December 1913 to the Treasury-Federal Reserve Accord in the spring of 1951. Several excellent descriptive and critical studies of various parts of this period of the Fed are available, led by a considerable portion of Friedman and Schwartz’s Monetary History. But Meltzer advances our understanding of the Fed in two respects that that I explore in this review: First, he considers all the significant episodes of monetary policy, usually in more detail than can be found elsewhere. This book must be the starting point for future studies of Federal Reserve monetary policy, not only for the period covered by the book, but also for the succeeding fifty years because the Fed’s organization and most of its beliefs and procedures were developed in the earlier period. The second main contribution is an extension of the first. Meltzer makes unequalled use of the unpublished minutes, correspondence, and other internal papers of the Federal Reserve Board and the Federal Reserve Bank of New York. He takes us further behind the scenes of policymaking.

This review seeks to locate the book in the literature on the Fed, a task made easier by Meltzer’s recognition of previous work and the absence of radically new interpretations. He supports the positions that have been associated with monetarist criticisms by Friedman and Schwartz and his work with Karl Brunner since the 1960s, especially the Fed’s lack of understanding of its role in the economy and its obsession with financial markets, commercial bank free reserves in particular. His support is in the form of information about the ideas, institutions, and personalities behind actions and inactions that are well known. We are told that the inflation and deflation of 1919-21, the Great Depression of 1929-33, the recession of 1937-38, and the post-World War II inflation would have been avoided or greatly moderated if the Fed had make money grow at a constant rate, as Friedman proposed (1959, 92) or as adjusted for velocity and inflation as Meltzer proposed (1984). Whether or not we accept these conclusions, Meltzer enables us to increase our understanding of the Fed’s intentions, or rather the intentions of different parts of an institution that was at war with itself.

The new material may be the book’s most important contribution to research because it adds to the information available for the study of the policy preferences of different interests in the Federal Reserve and their effects on decisions. Internal conflicts often involved battles for control between the Board in Washington and the regional Reserve Banks. The Federal Reserve Act of 1913 was vague about control. The powers of the Fed — particularly discounting and open-market operations — were vested in the Banks under the Board’s supervision. The extent of this supervision — broad or, as the Banks complained, amounting to the micro-management of a central bank from Washington — was the main source of these conflicts, which spilled over into policy decisions. It is also possible that policy differences between the Board and the Banks, especially New York, were partly due to the knowledge and interests arising from their political and economic environments. Given the importance attached to these differences, I would like to have seen more attention paid to their possible reasons beyond institutional grasps for power. It is no surprise to find the Board more sympathetic to (or under the thumb of) the Treasury during the latter’s pressures for continued bond supports after the two world wars. Less expected, perhaps, was the Board’s greater skepticism of market forces. Its preference for controls over interest rates helped to rationalize its support for Treasury low-interest programs. But the Board also differed from New York in believing that controls could control stock speculation in 1928-29 without impinging on “legitimate” credit. Havrilesky (288-331) found that the Banks’ greater reliance on interest rates continued in the second half of the century. Might those, like the New York Fed, who are immersed in the financial markets repose more trust in their operation, specifically in the efficacy of interest rates as rationing devices, compared with credit controls? On the other hand, this tack may not be appealing to monetarists who already find the Fed too sensitive to markets and interest rates. Meltzer finds that a good deal of the Board’s criticism of the New York Bank after the Crash was motivated more by concern for control than different perceptions of economic relations (289).

Meltzer confirms the charge that the Fed neglected to develop a model, or guide, to policy. This neglect can be interpreted with more sympathy than Meltzer and other critics have shown, although they recognize the Fed’s difficulties, because important conditions assumed by the Fed’s creators quickly disintegrated with war and its aftermath. They were adrift without a destination, compass, or anchor. The great inflow of gold caused by European inflations and other disorders divorced the Fed’s actions from the historic central bank concern for its reserve. The Fed’s timid support of credit during the Great Depression may have been partly due to a desire to preserve the gold standard (Eichengreen; Meltzer is doubtful, 405), but its interest in price stability between 1921 and 1929 prevented it from taking full advantage of its more-than-ample reserves.

We must also realize that prevalent economic models did not imply the countercyclical policy to which economists were converted a decade later. An influential theory that implied “liquidation” in depression stemmed from the belief that deflations are reactions to inflations that had been driven by speculations in inventories and fixed assets. These should be allowed to return to normal levels. Deflations must be allowed to run their course (Hayek; Treasury Secretary Mellon, discussed by Meltzer, 400). Attempts to force money into paths “where it was not wanted” merely sow the seeds of future inflation. We can see where this policy was conducive to long-run price stability under the gold standard — price indexes in 1933 still exceeded those of 1914. Even if Meltzer, like Friedman and Schwartz, is right that the Fed should have tried for constant money growth or at least a stable price level, the application of such a policy would have required remarkably prescient theoretical sophistication by a group of committees of mainly conventional businessmen unused to abstractions.

Irving Fisher was a notable exception in his resistance to conventional sound money. But his “compensated dollar” plan for stabilizing the price level by adjusting the price of gold (182) was ridiculed as “a rubber dollar” (Hoover, 119) and dismissed by the New York Fed’s Benjamin Strong as the work of “extreme quantity theorists” (Chandler, 203).

Meltzer’s criticisms of the Fed, like Friedman and Schwartz’s, are meant to be lessons for policy. In its theoretical and policy implications, the book is mainstream monetarism, deserving of the usual plaudits and criticisms: money and output are correlated, so that money must be important, but no convincing evidence of the direction of causation is offered.

Prospective buyers should note that the book is not about Federal Reserve activities that are not directly part of monetary policy. Check clearing and other parts of the payments system, on which most Fed employees work, are ignored, and the structure and regulation of banking receive little attention. The last omission is more the Fed’s than Meltzer’s. The Fed recognized the weakness of the banking system as evidenced by the high failure rate of banks during the 1920s, but it did not work towards an improvement — unlike President Hoover (121-25), who tried unsuccessfully for a system of larger and stronger banks. When Board Chairman Marriner Eccles (266-69) sought measures similar to Hoover’s in 1936, he was rebuffed by President Roosevelt. The Fed’s lack of attention to the banking structure is striking in light of England’s experience, where the encouragement of amalgamations after the Panic of 1825, which was attributed to the fragility of small banks, contributed to the decline in the frequency and severity of panics as the nineteenth century progressed (none after 1866). On the other hand, the Fed might have followed Congress in taking the banking structure as given because the protection of local banks had been a political condition of the Federal Reserve Act.

Returning to the Fed’s model, or lack thereof, Meltzer agrees with his predecessors that monetary policy was an irregular mix of the gold standard rules of the game, the real bills doctrine, and a concern for price stability that seemed important only when inflation threatened. The place of the real bills doctrine in Fed thinking is unclear. The Federal Reserve Act has been interpreted as a legal implementation of the doctrine by its limitation of private discounting to real bills of exchange, that is, short-term lending secured by inventories. This had always been regarded as sound practice for commercial banks, and the Fed favored it in aggregate because lending for productive purposes was more conducive to economic activity and price stability than “speculative” lending on securities. But favoring real bills is not the real bills “doctrine,” as Meltzer would have it. The doctrine’s fallacies had often been shown, particularly the indeterminacy of the price level when credit is linked to expected prices (Thornton, 244-59), and monetary policy (as opposed to rhetoric, for example, Senator Glass; Meltzer, 400) did not suggest that the Fed believed it. If it had, there would have been no role for interest rates. In the closest it came to expressions of policy guides, in the Board’s 1923 Annual Review and statements by Benjamin Strong (Chandler, 188-246), the Fed indicated less fear of inflation from real bills than other lending. But it depended on interest rates to rein in excessive borrowing, whatever the purposes. Whether credit was “excessive” tended to depend on what was happening to the price level, although this connection was cloudy in Fed statements at least partly because it did not wish to be held responsible for price stability. The reasons for the Fed’s opposition to an official goal of price stability probably included its constraints on the pursuit of other goals, such as the alleviation of financial stress, and the fact that its proponents in Congress (especially James Strong of Kansas) were most interested in restoring agricultural prices to previous heights.

Touching on Meltzer’s relations to other controversies: He continues to differ from Friedman and Schwartz (692) in his argument (with Brunner, 1968, and agreed by Wicker, 1969, and Wheelock, 1991) that the Fed’s actions during the Great Depression would have been approximately the same if Benjamin Strong (who died in 1928) had continued at the helm of the New York Bank. Meltzer believes that Strong’s “attachment” to commercial bank borrowing from the Fed and free reserves as policy guides continued after 1928, and were responsible for its failure to increase credit between 1929 and 1933 and its doubling of reserve-requirements ratios in 1936-37. This position dates at least from the 1960s, when he and Brunner assisted Congressman Patman’s investigation of the Fed that initiated the work leading to the book under review.

It was a common belief in government and Congress that “international cooperation,” specifically the creation of inflation in the interests of European currencies (Hoover, 1952, 6-14), interfered with domestic goals. Meltzer agrees with Hardy (228-32) and Friedman and Schwartz that the accusation is unsupported. Quoting the latter: “foreign considerations were seldom important in determining the policies followed but were cited as additional justification for policies adopted primarily on domestic grounds when foreign and domestic considerations happened to coincide” (279).

I do not think that Meltzer’s treatment of bank failures during the Great Depression adequately reflects Wicker’s (1996) investigations that seriously undermine Friedman and Schwartz’s interpretations and suggest that the name “runs” is inappropriate. The three banking crises of 1930-31 identified by Friedman and Schwartz (and accepted by Meltzer, 323, 731) involved mostly small banks that were insolvent. Farm and real estate prices had fallen drastically, and banks failed because their customers failed. The frequency of failures in the “crisis periods” was only slightly greater than in the period as a whole, and were geographically concentrated. None became national in scope or exerted pressure on, not to say panic in, the New York money market. The first consisted largely of the collapse of the Caldwell investment banking firm of Nashville, Tennessee, which controlled the largest chain of banks in the South and was heavily invested in real estate. There is no evidence of contagion. The “crisis” of mid-1931 was concentrated in northern Ohio and the Chicago suburbs, where small banks had multiplied with the real estate boom. The crisis of September-October 1931was wider, but concentrated in Chicago, Pittsburgh, and Philadelphia.

This brings us to Meltzer’s (and Friedman and Schwartz’s) criticism of the Fed’s failure to apply Bagehot’s proposal that the central bank act as lender of last resort. That is, as holder of the nation’s reserve it should stand ready to supply the cash demanded in times of panic. Meltzer contends that “Most of the bank failures of 1929 to 1932, and the final collapse in the winter of 1933, could have been avoided” (729) if the Fed had applied Bagehot’s rule. However, as he (283-91) and Friedman and Schwartz (335-39) recognize elsewhere, the New York Fed actively assisted the financial markets during and after the Crash, and withdrew when there was no evidence of panic in New York, that is, “once borrowing and upward pressure on interest rates” declined (Meltzer, 288). I find Meltzer convincing when he suggests that this “was consistent with the Riefler-Burgess [free reserves] framework,” as opposed to Friedman and Schwartz’s argument that New York eventually yielded to the Board’s opposition to its open-market purchases. “The dispute was mainly about procedure, not about substance,” Meltzer (289) argues. “They [the Board] disliked New York’s decision to act alone.” It appears to this reviewer that the Fed’s actions as described by Meltzer and Friedman and Schwartz, generally conformed with Bagehot’s advice to relieve illiquidity in the money market in times of panic. He had not recommended the rescue of insolvent banks in the hinterlands that did not threaten the money market. This includes at least the beginnings of the nationwide closures of 1933 that were precipitated by the Michigan governor’s decision to close the banks in his state to protect them from the possibility of a run when the failure of Ford’s bank in Detroit (which was also heavily invested in real estate) was announced.

