The 80th anniversary of the Great Crash is upon us. This touches a nerve because we seemed to be looking into the same bottomless pit only a year ago. The chain of events, leading from a dramatic collapse in stock prices on Wall Street, beginning in late October 1929, to a Great Depression that engulfed the world economy for years, has suddenly leapt off the pages of the history books with an entirely fresh verisimilitude. Pessimists have asked, what is to stop it all happening again? Optimists have asked, what can we learn to stop it from doing so?
The links between the Great Crash and the Great Depression have always been controversial. After all, the bursting of a speculative bubble in the US, however widespread its effects upon a society that had extended democracy into share ownership, is not the same thing as a global spiral into mass unemployment and impoverishment. One key question is how a process of deflation led to depression, – falling output in the wider economy. Another question is what could be done about it? This is a different question because running the film backwards is not an option in real life.
Academic economists and historians, marooned in what is usually derided as their ivory tower, have long made a frugal living out of debating such issues. In the tower at Princeton, about 10 years ago, one economist decided to republish the collected articles that he had written over the past couple of decades. “I guess I am a Great Depression buff, the same way people are Civil War buffs,” he wrote in the preface, and barely a dog barked as the unworldly man confessed to his harmless hobby.