With a story like the Great Crash of 1929 and the ensuring Great Depression, there are numerous angles a writer might take. Approaching the events some 80 years later, but with the present crisis at the forefront of his mind, Liaquat Ahamed concentrates on four central banks in France, the UK, Germany and the US, and a fifth figure, the outsider of John Maynard Keynes.
What’s surprising and yet what makes this book such an absorbing read is that Ahamed goes back in time to 1912, telling the biographies of these bankers and the individuals they dealt with over more than a decade.
It’s a big book, but I raced through it, so compelling is the tale and the manner in which is it told. After a few days of reading and more than 300 pages in I realised I was still two years away from the Crash, yet by now had a wealth of information not only about the larger economic environment, but also the capacity of the various governments to deal with it. Having read books such as JK Galbraith’s The Great Crash 1929, it’s very easy to be condescending when considering the efforts – or non-efforts of the central bankers to deal with the crisis of the Great Depression, but after reading this book I now have an understanding of what their own concerns were, the constraints within which they worked, and also their own lack of understanding about many of the more macro elements.
In fact, although Keynes was more often right than not, the reason for him being ignored by many of these bankers is clear. No one likes a smart alec, or as Ahamed terms his persona, “the premier gadfly of economic orthodoxy”. There‘s a good deal of sympathy for the four central bankers: Benjamin Strong of the Federal Reserve Bank of New York; Montagu Norman of the Bank of England; Émile Moreau of the Banque de France; and Hjalmar Schacht of the Reichsbank.
In fact, although the subtitle is about “the Great Depression and bankers who broke the world”, it is actually about world banking from 1918 to 1929 and the issue of reparations and the attempts of these bankers to wrestle with the inflows and outflows of capital as a result of the war and the gold standard. Contrary to many accounts, Ahamed comes to “… the inescapable but unsatisfying conclusion that the bull market of 1929 was so violent and intense and driven by passions so strong that the Fed could do nothing about it. Every official had tried to talk it down. The president was against it, Congress too; even the normally reticent secretary of state had spoken out… All the Fed could do, it seemed, was to step aside and let the frenzy burn itself out.”
Nevertheless Ahamed is clear that the Great Depression which followed was avoidable since it was “… the direct result of a series of misjudgements by economic policy makers, some made back in the 1920s, others after the first crises set in – by any measure the most dramatic sequence of collective blunders ever made by financial officials.”
The issue of reparations first set in train at the Paris Peace Conference “Burdened a world economy still trying to recover from the effects of war with a gigantic overhang of foreign debts… dealing with these massive claims consumed the energies of financial statesmen for much of the decade and poisoned international relations.” It also led to the rise of fascism and the Second World War, which is about the only catastrophe that can dwarf the terrible Great Depression of the 1930s.
This is a superb book; well deserving of all the prizes it has one – including the Pulitzer Prize for History 2010. At 500 pages, I wish it had been longer.