I end with comments that are more differences of emphasis than of substance: The Fed’s irrelevance in planning postwar financial arrangements is interesting, although Meltzer may exaggerate its significance. He wrote: “In the 1930s, the Treasury replaced the Federal Reserve as the principal negotiator on international financial arrangements” (737). In fact, governments have always, directly and firmly, controlled monetary arrangements. Their seizures of the details of monetary policy in the U.S. and U.K. in the early 1930s were remarkable, but the U.S. government’s control of changes in the monetary system as exemplified by the devaluation of 1933, Bretton Woods in 1944, and the Nixon suspension of 1971 had also been the practice of Parliament, which decided (with more or less advice from the Bank of England) suspensions, resumptions, legal tender, and other trade and financial arrangements. The irrelevance of the Fed in the negotiation of post-World War II financial agreements was shared by the Bank of England. Their places in the row behind finance ministers during negotiations continued an age-old practice. It is interesting in light of the high visibility of central banks in the operation of monetary systems that the structures of those systems belong to governments. Without defending the Fed, which ought to have behaved better within the framework that it was given, the real failure to respond to the catastrophe should be laid at the feet of the government. Herbert Hoover was more active than he is often given credit for, but he departed from tradition in leaning on the “weak reed” that was the Federal Reserve (1952, 212; Meltzer, 413).

Meltzer suggests that the Great Depression was not considered a failure of monetary policy at the time (727). He refers to the Federal Reserve and economists, and I agree. But this was not true of the public or of substantial parts of Congress (which he acknowledges on p. 427). Carter Glass was a powerful defender of the Fed in the Senate, but the House passed the Goldsborough Bill directing the Federal Reserve “to take all available steps to raise the present deflated wholesale commodity level of prices as speedily as possible to the level existing before the present deflation” by a vote of 289-60 in 1932, before it was watered down into a meaningless resolution in the Senate. The 72nd Congress (1931-33) introduced more than fifty bills to increase the money supply, which came closer to passage as the depression worsened (Krooss, 2662). It would be difficult to imagine a more damaging commentary on Woodrow Wilson’s idealistic expert (read “remote”) institution than Chicago Congressman A.J. Sabath’s question to Chairman Eugene Meyer in 1931: “Does the board maintain that there is no emergency existing at this time” (letter entered into the Congressional Record, Jan. 19) — or a similar lack of sensitivity of legislators in a democracy. The monetary authority supplanted by the Fed — the Treasury with an attentive Congress — might have done no better. But the sharp actions in 1865 (when Congress reversed its decision to retire the greenbacks after voters complained) and 1890 and 1893 (when it increased and then reduced the monetization of silver during recession and then gold flight) suggest that it would not have stayed on the sidelines if it had not been inhibited by (and waiting for) its expert creation. This is not (necessarily) a plea for free banking, but at least for monetary authorities that are closer to the effects of their actions.

I would have liked to see Meltzer subject the Fed’s existence to a little scrutiny, and to consider what kinds of institutions might have better responded to events or (this is surely an oversight) been more likely to adopt his preferred policy model. My guess is that he, Friedman and Schwartz, and most of the rest of the economics profession share Woodrow Wilson’s desire for experts: The Fed should be independent but use the right model.


Karl Brunner and Allan H. Meltzer. The Federal Reserve’s Attachment to the Free Reserve Concept. For Subcommittee on Domestic Finance, The Federal Reserve after Fifty Years. House Committee on Banking and Currency. Washington, 1965.

Karl Brunner and Allan H. Meltzer. “What Did We Learn from the Monetary Experience of the United States in the Great Depression?” Canadian Journal of Economics, May 1968.

W. Randolph Burgess. The Reserve Banks and the Money Market. New York, 1927.

Lester V. Chandler. Benjamin Strong, Central Banker. Washington, 1958.

Marriner Eccles. Beckoning Frontiers. New York, 1951.

Barry Eichengreen. Golden Fetters: The Gold Standard and the Great Depression, 1919-39. New York, 1992.

Milton Friedman. A Program for Monetary Stability. New York, 1959.

Milton Friedman and Anna J. Schwartz. A Monetary History of the United States, 1867-1960. Princeton, 1963.

Charles O. Hardy. Credit Policies of the Federal Reserve System. Washington, 1932.

Thomas Havrilesky. The Pressures on American Monetary Policy. Boston, 1993.

Freidrich A. Hayek. Prices and Production. London, 1931.

Herbert Hoover. Memoirs: The Great Contraction, 1929-41. New York, 1952.

Herman E. Krooss, editor. Documentary History of Banking and Currency in the United States. New York, 1969.

Allan H. Meltzer. “Overview,” in Federal Reserve Bank of Kansas City, Price Stability and Public Policy, 1984.

Winfield W. Riefler. Money Rates and Money Markets in the United States. New York, 1930.

Henry Thornton. An Inquiry into the Nature and Effects of the Paper Credit of Great Britain. London, 1802.

David C. Wheelock. The Strategy and Consistency of Federal Reserve Monetary Policy, 1924-33. Cambridge, 1991.

Elmus Wicker. “Brunner and Meltzer on Federal Reserve Monetary Policy during the Great Depression,” Canadian Journal of Economics, May 1969.

Elmus Wicker. Banking Panics of the Great Depression. Cambridge, 1996.

John Wood’s main research interest is a history of the ideas and behavior of British and American central bankers since 1694. Recent articles include “Bagehot’s Lender of Last Resort: A Hollow Hallowed Tradition,” Independent Review (Winter 2003), and “The Determination of Commercial Bank Reserve Requirements” (with Cara Lown), Review of Financial Economics (December 2002).

Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

Deutschlands Krise und Konjunktur, 1924-1934: Binnenkonjuktur, Auslandsverschuldung und Reparationsproblem zwischen Dawes-Plan und Transfersperre

Author(s):Ritschl, Albrecht
Reviewer(s):Voth, Hans-Joachim

Published by EH.NET (March 2003)

Albrecht Ritschl, Deutschlands Krise und Konjunktur, 1924-1934:

Binnenkonjuktur, Auslandsverschuldung und Reparationsproblem zwischen

Dawes-Plan und Transfersperre. Berlin: Akademie Verlag, 2002. 297 pp.

$79.80 (cloth), ISBN: 3-05-003650-8.

Reviewed for EH.NET by Hans-Joachim Voth. Department of Economics, Universitat

Pompeu Fabra, Barcelona.

Wrong tales last longer, or so it seems. An op-ed piece for the Wall Street

Journal on January 29, 2003 recounted the old Kindleberger/Landes story

about how the withdrawal of funds in the runup to the 1929 crash in the US led

to a downturn in Germany. Never mind that the timing is all wrong, or that

domestic reasons as well as changes in US monetary policy possibly played a

more important role — it’s a good story, and connected with one of the most

dramatic episodes in twentieth-century economic history. Of twenty-six European

democracies in 1920, thirteen had become dictatorships by 1938. Nowhere were

the consequences more catastrophic than in the case of Germany — and nowhere

did economic breakdown loom larger as a contributing factor in the demise of

democracy. A mere five years after the end of hyperinflation, the country’s

economy began to turn down once more. With the possible exception of the US, no

other nation experienced a more severe depression. Unemployment skyrocketed to

six million and industrial production fell by half; by 1932, communists and

Nazis together held a majority of seats in parliament. Ever since, debate has

raged about the inevitability or otherwise of the final outcome — Hitler’s

rise to power. Was economic misery crucial? Did the prosperity of the roaring

twenties demonstrate that Germany’s economy was in perfectly good shape? Or was

Weimar already living on borrowed time? Once the downturn began, could it have

been mitigated? Questions such as these are not just for the economic

historians, who have debated them for decades [Borchardt 1991, Kershaw 1990].

In Germany, where politicians can score an easy goal by claiming that the other

side is “emulating Br?ning” (the German chancellor during the early 1930s whose

austerity policy allegedly aggravated the slump), they are also deeply

political. Albrecht Ritschl’s Deutschlands Krise und Konjunktur attempts

to rethink many of these vexed and contentious issues. The book is primarily

addressed to a German audience, but its argument and the new data it contains

will be of interest to other scholars working on the Great Depression. It is

also an example of a peculiar art form, which needs some explaining before we

can turn to the book’s contents.

In the Anglo-Saxon world, the Ph.D. separates amateurs from professional

scholars. Uniquely, Germany has two doctorates for young and aspiring

researchers — the first is often not much of an academic affair at all, and

mainly serves to reinforce social distinctions (the delight of being called

“Herr Doktor!”, grovelling treatment from realtors, etc.). The second

dissertation, the Habilitation, on the other hand, is often only

completed in one’s late 30s or early 40s, after half a decade or so of

indentured servitude. What it lacks in originality it makes up for in length —

the second dissertation has to be an ?ber-dissertation, often exceeding 500

pages. As a result, creativity is stifled, manuscripts are basically

unreadable, and the transition to independent scholarship comes much too late

for most scholars; no other institution has contributed more to the decline of

German academia as the Habilitation.

In contrast to the mostly mindless outpourings generated by this peculiarity of

the German system, Albrecht Ritschl’s book is a contribution to scholarship. It

is actually two books between a single set of covers — one that tries to

rectify numerous problems with the national accounts for interwar Germany, and

the other an economic analysis of the slump’s causes and the policy

alternatives that could have been pursued. Aficionados of German economic

history will be grateful for having the final set of estimates for GDP and

especially for government borrowing in published form. For much too long, these

calculations were similar to an iceberg in the cold waters of German economic

history, with only a small percentage visible above the waterline, and the main

volume of work removed from the public’s eye, being only available as

unpublished working papers or in manuscript form. Ritschl has not just reworked

published figures, but made use of the extensive range of semi-official sources

published in Germany at the time. He also collected substantial amounts of

archival material, which reveal the full extent of Nazi (and pre-Nazi)

government borrowing. While some scholars may quibble with some of the

assumptions, most of the revisions are likely to supplant or augment earlier

estimates. As a result, we can now say with greater certainty than before that

during the brief halcyon days of the Weimar Republic, growth was possibly

slower than previously thought, and that deficit spending during the Nazi

recovery was nowhere near as rampant as popular mythology claims. While not as

wide-ranging as other revisions of national accounts nor as important in its

implications, this is a thorough and useful addition to the literature.

The second book contained in this volume sets itself an altogether more

ambitious aim — to provide a new explanation for the severity of the Great

Depression in Germany, and to bury alternative interpretations that have been

offered in the past. The “big idea” is that a change in the seniority of debt,

agreed as part of the renegotiation of Germany’s reparations debts, shut off

access to foreign funds when they were needed most — after 1929, when the

country had entered into a severe recession and was about to plunge even

further. Deemed the main culprit for the outbreak of World War I in the

Versailles treaty, Germany was saddled with paying reparations of an

unspecified value. Until 1932, the volume of claims and the form of payment was

being negotiated — mostly at the conference table, sometimes at gunpoint (such

as in 1923, when the French and Belgian armies invaded the Ruhr because a

shipment of telegraph poles was overdue). After the hyperinflation, in 1924,

the Dawes Plan gave Germany access to a big loan, some relief from reparations

payment, as well as “transfer protection” — money to satisfy the allies could

only be sent abroad when the conversion of marks into foreign currency did not

undermine the currency’s stability. Implicitly, this enabled the Germans to try

and “crowd out” reparations by other borrowing — since the ability to repay

foreign debt is not unlimited, and since transfer protection effectively made

reparations payments junior debt. The idea that Weimar’s borrowing/spending

spree (resulting in gleaming new spas, public swimming pools, rapid

electrification of the railways, generous public housing programmes etc.) is

partly to blame for the brutal downturn after 1929 is not particularly novel.

Also, numerous others have highlighted the importance of transfer protection

under the Dawes Plan. What makes this variation of the tale interesting is the

claim that a radical change under the Young Plan drastically undermined the

ability to borrow abroad — with reparations the senior debt, who would want to

lend? Ritschl presents a theoretical model that demonstrates exactly how the

change in seniority might have made a difference. This is a laudable exercise,

but it is somewhat uninspiring — the model adds little or nothing to the

simple verbal argument, generates no surprising implications or new ways of

testing the basic hypothesis.

The book’s main shortcomings are its unwillingness to confront the data and an

inability to show any evidence that would substantiate its key arguments. This

applies both to the borrowing binge and the debt hangover after 1929. There is

some archival evidence that suggests that Germany was keen to pile the

non-reparation debt high in order to leave the allies dry, such as an

incriminating internal document from the Foreign Office in Berlin. In effect,

the Germans deliberately tried to ensure that there were “American Reparations

to Germany” (as Stephen Schuker called them (see Schuker 1988)) — Germany

borrowed more from US investors than it ever paid in reparations, and then

defaulted on its debts. Yet those crafty Krauts clearly did not all get

together to crowd out the reparations — there were also drastic steps to

curtail foreign borrowing, not least by one of the chief conspirators in

Ritschl’s tale, the President of the Reichsbank, Hjalmar Schacht. Any borrowing

should have been good borrowing in his book if Ritschl’s main thesis is

correct. Instead, he repeatedly railed against the evils of foreign borrowing

in any shape, size or form, effectively seized control over access to foreign

funds, and succeeded in bringing inflows to a standstill for an extended

period. What is also missing is some assessment of the level of foreign

borrowing that should have been expected and that would have been “normal” in

an economy recovering from a major shock — for example, by comparing the

volume of debt issuance with Third World countries stabilizing after

hyperinflations since 1945 [for an instructive list of cases, see Fischer,

Sahay and V?gh 2002].

If the story of a deliberate crowding out of reparations appears questionable,

the central hypothesis has even less to recommend it. The well of international

credit ran dry for pretty much every borrower around the world after 1929 —

which is the origin of the Kindleberger story. Without compelling empirical

evidence to show that Germany suffered more than everyone else, it is hard to

see how the highly idiosyncratic explanation for its troubles could be

plausible at all. There are a number of obvious variables one could and should

have checked before basing so many claims on so little — did the spreads of

German bonds widen dramatically over those of other borrowers in the London and

New York markets? Was it even harder for Germany to get access to credit than

for everyone else? To this reviewer’s dismay, the book makes no attempt to

address these questions, despite the easy availability of data and the wealth

of information in the forms of charts and tables that the author assembles.

Also, inconvenient facts are largely ignored or belittled. In fact, Germany did

borrow — the famous Lee Higginson loan of 1930 — even after the change in

debt seniority rules. Ritschl notes that the conditions were not generous,

perhaps even humiliating. Yet he fails to resolve the conundrum: how could the

country obtain a loan at all if the prospect of repayment was nil? More

importantly, as recent work by Temin and Ferguson shows, political decisions —

and not the letter of the Young Plan — stood between Germany and further fresh

loans in 1931. Had the Reich not decided to build a pocket battleship and to

pursue a misguided tariff union with Austria (violating the spirit of the

Versailles treaty, and probably its letter), France would most likely have

extended fresh credit [Temin and Ferguson 2003]. Also, the author’s own data

show clearly that commercial paper issuance abroad revived in 1930, after a

brief downturn in late 1929, and that it only dried up for good towards the end

of the year (p. 120). If the seniority clause was as important as the author

claims, then it evidently took contemporaries at least eighteen months to

figure this out; and by the time they allegedly did, there were plenty of other

reasons not to lend. An externally imposed credit crunch may be the right

explanation for at least some of the German Slump’s severity; yet Ritschl’s

seniority-clause story cannot be squared with the available evidence.

True to the cliometric tradition, the book presents some counterfactuals of

German GDP during the 1920s and 1930s. Had the Reich paid up and transferred

the reparations instead of borrowing right, left and center, it could have

avoided most of the downturn, or so Ritschl argues. Between 1928 and 1931,

there would have been healthy growth, while the 1920s would have been more

subdued. Except for a small dip in 1932, the slump could have been avoided

almost entirely: Germany’s depression would have looked more like that of

France than the US experience. The underlying cause is that actual policy was

pro-cyclical twice — during the expansion and during the downturn. In

traditional accounts, the villain in the piece is Heinrich Br?ning, a dour and

ascetic Catholic whose austerity measures were designed to aggravate the slump

in a bid to show that Germany could not pay reparations. Ritschl substitutes

his story of externally imposed fiscal discipline due to credit constraints,

and turns Br?ning’s gratuitous hairshirt exercise into the just punishment for

the Republic’s debt-financed consumption mania during the 1920s. The story is

problematic on several counts. First of all, the counterfactuals are predicated

on using the Keynesian import multiplier. This is despite the fact that a good

part of the book is actually devoted to showing that Keynesian interpretations

do not apply to interwar Germany, that the fiscal multipliers are unstable,

etc. This reviewer was troubled to see the author return so happily to the same

analytical toolkit at the earliest convenience, having spent so much time

dismantling it just a few pages before. Also, it seems altogether unlikely that

Germany could have emulated the relatively good French performance, as Ritschl

argues. This was largely due to a unique set of circumstances that sheltered

the latter from the contractionary impulse that was being transmitted via the

gold standard [Eichengreen 1992, Eichengreen 2002]. Finally, how likely is it

that Germany could have borrowed much more in 1931 or 1932 if it had been more

restrained in the late 1920s, given the worldwide turmoil on financial markets

and the severe crisis in the US?

Given the unfortunate lack of compelling data analysis and the lack of cohesion

overall, it is to be feared that many of the interesting and challenging ideas

in this work may not find their way into peer-refereed journals. Yet it would

be useful if at least the data revisions could be presented and published in

English so that they may serve as a basis for future substantive work on the

many fascinating questions that Weimar’s economic history continues to raise.


Borchardt, Knut, Perspectives on Modern German Economic History and

Policy (Cambridge, New York: Cambridge University Press, 1991).

Eichengreen, Barry, Golden Fetters: The Gold Standard and the Great

Depression, 1919-1939 (New York: Oxford University Press, 1992).

Eichengreen, Barry, “Still Fettered after All These Years,” Macintosh Lecture,

delivered at Queen’s University, 2002.

Fischer, Stanley, Ratna Sahay and Carlos V?gh, “Modern Hyper- and High

Inflations,” Journal of Economic Literature, XL (2002), 837-80.

Kershaw, Ian (editor), Weimar: Why Did German Democracy Fail? (New York:

St. Martin’s Press, 1990).

Schuker, Stephen, “American “Reparations” to Germany,” Studies in

International Finance, 61 (1988).

Temin, Peter and Thomas Ferguson, “Made in Germany: The German Currency Crisis

of July 1931,” Research in Economic History, forthcoming (2003).

Hans-Joachim Voth is Associate Professor of Economics at Universitat Pompeu

Fabra, Barcelona, a Research Fellow in the International Macro Program at the

CEPR, London, and a Research Fellow at the Centre for History and Economics,

King’s College, Cambridge. His latest publications include “With a Bang, not a

Whimper: Pricking Germany’s Stockmarket Bubble in 1927 and the Slide into

Depression” (Journal of Economic History, 2003), “Factor Prices and

Productivity Growth during the British Industrial Revolution” (with Pol Antr?s,

Explorations in Economic History, 2003, forthcoming) and “The Longest

Years — New Estimates of Labor Input in Britain, 1760-1830″ (Journal of

Economic History, 2001).

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):Europe
Time Period(s):20th Century: Pre WWII

And a Time for Hope: Americans in the Great Depression

Author(s):McGovern, James R.
Reviewer(s):Dighe, Ranjit S.

Published by EH.NET (February 2002)


James R. McGovern, And a Time for Hope: Americans in the Great Depression. Westport, CT: Praeger Publishers, 2001. xii + 354 pp. $69.95 (hardcover), ISBN: 0-275-96786-7; $24.95 (paperback), ISBN: 0-275-97544-4.

Reviewed for EH.NET by Ranjit S. Dighe, Department of Economics, State University of New York at Oswego.

James R. McGovern’s engaging new book is a social history of America in the 1930s whose main thesis is that the American people weathered the Depression Decade remarkably well, never losing their characteristic confidence and hopefulness. Although economics is not the book’s focus, the book will still be of interest to economic historians seeking a fuller picture of the response to depression and of American life in general during the 1930s.

The resilience and hopefulness of the American people in the Great Depression have been noted before. Arthur M. Schlesinger, Jr.’s Franklin D. Roosevelt trilogy described a nation that reflected its president’s sangfroid and confidence, taking to heart FDR’s famous line, “We have nothing to fear but fear itself.” An early review of Studs Terkel’s landmark oral history Hard Times called it “a huge anthem in praise of the American spirit” (Terkel, p. i). McGovern’s contribution is to give us a social history of the 1930s that places that spirit of hopefulness at its center and that emphasizes the progress that did occur during that decade. Far from being a decade of drift, McGovern argues, the 1930s continued America’s forward march, even if the country’s economic indicators did not.

The book is smartly organized by topic rather than chronologically, with twelve central chapters that are sufficiently self-contained that they can be read in any order. That flexibility is a particular virtue because the quality of the individual chapters is somewhat uneven. Because the book’s stronger chapters stand so well on their own, they are ideal as outside-reading assignments for American economic history classes and as quick refreshers for researchers trying to get a feel for 1930s America.

Although the author has clearly gotten his hands appropriately dirty with primary sources, the book’s key findings seem to come as syntheses of other research works, as is evident from the extensive endnotes and the inclusion of seventy-five books in the select bibliography of “books especially helpful to me.” This is not really a problem, since the author’s thesis is unique. Indeed, some of the book’s strongest chapters are those that rely most heavily on secondary sources. The key primary sources used are the official papers of Franklin D. Roosevelt and his Civil Works Administration chief Harry Hopkins, numerous reports from the Federal Writers Project and photographs from the Farm Security Administration (FSA), and microfilms from a dozen-plus newspapers

Title notwithstanding, the book is really about the New Deal years of the 1930s, not the entire Depression. The Great Contraction of late 1929 to early 1933 does not fit so well with the book’s thesis about the “relative poise and ease” with which Americans confronted the worst economic catastrophe in their country’s history. McGovern himself admits in the book’s conclusion that a “more severe and longer-lasting Depression” would have severely tested the people’s resilience. Thus the Great Contraction is handled separately in the first chapter, “A Troubled Nation, 1929-1934,” which describes a nation under severe strain and desperate for a way out. While the chapter does a fine job of telling its story with primary-source quotes from people feeling the pinch of the Depression, the story is nevertheless a familiar one. Since one cannot tell this story without some discussion of the contraction’s economic causes, McGovern briefly discusses them, and manages to do so in terms that most economic historians would find reasonable. He describes the contraction as a collapse of aggregate demand brought on by a massive decline in consumer confidence, likely precipitated by the stock-market crash (a la Romer 1990) and amplified by the thousands of bank failures.

Again, while the book is a social rather than economic history of the depression years, economic historians and their students will still likely want to know how Americans coped with the country’s greatest economic catastrophe. Here McGovern does a good job of sketching the various institutions, from families and churches and communities to New Deal programs to movies and radio and magazines to urban entertainments and immigrant networks, that gave Americans strength and nourishment. McGovern properly focuses on those institutions in the 1930s not merely as coping mechanisms but as central features of American life whose evolution and various changes are essential developments in the country’s history. The book is at its best in detailing those institutions, as in the chapters on rural and small-town communities, African Americans in the South’s cotton belt, and the sporting and nightlife attractions of New York City and Chicago.

The book reaches its zenith in Chapters 8 through 10, “Seeing Tomorrow,” “Americans Go to the Movies,” and “Americans Listen at Home,” all of which would be excellent supplementary readings for an undergraduate economic history class. “Seeing Tomorrow” surveys the numerous economic advancements and innovations that did occur in the 1930s: the spread of radio, the wider use of electricity (aided by such New Deal projects as the Tennessee Valley Authority) and appliances such as refrigerators, the great dams, the great skyscrapers and bridges, the spread of commercial air travel, and, of course, the two major world’s fairs, in Chicago (1933-34) and New York (1939-40). One easily overlooks how many of America’s great landmarks were built in the 1930s, including the Empire State Building, Rockefeller Center, the Hoover Dam (then called the Boulder), and the Golden Gate Bridge. These landmarks were instant sensations with tourists (the still-unfinished Boulder Dam drew more visitors in 1934-35 than the Grand Canyon!) and with the rest of the public, who eagerly read about them in picture magazines such as Life (which also made its debut in the 1930s).

Chapters 9 and 10, on the movies and radio, are delightful and grounded in subtle yet convincing economic explanations of the trends in both media. Motion pictures and radio were two of the country’s rare economic success stories in the 1930s. The growing popularity of Hollywood movies and national radio broadcasts gave Americans a common (pop) culture and a greater sense of connectedness. The 1930s are almost universally acknowledged as a golden age of Hollywood, but its films in 1930-34 and 1935-39 were of distinctly different types. The earlier period was the heyday of the “kiss kiss” and “bang bang” movies (think Mae West and Jimmy Cagney), whereas the later period saw a decided turn toward more wholesome and uplifting fare, as exemplified in the films of Frank Capra. McGovern makes a convincing case that the shift occurred because the public voted with its dollars against the sensational and for the inspirational. Chapter 10 makes much the same argument for consumer sovereignty on the part of the American radio public, who demanded, and got, similarly affirming family fare that would help them maintain a positive attitude in the face of economic adversity. In both cases we see an interesting endogenous relationship, in which the public demands positive messages in its entertainment media, gets them, and finds comfort and inspiration in them.

Another chapter that I suspect will be of interest to economic historians is Chapter 6, “Rural Worlds Confirmed,” which is devoted mostly to debunking John Steinbeck’s The Grapes of Wrath. Although Steinbeck’s classic is one of my favorite books, and one I have even used as a supplementary reading in my economic history class, McGovern argues effectively that the typical experience of the 315,000-plus “Okies” who migrated to California in the 1930s was not nearly so dire as that of Steinbeck’s fictitious yet archetypal Joad family. Many Oklahomans had already moved to California, under better conditions, in the 1920s, and many of the 1930s migrants were able to draw on the resources of already-established Okie communities in California (Merle Haggard’s Bakersfield comes immediately to mind). Moreover, far from finding nothing but dismal migrant farm work, the majority of Okies seem to have eventually experienced upward mobility in California, and chose to settle down in a single place, even if it meant a temporary stint on relief. To be sure, the misery and exploitation that Steinbeck described was the reality of many of the new arrivals in California, especially the Mexican immigrants, but California was hardly the dead end that his book implied.

McGovern is less sure-footed, and sometimes tendentious, when he ventures out of the realm of social history and into the areas of political and labor history. Chapters 2 and 3, “The President” and “The New Deal,” seem almost to have been written by two different people. Chapter 2 is a glowing tribute to the inspirational character and personality of Franklin D. Roosevelt, whereas Chapter 3 is a near-indictment of the New Deal for failing to provide adequate relief or sufficiently vigorous anti-poverty programs. (And yet the concluding chapter strongly praises the New Deal’s relief and reform programs, as well as the “responsive and innovative government under Roosevelt.”) Taken together, the two chapters underscore McGovern’s theme of a confident and hopeful people who prevail over extreme hardship, but they could have been organized better. Moreover, McGovern seems to overstate the New Deal’s failings so as to strengthen his story of American perseverance.

While the New Deal obviously fell well short of producing a full economic recovery, it did provide substantial relief to millions of Americans, a fact that McGovern seems to soft-pedal. McGovern presents the high official unemployment figures for the late 1930s as evidence of the inadequacy of New Deal relief, yet he does not mention the “Darby-corrected” unemployment rates (the Darby correction is to follow current practice and count government relief workers as employed), which lower the late-1930s unemployment rates drastically and suggest that the New Deal provided a lot of employment relief. The Darby-corrected unemployment rates in 1937 and 1940, for example, are in the single digits, more than five percentage points lower than the official unemployment rates of 14.3 percent and 14.6 percent. Although the American social safety net of the late 1930s was not without some gaping holes, the New Deal did mark a sweeping regime change, moving the United States once and for all into the world of welfare-state capitalism. Even though Roosevelt never embraced socialism, aspects of the New Deal were clearly socialistic, as Peter Temin (1989) has noted. In fact, by 1938 federal spending on employment programs was a larger share of GDP in the United States (6.3%) than in Britain, France, Germany, or Sweden (Lipset and Marks 2000, p. 286).

If Chapter 3 seems to take a left-wing approach to the New Deal and its shortcomings, several of the subsequent chapters seem to approach matters from the opposite end of the political spectrum, telling a rosy story of American exceptionalism based on individualism and contentment. The chapter on “American Workers,” for example, seems to go out of its way to minimize the gains in union membership and strength in the 1930s. McGovern cites the sixteen percent unionization rate as evidence that very few workers “regarded the situation to be so threatening to warrant union membership” (p. 275), without noting that the unionization rate of nonfarm workers was much higher (about twenty-nine percent). He attributes the union setbacks in the severe “Roosevelt recession” of 1937-38 not so much to the recession but to a general disenchantment with unions, and gives the misleading impression that the unions’ late-1930s setbacks were the beginning of the end for them, when in fact their gains would continue through the mid-to-late 1940s (when some two-thirds of factory workers belonged to unions). Most egregious of all is the following slam at FSA photographer Dorothea Lange, whose harrowing photographs (including the classic “Destitute Pea Picker in California, Migrant Mother of 6″) are among the most enduring representations of the Depression: “Although middle-class intellectuals like Lange showed a great capacity to empathize with poor folks living on the edge, they seem less well endowed to depict an abiding personal and cultural strength in their subjects. To do so, of course, would imply that they could begin to help themselves” (pp. 105-06). Thankfully, such snideness is relatively rare, and McGovern seems to contradict that statement in the book’s conclusion, when he says Lange underscored her subjects’ “real courage” as outstanding. (That assessment seems closer to the mark: Lange told an interviewer that the most important things about her subjects were “their pride, their strength, their spirit” [Davis, p. 49]).

Ultimately, such flaws are vastly outweighed by the book’s contributions. Beyond fulfilling his goal of portraying an America that maintained a sense of hopefulness and progress during hard times, McGovern has written a fascinating account of a vibrant American cultural and social life that (as William Faulkner might have said) not only endured but prevailed in the Depression Decade. Together with the books cited below, plus Irving Bernstein’s great trilogy on the labor and political history of the period and William J. Barber’s slender volumes on Hoover’s and Roosevelt’s economic policy-making, McGovern’s book belongs on a list of essential reading about the American economy and society in the Great Depression.

(James R. McGovern is Emeritus Professor of History at the University of West Florida.)


Bernstein, Michael A. (1987) The Great Depression: Delayed Recovery and Economic Change in America, 1929-1939. New York: Cambridge University Press.

Darby, Michael (1976). “Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941,” Journal of Political Economy 84: 1-16.

Davis, Keith F. (1995) The Photographs of Dorothea Lange. Kansas City: Hallmark Cards, Inc.

Lipset, Seymour Martin, and Gary Marks (2000). It Didn’t Happen Here: Why Socialism Failed in the United States. New York: W.W. Norton.

Romer, Christina D. (1990). “The Great Crash and the Onset of the Great Depression,” Quarterly Journal of Economics 105: 597-623.

Temin, Peter (1989). Lessons from the Great Depression. Cambridge: MIT Press.

Terkel, Studs (1970). Hard Times. New York: Avon Books.

Ranjit S. Dighe is Assistant Professor of Economics at the State University of New York at Oswego. He is the author of several papers on American labor markets in the Great Depression, as well as The Historian’s Wizard of Oz: Reading L. Frank Baum’s Classic as a Political and Monetary Allegory (2002, forthcoming).

Subject(s):Social and Cultural History, including Race, Ethnicity and Gender
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Famous First Bubbles: The Fundamentals of Early Manias

Author(s):Garber, Peter M.
Reviewer(s):Kindleberger, Charles P.

Published by EH.NET (August 2000)

Peter M. Garber, Famous First Bubbles: The Fundamentals of Early Manias.

Cambridge, MA: MIT Press, 2000. xii + 163 pp. $24.95 (cloth), ISBN


Reviewed for EH.NET by Charles P. Kindleberger, Professor of Economics,

Emeritus, MIT.

This small book has been hailed by a series of financial economists with high

reputations, including Rudi Dornbusch, Robert Shiller, Richard Sylla, Michael

Bordo, Mike Dooley, Eugene White and Charles Calomiris. Its thesis is that

calling a sharp financial expansion that collapses a “mania” or “bubble” is

sloppy thinking. Behind each upset lie some fundamental conditions. Even if

historical contemporaries call an episode a mania or bubble, good economic

historians should probe more deeply and determine what fundamental brought it

on. They should stay clear of expressions like mania, bubble, herd behavior,

panic, crash, irrational exuberance, financial crisis, chain letter, Ponzi

scheme, contagion and “other-fool theory.” Instead, they should dig.

Peter Garber focuses on three episodes: the Dutch tulipmania of 1634-37 (one

word in his lexicon) and the Mississippi and South Sea “bubbles” of 1719-1720.

The tulipmania, on which he has written before, takes eighty-three pages of

text, compared with thirty-five for both Mississippi and South Sea. The tulip

fundamental is that rare bulbs are hard to produce, but once achieved they are

relatively easy to propagate-this brings high and rising speculative prices for

rare species in the process of being developed, which fall after the exotic

coloring has been won. In earlier work Garber held that the similar bubble for

common varieties or pound goods was difficult to explain. In this book he holds

that their price history was meaningless-the players at the various “colleges”

or taverns were merely seeking entertainment, after the disastrous bubonic

plague of 1634-36, confident that any substantial losses would be written down

by the state. The speculation in his new view was just an idle “winter drinking

game” played for amusement. This basis of that confidence in February 1637,

when the write-down in Haarlem occurred in May 1638, is unclear.

Garber has provided a great deal of tulip prices in the period, much of it for

different dates, apart from February 7, 1637, from different sources. One major

source took the form of a debate for and against the speculation promoted by

government in the spring of 1637 to discourage speculation. Some sixteen charts

of the prices of particular bulbs (some exotic, some common) display straight

lines joining an early price to those of 1636 or 1637-to the weighted average

of the day’s price, not the peak. A straight line from, say, 1622 to 1637 gives

an impression of gradual rising, whereas there might have been a sharp rise in

the last weeks or month, as is shown in some charts.

Some arguments against the existence of a bubble are hardly persuasive. One is

that there was a depression following the collapse, as there had been after the

US stock market bubble of 1929 and the Japanese of January 1990. Another is

that the Cambridge Economic History of Europe in the Sixteenth and

Seventeenth Centuries does not mention it. Two important Dutch histories,

do, however: Jonathan I. Israel whose The Dutch Republic (Oxford:

Clarendon Press, 1995) sets it in the boom of East India Company shares, the

West Indies Company, housing, drainage schemes for the wealthy and tulips for

small town dealers and tavern keepers (pp. 552-53); and Jan de Vries and Ad van

der Woude, The First Modern Economy: Success, Failure, and Perseverance of

the Dutch Economy, 1500-1815 (New York: Cambridge University Press, English

translation, 1997), who call it a mania and include considerable detail. They

make the point that the contracts in the taverns were unenforceable. “Public

officials viewed this democratic speculation with both fear and loathing, and

once the mania collapsed . . . pamphlets appeared denouncing the irrational and

immoral conduct of the speculators” (p. 150-51).

Garber’s book was written before the appearance of Devil Take the Hindmost:

A History of Financial Speculation (New York: Farrar, Straus and Giroux,

1999), by Edward Chancellor, English banker and historian. So he had no

opportunity to respond to Chancellor’s third chapter devoted to tulipmania.

Chancellor, on the other hand, had read one of Garber’s early articles and

takes a dim view of it. “This bold attempt at historical revision does not

withstand scrutiny.” Several points are questioned, especially buying bulbs in

the ground in winter which will not be known to have produced exotic offshoots

until exhumed in June, and then whether the offshoots would produce exotic

flowers until years later . . . “The term ‘speculative mania’ aptly described

the condition of the Dutch tulip market in the mid-1630s” (pp. 24-25).

I have left too little space to deal with Garber’s treatment of the Mississippi

and South Sea bubbles. He regards each as a sensible experiment in what is now

called Keynesianism, bidding up the price of shares, financed by a captive

bank, in the hope that supply would expand later to justify the higher prices.

But speculation based on hope is difficult to characterize as a fundamental,

which in ordinary parlance is more tangible. The enemies of John Law in France,

largely in the Languedoc, were “infinitely more realistic than Law . . . . The

true masters of high flight who directly stimulated the agiotage, kept aloof

from the fever, planning themselves to ruin Law’s systeme when they judged the

movement favorable” (Guy Chaussinand-Nogaret, Les Financiers de Languedoc au

XVIII Siecle, Paris: S.E.V.P.E.N., 1970, p. 129). Chancellor includes the

South Sea bubble in Devil Take the Hindmost, noting that “some

speculators lost fabulous sums . . . ?247,000 . . . and ?700,000 of a paper

fortune. Sir Isaac Newton lost ?20,000 by selling out too early (with profit)

and then returning to the market at its peak” (p. 88). “A rational investor is

one who seeks to optimise his wealth by offsetting risk with reward and using

all publicly available information. Was the investor who bought South Sea stock

at ?1,000 behaving rationally? The answer is no. First, there was sufficient

public information to suggest that the share price was seriously overvalued.

Second, by entering the bubble at an advanced sate the investor faced a poor

ratio of risk to reward: he was chasing a small potential gain and risking a

larger and more certain loss. Third the ‘fundamentals’ (i.e., the long-term

prospects of the company) did not change significantly in the year” (p. 94).

Chancellor does not address the Mississippi bubble except tangentially.

As for herding, investors in London and Paris, cashing out in their local

bubble bought shares in the other. As South Sea stock started to slip in July

1720, eighty denizens of “change alley” in London went to the Dutch Republic to

mend their fortunes in insurance companies in Amsterdam, Middelburg, and

Rotterdam. Only, two insurance companies of the more than twenty survived

(Frank Spooner, Risks at Sea: Amsterdam Insurance and Maritime Europe,

1766-1780, New York, Cambridge University Press, 1983, pp. 24-25).

Belief in efficient markets is subscribed to by many, but may be losing

credence after the April 2000 decline of the NASDAQ share index. Andrei

Schleifer of Harvard has just brought out a book, Inefficient Markets

(New York: Oxford University Press, 2000), which argues, inter alia, that many

investors do poorly in the market because they chase the latest fashion. This

is herd behavior.

Garber claims that the world “bubble” lacks clear meaning and that it should be

invoked only as a last resort. The same would seem to apply to fundamentals

based on hope. The notion that markets are rational, efficient and collate all

available information is a strong prior belief often used in the absence of

clear facts. Finance has fads that rest on contagion, some of which may later

prove illusory. For the world today, one can mention conglomerates, mergers and

acquisitions, initial public offerings, hedge funds, loans to emerging markets,

and the Long-Term Capital Management fund.

The last in this list evokes a remark from Garber with an edge to it. “Law’s .

. . experiment is tarred with the pejorative ‘bubble.’ When modern economic

policymakers’ reach exceeds their grasp, they simply accommodate the ensuing

tenfold price inflation and get the Nobel Prize” (p. 107).

The debate between those who believe market are always rational and efficient,

resting on fundamentals, and historians who call attention to a series of

financial crises going back to at least 1550 is likely to continue. Parsimony

calls for making a choice for or against financial crises; complexity permits

one to say that markets are mostly reliable but occasionally get caught up in

untoward activities.

Subject(s):Markets and Institutions
Geographic Area(s):Europe
Time Period(s):18th Century

An Encyclopedia of Keynesian Economics

Author(s):Cate, Thomas
Harcourt, G.C.
Colander, David C.
Reviewer(s):Lawlor, Michael S.

Published by EH.NET (August 1999)


Thomas Cate, Editor, G.C. Harcourt and David C. Colander, Associate Editors. An Encyclopedia of Keynesian Economics. Cheltenham, UK and Brookfield, MA: Edward Elgar, 1997. xxiv + 638 pp. $235, ISBN: 185898145X.

Reviewed for EH.NET by Michael S. Lawlor, Department of Economics, Wake Forest University.

Macroeconomics today is in a peculiar state. Internally, the profession seems to have lost interest. Macroeconomics is neglected as a research topic. Outside of handy data to which to apply the latest advances in time-series econometric technique, graduate students seem to frown upon it as a dissertation topic (judging from the informal sample of assistant professor candidates we have interviewed in the last ten years). No longer are the heady debates, claims and counter-claims of the theoretical battles of the 1970s and 1980s making headlines in the journals.

Yet simultaneously, externally, out in the real economy, something of a revolution (to use a phrase popular in macro-talk) does seems to be taking place in macroeconomic performance, and possibly also in policy. T his is especially so in the case of the United States economy. U.S. real output growth has exceeded all consensus forecasts for the last 3 years (final figures for 1997 and 1998 came in at 3.8% and 4.2%). The duration of the expansion of the economy has now pushed into record territory. Unemployment has been falling for years and has now stood below 5% since 1996. And, most macroeconomically amazing of all, these good times have been accompanied by falling rates of inflation (below 3% for all but two quarters since 1995, below 2% since 1997:4). On the policy side, meanwhile, there is a degree of unreality. Fiscal policy, long ignored in the shadow of deficit politics, has seemingly dropped from the U.S. policy debate (although not so in Japan). Monetary policy in the era of Greenspan is widely given credit for engineering the U.S. miracle. But if you look a bit closer, both Greenspan and his cheering section seem a bit puzzled, even nervous about all the good fortune. M2 growth has fluctuated widely in the nineties, with little apparent correlation with inflation. Moreover, as inflation has declined, M2 growth has been consistently above the upper bound of its target range for most of the period since 1995. Consequently, both publicly and privately the Fed has abandoned money as an intermediate target, preferring to concentrate on the federal funds rate. Federal Open Market Committee (FOMC) minutes reveal a confusing search for signs of inflation that “must be there,” given the state of unemployment, along with much vague discussion of the financial press’s view that we are now in a “New Economy.” The essence of the novelty and the puzzlement seems to be a search for an unexplained and unmeasured productivity boost. Finally, there is the intriguing macroeconomic record of the rest of the world to add spice to this seemingly fertile ground for macro researchers. The largest experiment in one-shot monetary reform since Bretton Woods is taking place in Europe, while all of its major member states, except the dissenting U.K. (see IMF, 1999 for complete details), are still suffering from years of persistently high unemployment. The Asian Tigers have come down with a case of financial flu-if not pneumonia. Japan, the shining light of the 80s, has been limping through a very depressed decade, with disastrous GDP growth, and an interminable financial mess. As Japanese short-term interest rates have hovered below 1% for over four years now, we are perhaps catching the first real glimpse of a that old Keynesian curiosa, the liquidity trap. These are interesting times indeed.

What does modern macroeconomics have to tell us about all this? Has the profession’s enlightenment by the New Classical school helped us in understanding this state of affairs? More to the point of the book here under review, can we now profitably reassess the recent decades of macroecomic debate and experience with a less ideologically heated, more balanced and sober historical view? These are the issues that reading the current volume bring to mind, especially when considering a review for a list that has recently staged a fascinating forum calling for research on “economic history since 1950.”

Let me postpone some short remarks on these questions, though, to turn to the volume I was given to read. An Encyclopedia of Keynesian Economics contains 169 entries by 144 contributors and runs to 638 pages, with no index. The entries are of three varieties: brief biographies of various economists associated with “Keynesianism,” very broadly conceived (Silvio Gessel, Arthur Okun and Robert Lucas are profiled, for example); brief sketches of theoretical issues, models and tools arising in macroeconomic debates (e.g., “Okun’s Law” and “The Lucas Critique”); and longer pieces which typically deal much more closely with issues in Keynes scholarship (e.g., “The Influence of Burke and More on Keynes”).

The quality of the entries is varied. Some of the entries are entirely pedestrian, perhaps intentionally so to fit the evidently strictly imposed spac e requirements for the shorter biographies and theoretical topics. Theoretical topics suffer the most from this enforced brevity. Overall, I find the average level of the discussion in this volume inferior to some other recent reference works of its kind. The New Palgrave: A Dictionary of Economics (Eatwell, Milgate and Newman,1987), more deeply covers many of the same topics, albeit mixed in with much else. On the general topic of macroeconomics, the recent Business Cycles and Depressions: An Encyclopedia (Glasner, 1997) provides more complete coverage, especially of empirical issues in macroeconomics. Closer still to Keynesian concerns, but a beast of a different kind, is “A Second Edition” of the General Theory (Harcourt and Riach, 1997), which includes much more extensive treatments of issues arising within and from Keynes’s landmark book. At a minimum I would recommend cross-references to these sources be consulted along with the entries in the present volume. In any case such short entries as are here provided for theoretical issues can only serve as a mere starting point for further reading, and in this volume the excellent bibliographies attached to many entries will be as valuable a tool in that search as the articles themselves.

Some entries are not well done-“The Monetarist School of Economics” is bizarrely written, for example. It appears to have been inelegantly ripped from the preface of the author’s book on the subject, making references to that text that are unintelligible to the readers of the encyclopedia. But others are remarkable, mostly in those instances where more freedom of space was allowed. My favorite, was “Marshall and Keynes” by Peter Groenewegen, a fascinating and admirable condensation of the extensive treatment Groenewegen gave to this topic in his recent biography of Marshall (Groenewegen, 1995). It shows clearly the continuing impact of Marshall and Marshallian habits of thought on Keynes’s work up to and including his framing of the General Theory. Other entries raise expectations that are ultimately disappointed. In the treatment of Lucas and the “New Classical School of Economics,” for instance, there is a lamentable failure to confront the challenge that the last decades’ theoretical debates have posed for Keynesian economics. The reader longs to see a position taken on who has been left standing after the dust settles. Instead, we get sterile recounting of the dry points of various famous articles (evidently no “books” are influential in this field anymore) with no attempt at evaluation. (For a sterling discussion of this very topic, one that goes far to redeem Keynesianism, while recognizing the contributions of Lucas, see Peter Howitt’s “Expectations and Uncertainty in Contemporary Keynesian Models” in Harcourt and Riach, 1997). I suspect that the editors wanted to limit the partisanship of the volume and thus let each camp speak for itself. No conflict seems evident in this account and thus no evaluation of what we have learned from the tumultuous debates of the last twenty years emerges. Similar complaints apply to the entries on “Money,” “Neutrality of Money: The Keynesian Challenge,” “Monetary Policy,” and “Business Cycles.”

Partly this unsatisfactory nature of the debate reflects the problem of what purpose such a volume is intended to fulfill. This encyclopedia seems to be at cross-purposes with itself. It wants to reach out for inclusiveness-arguably all macroeconomics can be considered in some sense derivative from Keynes. Yet it must be taking sides to some extent in light of its very title. There has obviously been an explosion of scholarship on Keynes, Keynesianism, Post-Keynesianism and things Keynes-like (e.g., the philosophical issues surrounding expectation formation) in recent years. Much of this work was spurred by the combination of dissatisfaction with macro theory in the seventies and the publication of Keynes’ Collected Works. Thus there is now a whole (often interesting) sub-culture of the sub-culture that is the History of Economics devoted to Keynes studies. Another aspect of the same period of resurgence of interest in Keynes has been the extreme partisanship of macroecnonomic debates. It came to be something of a political and methodological ‘statement’ to be identified as a Keynesian in the eighties. While none of the issues raised in this period were ever settled-indeed I would say that much of Keynesianism has aged the period considerably better that any one would have predicted in the midst of the New Classical heyday-the debate itself seems now to have disappeared (except to be drearily recounted in the, significantly last, chapters of most otherwise Keynesian intermediate macro texts). Talking to most recent Ph.D. graduates reveals a pervasive ignorance and disdain for the whole topic of macroeconomics. Thus at whom is the present volume aimed? Is it designed to convert the heathen or to preach to the choir? Consideration of this issue will bring us back to the peculiar state of modern macro theory mentioned above. To motivate that consideration I would like to direct attention to the general history of encyclopedias, looking for clues to the role they have played in past eras of scholarship.

Encyclopedias as a bibliographic form can be traced back more than 2000 years (see the Encyclopedia Britannica entry for a useful account). The beginnings in Greek and Roman times play upon the first meaning of the word-a circle-to imply a complete system of learning or an all around education. There is a long and fascinating history of the concept since Plato’s nephew Speusippus (died 339 BC) began to convey his uncle’s ideas by recording the spoken word of the Forum. Some issues that arose over the course of this long development are interesting to consider in relation to our current theme. The question of audience has always been paramount. For most of their history encyclopedias were written to be a source of sound moral instruction. Hence the fashion of including biographies of exemplars from the past. The reader, it was hoped, would be elevated, inspired and refined by contact with the minds and lives of ideal man. Prior to the Enlightenment, encyclopedias were usually intended for very select groups that the author or editors could easily visualize and about whom they could therefore make certain assumptions. Early on, one could assume that he could read Latin (or “she” could-one of the most beautiful mediaeval encyclopedias is an illustrated manuscript of 636 pages by the abbess Herrad (died 1195), for use by the nuns in her charge). Other safe assumptions included that he or she was of high status and young and so in need of instruction, or later that he or she was a believing Christian, probably a Catholic cleric. In these didactic encyclopedias the common presumptions of the background of the reader were the source of the notion that encyclopedias should dispense with excessive moralizing and commentary in trade for brevity and clarity. Thus many early encyclopedias were little more than compendiums of selected pass ages of great writers, chosen to impart information that would be useful in the readers’ work and private life.

Another closely associated concern of encyclopedias in the pre-Modern period was the issue of the division of knowledge into the Sacred and Profane, or the Spiritual and the Secular. Increasingly, as scholarship became more developed and use was found for non-Christian ancient texts in describing the world, the Scholastic encyclopedists found themselves torn between acceptable beliefs and a passion for objective reporting of scientific observations. This division of course reached its height in the Enlightenment period. In the hands of Bacon, and especially Denis Diderot, the implicit and explicit purpose was to herald a new secular order where all thought would be encompassed in a philosophical system based on logic and natural law – the Enlightenment project. Diderot’s famous Encyclopedie (1751-65) enlisted, perhaps for the first time, a gigantic assemblage of high quality writers, commissioned to survey only secular knowledge. Scandalous in its day as a challenge to orthodox authority, this concept, as much as its uneven execution, has been accorded a substantial role in conditioning the revolutionary spirit of France in those crucial last decades of the Ancien Regime (Darnton, 1979).

If this can only seem incredible to us today-a revolutionary encyclopedia! – it is not only due to the irrelevance of the Academy in our post-Modern age. More directly it is due to the British reaction to the French Encyclopedia. The Britannica consciously avoided the lengthy and scandalous polemics of Diderot’s work, and instead soberly set out to achieve with an extensive list of short, factual entries, the aim of complete scientific and scholarly coverage. To this day we associate this task with the very meaning of encyclopedic. In the vernacular, completeness is the essence of what might be called the popular view of encyclopedias as the ready source for the answer to all queries. (In this regard it is useful to recall that in the 18th and 19th centuries most encyclopedias were sold ahead of time by mass subscription, the funds from which went to pay the writers. Since then the notion of a mass audience, not a select few, has characterized most modern encyclopedias.) This all-encompassing authority of encyclopedias is a view that has no doubt been much damaged at the hands of encyclopedia salesmanship, but still “sells” to the general public via parental faith in educational salvation for their children and schoolroom searches for last minute research papers. Truth be told the attraction reaches much higher in the hierarchy of the knowledge industry than that. What scholar can deny the still live attraction of the promise of knowing the essentials of all there is to know? Thus we can easily connect with the marketing savvy that inspired Dominco Bandini to market his fifteenth-century encyclopedia as Fons Memorabilium Universi (“The Source of the Noteworthy Facts of the Universe”).

Considering this complex set of issues from the general history of encyclopedias along with modern economics is an interesting exercise. Let us begin with the question of audience. An outside audience for economics in its true rhetorical dress of peculiar notation and specialized jargon is now an impossibility. Most of economic “research,” like most of science in general, has now progressed into corners that only the sub-discipline specialists themselves care to venture. Consequently the notion of an all-encompassing dictionary of economics, let alone of all knowledge as in encyclopedias of old, now is beyond belief. Today, the primary purpose of a scientific encyclopedia is to explain to the profession as a whole what the specialists in any area are doing. Here is one dimension in which economics truly can compare to modern science. The New Palgrave definitely fits this bill, as anyone who has ever sent an undergraduate over to the library to consult it has found. If ever there was one of those much discussed businessmen for whom Marshall was writing at the turn of the century, they are definitively not the targets of economic encyclopedias, the Encyclopedia of Keynesian Economics included.

Who among us economists then would profit from the volume? It is safe to say that anyone could profit from some aspect of the volume. At the most universal level some biographies are very interesting and even instructive (some are horribly dull). My favorite was the account by Robert Leeson of the New Zealander A.W.H. Phillips, of the much abused Phillips Curve (an association he was evidently loath to acknowledge). He was a kind of Henry-George-like figure in his colorful background and circuitous route to economics by way of earning his living as a fiddler, crocodile hunter, R AF officer, Japanese prisoner of war and engineer. He seems also to have been an exemplar of the gentleman scientist in the best possible sense of the phrase-disdaining both his own personal acclaim and the, as he saw it, distasteful acrimony of the macro policy debates inspired by his famous paper. But even less colorful biographies offer interesting tidbits-for instance that R. E. Lucas’s parents were New Deal Democrats, that he earned his BA in history and that he prefers to be called a “Monetarist” rather than a “New Classicalist.” Of course the fascination of Keynes’s biography needs no elaboration. Beyond the personal stories, unfortunately, it seems very doubtful to me in our ever more unconsciously conservative profession that many besides the already initiated will find a dictionary on “Keynesian” economics worth the look.

Which brings me to the issue of fact versus faith, or what the medieval monks who compiled encyclopedias termed, “the sacred and the profane.” If encyclopedias are to instruct the young and uninitiated they must have some imprimatur of authority akin to the ecclesiastical seal that the scholastics put upon medieval texts and the similarly ceremonial listing of the legion of famous authorities, resplendent in their degrees and positions, which all modern mass-market encyclopedias display prominently at the head of the first volume. Amongst the brothers and sisters of the macro faith today, though, the priesthood is in serious disarray. There is little enough agreement on basic principles for a consensus among specialists, let alone among the profession as a whole. Just who are the true priests and who are the worshipers of false idols varies by sect. It is this state of uncertainty and discord, I believe, that has effected the graduate training of new economists and turned them away from macroeconomics at just a point in time when the topic seems so interesting. If one has to spend hours learning the latest refinements of New Classical, Real Business Cycle, New Keynesian and Cash-in-Advance macro models to get through the macro sequence, there is little time left to synthesize what one really knows about macroeconomic theory, much less macroeconomic events that will not be covered on the preliminary exam. More telling perhaps is the partisanship, for no vibrant research program is ever just a catalogue of received truths, but must generate ever-new questions and puzzles to progress. If there is little tolerance shown for alternative viewpoints by the lights of the profession, then graduate students are not to be blamed for their reluctance to try to sort it all out for themselves.

Moreover, if the student does happen to have a prior interest in macro events or, more likely, finds himself assigned to teach or write about macro to a non-economist audience (like a group of Principles students) he will quickly find that the only intelligible framework for doing so is the very same old-time Keynesian macro of the pre-Lucas era that was supposedly destroyed by that JPE paper back in ’75! An archipelago of islands inhabited by rational agents, continuously in equilibrium but frustrated by the signal extraction problem is interesting enough, perhaps-but what does it have to tell us about the crash of the crash of the Indonesian Bahtand its implication for the sustainability of the long boom in the U.S.? Faced with the latter question, one inevitably starts talking about aggregate demand, lender of last resort, etc., in ways that would hardly surprise your average 1970s-era macro theorist.

Or, alternatively, we have this puzzle that Alan Greenspan has now spoken of on numerous occasions of how to determine if the recent (pleasant) inflation surprise was a temporary cyclical artifact of reduced world demand or a new era of increased productivity growth. From the realm of high theory we might well sense a resemblance to both the new endogenous growth literature and the real business cycle model. But what do they have to offer in explanation for the current short-term situation or as a guide to Fed policy making? Next to nothing it would seem, judging from the discussions at the recent FOMC meetings. Yoo (1998) offers a very interesting analysis of the “puzzlement” in the FOMC over what they should do to respond to the current macro situation. His analysis, following their discussion, is framed in terms of such issues as the state of “aggregate supply,” “productivity,” the “investment and consumption components of aggregate demand” and the “capacity constraints on the economy.” Reflecting on the impact of the recent macro theory debates, he notes that the Fed continues to distrust money supply growth as a reliable indicator and finds itself “puzzled” by recent performance. The minutes for the FOMC meeting of May 20, 1997 report that:

The members found it very difficult to account for the surprisingly benign behavior of inflation in an economy that had been operating at a level approximating full employment, indeed, possibly somewhat above sustainable full employment in labor markets in the view of a number of members, especially taking into consideration the recent further decline in the unemployment rate. On the basis of historical patterns, any overshooting of full employment would be expected to generate rising inflation over time. (quoted in Yoo, 1998, p. 35)

In one fashion we might say that the big puzzle for the Fed has been to try to uncover what the non-accelerating inflation rate of unemployment (NAIRU) now is, after having seen virtually every consensus estimate of it for the last 15 years succumb to continuing growth with falling inflation.

My point is that virtually all of this policy discussion is conducted in terms of an aggregate short-run supply and demand framework that most closely resembles textbook Keynesianism of the kind that still dominates the intermediate course market. It bears little evidence of influences from the last 20 years of macro research. And if such an application were to be attempted, what would it suggest? That we continuously measure the elasticity of substitution between labor and leisure and between present and future consumption? That we try to anticipate the next shock to the economy’s production function – which are after all considered completely stochastic in the New Classical/Real Business Cycle literature anyway? At best such models approach reality by a non-unique calibration of a whole set of parameters that allows the model to simulate the record of past business cycles. They seem to have no forecasting ability. Note, that while automatic “rules” are very popular among recent theorists of macro policy, no central bank is actually bold enough to seriously adopt one. Flying completely blind, counting on the economy to right itself, neglecting any attempt at anticipation of events, is not in the repertoires of central bankers today – if it ever was (see John Wood’s forthcoming book (Wood, 2000) for a fascinating argument about the mindset of central bankers versus that of economists).

Yet confidence in the self-correcting automaticity of the macroeconomy is the bedrock of classicism (old and new), considered as a policy framework. Thus to give the classical view its due we should also consider the possibility that we have returned to the long-run stability of some past macroeconomic golden age-the gold-standard era seems to be a favorite. This would be a period when budgets were routinely balanced, governments non-intrusive and money so stable in value that actors on the economic stage did not even consider monetary policy in their calculations. Or, put more theoretically, the explanation might be that macroeconomics is not even at issue and what we are dealing with today is long-run supply considerations that no macro policy could do anything to foster in the first place. It is tempting to reply, “tell that to the Japanese!” More soberly, what evidence can we bring to bear on this proposition?

First I believe it is the economic historians who staged the debate in the last 15 years or so on the question of the relative stability of older (pre-war, pre-Keynesian) business cycles, versus newer (post-war, activist government-era) cycles. The exact outcome of the debate as I read it (Romer, 1986, Lebergott, 1986, Weir 1986, Diebold and Rudebush, 1992) is that the initial, and macroeconomically conventional, claim that the post-war business cycle was more stable (challenged by Romer, defended by the others) still holds up. But whatever the case, no one has suggested that the post-war cycle is less stable than the pre-war one. Outside of price stability (where the Gold-standard era is clearly superior), data scarcity makes macroeconomic comparisons before 1929 difficult. But an argument can certainly be made (given one’s weighting of low unemployment and growth along with price stability) that the 1950-1970 era (1961-1969 is still the longest expansion on record but is normally discounted for the “war” effect when compared with “peacetime” expansions) is the most ‘golden’ of ages from the standpoint of macro performance – particularly if we look at international comparisons. Is returning to a pre-war policy context necessarily a good thing?

But other problems are also evident in a crude classical view from a shorter-term perspective. One, the fiscal policy aspect is not at all clear. Th e long-boom(s) of the last 15 years (the expansions 1982:4 – 1990:3, plus 1991:2 – today) were of course mostly a period of extremely high and growing deficits, though followed by shrinking ones after 1992. Moreover, as the European countries positioned themselves for monetary union, they too shrunk their deficits as a percent of GDP (since about 1994). But they have mostly seen no similar decline in the unemployment rate. Thus the role of fiscal effects is not easy to untangle. An alternative story could be told that the U.S. example is one of fiscal demand stimulus (under the banner of supply-side economics), followed by a cyclically balanced budget as the Clinton tax-plan and output increases pushed up tax revenue. Finally, as to the benefits of the productivity shocks we may be experiencing, they are of course part of the Keynesian view in terms of the effect on aggregate supply. But one does wonder about Japan in this context, which seems to be the source of much of the information management and inventory techniques that are often cited as the source of the “New Economy,” but which can’t pull itself out of a very deep recession. (It has been interesting to watch the US administration, the policy institutes and even the Wall Street Journal, admonish the Japanese for not pushing a more aggressive fiscal stimulus package. Evidently the rhetoric of balanced budgets stops at our shores.)

Lastly there is the hand wringing over the financial and monetary situation. We have seen the Fed successfully intervene to ward of the contagion of financial crises and stock-market crashes both at home and abroad in this time period. The money supply seems to have become unhinged from inflation. Most policy moves are made today with a fearful eye on how the bond and stock markets will react. And the guru of the whole era’s prosperity, Alan Greenspan, has nothing but stern words for the high-flying stock market. This potentially unstable combination of interlocking psychologies and ultimate dependence on the Fed to do what is right when the Fed itself seems puzzled over what is going on, does not look like an “automatic adjustment” economy to me. In fact it looks very much like the kind of economy Keynes was describing in the General Theory. Is this what the advocates of the supposedly unmanaged economies of old have in mind?

The French Aristocracy and Jesuits together vehemently opposed Diderot’s Encyclopedie. They were astute enough to realize the threat of Diderot’s self-consciously secular system of knowledge becoming widely disseminated. It was not dangerous that the Philosophes were themselves embracing a new language in which to conduct their professional conversations. What was dangerous was for the 2000 subscribers and the members of the Paris salons in which they gathered, to begin to notice that the entries on government and morality put forth in the Encyclopedie declared their position to be derivative of natural laws and not divine or ecclesiastical authority. If this view were to become widespread, they correctly sensed, the basis of the Ancien Regime was at risk.

Today in macroeconomics we have a curious reversal of this old conflict between social authority and profane science. The ‘science’ of macroeconomics itself has retreated into a kind of religiosity – what Keynes, complaining of his classical critics, called “scholasticism.” To him this was a discussion that proceeds in a kind of infinite loop, sustained by shared cherished assumptions that are not allowed to be questioned- like continuous market clearing and the insistence on modeling all choice as if it were made by rational anticipation of the consequences in situations defined by the impossibility of such anticipation. The risk of such private conversations is that Macroeconomics may be in the process of becoming irrelevant. Meanwhile the macroeconomy marches forward and policy analysis has become the province of non-economist policy analysts and low-status (within the economics profession) government staff economists. Much of the toolkit of these (evidently very successful) practitioners are filled with theories and tools that modern highbrow theory has relegated to historians and outmoded “Keynesians.” Many of these tools are profiled in the encyclopedia under review.

Michael S . Lawlor is Professor of Economics at Wake Forest University. His most recent publication on Keynes was the chapter “The Classical Theory of the Rate of Interest,” in G.C. Harcourt and P.A. Riach, eds, 1997. A ‘Second Edition’ of The General Theory. Lon don and New York: Routledge.


Darnton, Robert, 1979. The Business of the Enlightenment: A Publishing History of the Encyclopedia. Cambridge: Harvard University Press

Diebold, Francis X., and Glenn D. Rudebusch. ” Have Postwar Economic Fluctuations Been Stabilized?” American Economic Review, 82 (1992): 993-1005.

Eatwell, John, Murray Milgate and Peter Newman, eds. 1987. The New Palgrave: A Dictionary of Economics. London: Macmillan.

Glasner, David, ed., 1997. Business Cycles and Depressions: An Encyclopedia. New York and London: Garland.

Groenewegen, Peter D. 1995. A Soaring Eagle: Alfred Marshall 1842-1924. Aldershot: Edward Elgar.

Harcourt, G.C. and Peter Riach, eds. 1997. A ‘Second Edition’ of The General Theory. London and New York: Routledge.

International Monetary Fund, 1999. Chronic Unemployment in the Euro Area: Causes and Cures. Washington D.C.: International Monetary Fund.

Lebergott, Stanley. “Discussion.” Journal of Economic History 46 (1986): 367-71.

Romer, Christina D. “Is Stabilization of the Postwar economy of Figment of the Data?” American Economic Review 17 (1986): 314-34.

Weir, David. “The Reliability of Historical Macroeconomic Data for Comparing Cyclical Stability.” Journal of Economic History 4 6 (1986: 353-65).

Wood, John H. “A Company of Merchants:” A History of the Theories and Ideas That Have Shaped Monetary Policy. Forthcoming.

Yoo, Peter S. “The FOMC in 1997: A Real Conundrum.” Review of the Federal Reserve Bank of St. Louis 80:5 (19 98): 27-40.


Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII

Blue Skies and Boiler Rooms: Buying and Selling Securities in Canada 1870-1940

Author(s):Armstrong, Christopher
Reviewer(s):Michie, Ranald C.


Published by (March, 1998) Christopher Armstrong. Blue Skies and Boiler Rooms: Buying and Selling Securities in Canada 1870-1940. Toronto: University of Toronto Press, 1997. x + 390 pp. Photographs, appendix, and index. $39.95 (cloth), ISBN 0-8020-4184-1.

Reviewed for H-Business by Prof Ranald C. Michie , University of Durham

Usually with an academic book, the main title is designed to attract the attention of potential readers–even purchasers–while the subtitle is a more accurate description of the content. In this case, the reverse is true. Instead of being a history of the Canadian Securities market from 1870 to 1940, which I was expecting, this book concentrates, almost exclusively, upon the high pressure and/or fraudulent techniques employed to sell speculative mining securities to the investing public, and the measures employed by Canadian federal and provincial governments to stop them. Certainly there is much material on the various Canadian Stock Exchanges and their members, but this is a back drop to their participation in a process whereby large numbers of credulous investors were sold vast numbers of shares in numerous worthless mines year after year by manipulative promoters. Consequently, in reviewing this book one must be always conscious of what it is about, not what one might expect it to be about. However, judging from the introduction, there is the presumption that this book did begin as a history of the securities market in Canada, for it is stated that it “is one of two volumes dealing with the evolution of public securities markets in Canada” (p. 3). Volume II presumably takes the account from 1940 to the present. Quite quickly, the reader is informed that there is little of interest in the buying and selling securities, and thus one can hardly inflict upon the public an account of the evolution of the Canadian Securities market. Instead, it is considered much more rewarding to focus on “crooks and shysters” (p. 8) as that will result in a far more interesting book. Though I disagree with the author’s view that there is little to say about the development of securities markets–even that of Canada–he is probably right in his assumption that a book that concentrates upon fraud, corruption, and human greed has more appeal than one about the institutional arrangements of stock exchanges.

The first and third chapters do deal with the beginnings of Canada’s securities markets, but no distinction is made between the creation of a formal exchange and the existence of an open market, and thus there is no discussion of why the latter leads to former. If there had been such a discussion, the author might have been more aware of the extent and limitations of a stock exchange’s jurisdiction. A Stock Exchange can enforce discipline among its own members, ensuring that deals take place in an environment of trust, but it cannot be expected to police all aspects of the securities business, including the initial sale of securities, or to provide investor protection. The more an exchange is drawn into areas such as these the more likely it is to face competition from over-the-counter (OTC) markets devoid of such rules and regulations. At the same time there is no attempt to explore the relationship between the Canadian Stock Exchanges and those in New York and London, which had such an important influence on the Canadian securities market before 1914 and subsequently.

With Chapters Two and Four, the author settles into the theme of the book–the promotion of Canadian mining companies and the methods used to persuade investors to buy shares in them. Initially, the principle of “caveat emptor” applied, but even before the First World War various provincial legislatures, beginning with the Prairie Provinces, began to restrict such activities. This speculation in mining shares died away with the outbreak of the First World War. The exchanges were even closed for a number of months, and when they did re-open they were subject to government control while their business switched to trading Canadian government debt. During the period 1915-19 the Canadian government raised $2.1 billion domestically, rather than in London as had been the pre-war practice. In turn, trading in bonds on the Montreal and Toronto stock exchanges rose from $6.1 m in 1913 to $132 .1 m in 1919. Clearly, the Canadian securities market was transformed as a result of the First World War. Unfortunately, the book then ignores the post-war bond market, though, from the statistical appendix, it is clear that it had become an established feature. Instead, the chapters dealing with the 1920s (Six and Seven) concentrate on the miss-selling of mining securities, the lack of stock exchange regulation, and the role played by government. This then leads into the Wall Street crash of October 1929, which was felt heavily in Canada, where investors blamed the exchanges and their members for their losses. Again the focus is almost entirely on the mining market and its practices with little on industrial or utility stocks and nothing on government bonds.

What emerges as interesting from these chapters (Eight and Nine) is the author’s conclusion that Britain’s departure from the Gold Standard in September 1931 had no more damaging impact on the Canadian securities market than the Wall Street Crash of October 1929. The former undermined the confidence of banks, and this their lending policies, whereas the latter was an inevitable market correction. This to me is worthy of wider discussion.

As a result of the crises of 1929 and 1931, Canadian governments became very concerned with practices in the securities markets, which were seen as bearing a heavy responsibility for what had taken place. A Security Frauds Prevention Act was passed in 1930, but its effectiveness was hampered by provincial/federal rivalry. Thus, instead of following the United States in creating a Securities and Exchange Commission, in Canada the provincial authorities were left as sovereign in regulating securities. The experience of Ontario in particular is extensively chronicled as they attempted to curb fraudulent excesses in mining securities, especially when the market boomed in 1933/4, on the back of the revaluation of gold by the United States (Chapters Eleven through Thirteen). As part of this process, increasing pressure was placed on the stock exchanges to tighten up their own regulations. What thus emerged was growing co-operation in the 1930s both between the major stock exchanges in Montreal and Toronto and the various provincial authorities. What consequences this had for the securities market, both generally and individually, is never really explored. It would have been interesting to know if exchanges flourished best under a lax regime or in a more regulated environment providing greater investor protection.

The final chapter (Chapter Fourteen) sketches in the years immediately before the outbreak of the Second World War. With war being so widely predicted, investors adopted a more cautious attitude and so the level of stock activity was low. The book then draws to a close with a short conclusion and a valuable statistical appendix giving turnover on the Montreal and Toronto Stock Exchanges between 1901 and 1936. From this data, it appears that Toronto’s participation in the bond market virtually disappears after 1923, leaving the field to Montreal. Turnover in bonds in Montreal then collapses after 1931. Why all this took place is never explained in the book, which is a pity, for in it may lie part of the explanation of how Toronto came to dislodge Montreal as the financial center of Canada.

Overall this is a long, carefully researched book that weaves together financial, political, legal and social history to present an account of the problems encountered in protecting the human race–even Canadians–from their own stupidity. However, to consider it a history of the Canadian securities market would be a grave mistake. The securities of new mining companies, in their exploration phase, were always regarded as speculative counters and so attracted the gambling instincts of investors. However, these were not the only securities held by Canadian investors and traded on organized markets there. Throughout the period there was a regular business in the stocks of Canadian banks, insurance companies, railways, utilities and industrials as well as a significant bond market from 1916 onwards. The author’s own appendix makes this clear. This trading reflected the varied influences of the domestic and international capital and money markets, as well as changing investor sentiment, as with events like the First World War, the Wall Street Crash, and Britain’s departure from the Gold Standard in 1931. For me, this would have made a much more interesting book than the one delivered here, for I did tire of the endless repetition of mining scams. Finally, I do wonder why the author ignored my 1988 article in Business History Review entitled “The Canadian Securities market, 1850 to 1914.” Judging from his comments in the introduction to this book, he probably found it too boring!! I am sure many would agree with him!!


Subject(s):Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):North America
Time Period(s):20th Century: Pre WWII

Business Cycles and Depressions: An Encyclopedia

Author(s):Glasner, David
Reviewer(s):Whaples, Robert


Published by EH.NET (September 1997)

David Glasner, editor, Business Cycles and Depressions: An Encyclopedia. New York: Garland Publishing, 1997. xv + 779 pp. Index. $95.00 (cloth), ISBN: 0-8240-0944-4.

Reviewed for EH.NET by Robert Whaples, Department of Economics, Wake Forest University.

“The motion of the economy, unlike that of heavenly bodies, conforms to no immutable mathematical laws and follows no repetitive patterns (p. 66)”

David Glasner (economist at the Bureau of Economics, U.S. Federal Trade Commission) has assembled a stellar cast who have written an exceptionally useful reference book. Business Cycles and Depressions: An Encyclopedia includes 327 original articles on every major aspect of business cycles, fluctuations, financial crises, recessions, and depressions. The articles, which range from macroeconomic theory to econometrics to the historical record, are generally up-to-date, clear and to the point. Most entries will be accessible to students, but are informative enough to benefit almost any professional, as well. Each includes a bibliography. A seven-page appendix presents international data detailing business cycle turning points and durations. Perhaps the highlight of the volume is a ten-page entry, “Business Cycles” by Victor Zarnowitz, which surveys the entire field of business cycle research and is quoted above.

EH.NET subscribers will find this work especially helpful. The encyclopedia includes biographies of dozens of economists. (These entries focus almost entirely on the individual’s contributions to the understanding of business cycles. The biography of W.W. Rostow, for example, only briefly mentions his work in the Kennedy and Johnson administrations and says little about his writings on economic growth.)

The subjects of these biographies include Moses Abramovitz, Maurice Allais, Luigi Amoroso, James Angell, Walter Bagehot, Otto Bauer, Eduard Bernstein, Eugen Bohm-Bawerk, Arthur Burns, Richard Cantillon, Carl Cassel, John Commons, Charles Coquelin, James Duesenberry, Otto Eckstein, Friedrich Engels, Irving Fisher, Milton Friedman, Ragnar Frisch, John Fullarton, Richard Goodwin, Tygve Haavelmo, Gottfried Haberler, Alvin Hansen, Roy Harrod, Friedrich Hayek, John Hicks, Rudolf Hilferding, John Hobson, David Hume, William Stanley Jevons, Nicholas Kaldor, Michal Kalecki, Karl Kautsky, John Maynard Keynes, Charles Kindleberger, Lawrence Klein, Nikolai Kondratieff, Tjalling Koopmans, Simon Kuznets, Oskar Lange, Frederick Lavington, Abba Lerner, W. Arthur Lewis, Erik Lindahl, Eric Lundberg, Rosa Luxembourg, Thomas Malthus, Alfred Marshall, Karl Marx, Lloyd Metzler, John Stuart Mill, Frederick Mills, Hyman Minsky, Ilse Mintz, Ludwig von Mises, Wesley Mitchell, Franco Modigliani, Gunnar Myrdal, Bertil Ohlin, Arthur Okun, Vilfredo Pareto, Henry Parnell, Warren Persons, A. W. Phillips, Arthur Pigou, David Ricardo, Lionel Robbins, Dennis Robertson, Joan Robinson, W.W. Rostow, Paul Samuelson, Jean Baptiste Say, Joseph Schumpeter, Anna Schwartz, Eugen Slutsky, Adam Smith, Arthur Smithies, Piero Sraffa, Paul Sweezy, Henry Thornton, Jan Tinbergen, James Tobin, Thomas Tooke, Robert Torrens, Mikhail Tugan-Baranovsky, Thorstein Veblen, Clark Warburton, J.G.K. Wicksell, Wladimir Woytinki and Victor Zarnowitz

Among the entries that will be of most interest to economic historians are: Agriculture and Business Cycles by Randal Rucker and Daniel Sumner Bank Charter Act of 1844 by David Glasner Bank of England by David Glasner, C.A.E. Goodhart and Gary Santoni Bank of France by Pierre-Cyrille Hautcoeur Bank of the United States by Eugene White Banking Panics by Gary Gorton Baring Crisis (1890) by Richard Grossman Business Cycles in Russia, 1700-1914 by Thomas Owen Central Banking by Anna Schwartz Clearinghouses by Gary Gorton Crisis of 1763 and 1772-1773 by Eric Schubert Crisis of the 1780s by Fred Moseley Crisis of 1819 by Neil Skaggs Crisis of 1847 by David Glasner Crisis of 1857 by Hugh Rockoff Crisis of 1873 by David Glasner Crisis of 1907 by C.A.E. Goodhart Crisis of 1914 by Forest Capie and Geoffrey Wood Depression of 1873-1879 by Fred Moseley Depression of 1882-1885 by Alan Sorkin Depression of 1920-21 by Anthony Patrick O?Brien Depression of 1937-1938 by W. Gene Smiley Federal Deposit Insurance by James Barth and John Feid Federal Reserve System: 1914-1941 by David Wheelock Federal Reserve System, 1941-1993 by Thomas Havrilesky Free Banking by Philippe Nataf Glass-Steagall Act by Eugene White Gold Standard by Michael Bordo Gold Standard: Causes and Consequences by Earl Thompson Great Depression in Britain (1929-1932) by Forrest Capie and Geoffrey Wood Great Depression in France (1929-1938) by Pierre-Cyrille Hautcoeur Great Depression in the U.S. (1929-1938) by Elmus Wicker Great Depression of 1873-1896 by Forrest Capie and Geoffrey Wood Industrial Revolution (c. 1750-1850) by Clark Nardinelli Kondratieff Cycles by Robert Zevin Leading Indicators: Historical Record by Geoffrey Moore Long-Wave Theories by Massimo Di Matteo Mississippi Bubble by Larry Neal Napoleonic Wars by Larry Neal Panic of 1825 by Michael Haupert Panic of 1837 by Richard Timberlake Panic of 1893 by Richard Timberlake Phillips Curve by Richard Lipsey Political Business Cycles by K. Alec Chrystal Recessions after World War II by Alan Sorkin Recessions (Supply-Side) in the 1970s by John Tatom Reichsbank by Harold James Seasonal Fluctuations and Financial Crises by Jeffrey Miron Smoot-Hawley Tariff by David Glasner South Sea Bubble by Larry Neal Stock-Market Crash of 1929 by Eugene White Tulipmania by Peter Garber

The encyclopedia is a valuable teaching tool. It is a must for any college library.

Robert Whaples Department of Economics Wake Forest University

Robert Whaples is Associate Director of EH.NET and author (with Jac Heckelman) of “Political Business Cycles before the Great Depression,” Economics Letters, 51, May 1996.


Subject(s):Business History
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative