The World in Depression, 1929-1939

Charles Kindleberger's "The World in Depression" Is a unique look at the Great Depression. In the book Kindleberger explains the political and economic aspects of international finance throughout the interwar period. He pays particular attention to the "hegemons" of the era: The US and the UK. His work is truly international in its attempt to assess the cause/response of each economic substrata of the international financial community. Kindleberger's work (2ed) tries to incorporate the entire spectrum of literature regarding the causes of the Great Depressions length and severity. Kindleberger (tentatively) attributes the 1929 Depression as a failure of international finance. Britain was no longer able to act as the international hegemon and the US was unwilling to do so. The Depression occurred because they were unable to: 1) Maintain a relatively open market for distress goods; 2) Providing countercyclical, or at least stable, long-term lending; 3) Policing a relatively stable system of exchange rates; 4) Ensuring the coordination of macroeconomic policies; 5) Acting as a lender of last resort Kindleberger (in 1986) offers several suggestions in how to maintain international stability. His strongest suggestion is that a World Central be created with an atmosphere of free trade (with the possible exception to capital). If that is not possible the US or a small group of states should control international finance. One of the most interesting aspects of Kindleberger's account is his description of Franklin Roosevelt. Roosevelt did not understand economics, and his advisors were marginally better, but he cared greatly about recovering the economy. Roosevelt and his administration stumbled through the Depression. On the home front Roosevelt did a decent job at creating fiscal stimulus (culminating in the acceptance of Keynes' GT in 37'). On the international side Roosevelt made consecutive blunders. However, all things considered his mistakes could have been far worse (ex: France). "The World in Depression" should be seen more as an accompaniment to the existing literature rather than a pinnacle text. It offers a wonderful synthesis but lacks analytical depth in each particular era. I would highly recommend it as a starting point for a study of the Great Depression.

Written a generation ago, this concise and well written book is still regarded as the best single monograph on the Great Depression of the 1930s. Kindleberger provides a nice description of the major economic and financial events involved in the Great Depression coupled with a generally convincing analysis of its mechanisms. While Kindleberger uses a fair amount of economics/financial terminology (par, terms of trade, etc.), the analysis is generally easy to follow and a modest amount of background knowledge of economics is all that is needed to follow his discussion. Kindleberger sets out to answer 2 related questions; what caused the Great Depression and what made it so profound and durable? One criticism of Kindleberger is that the answer to the first question emerges implicitly while the answer to the second question is addressed explicitly. Kindleberger's narrative shows that the Great Depression was to a large extent a delayed sequel to WWI. The war generated a large number of structural and political problems that contributed significantly to the emergence of the Great Depression. These included the erosion of British dominance of the world financial system, the related problem of war debts and reparations, over-production of primary products, the considerable economic problems of Germany, and smaller problems like the deleterious economic consequences of the breakup of the Austro-Hungarian empire. Kindleberger shows the Great Depression as a massive deflationary event emerging and sustained by a series of interrelated vicious cycles. Competitive currency depreciation, competitive tariff barriers, and problems of individual national central banks to cooperate. Once the vicious cycles were initiated, they developed momentum of their own, severely affecting the economies of many nations, and leading to an enormous decline in international trade and paralysis of the international financial system. Kindleberger argues that this downward path could have been arrested only by intelligent leadership of the international financial system. But one of the sequelae of WWI was an absence of such leadership. The British, who had de facto occupied this role for much of the 19th century were no longer able to exert such leadership. The logical successors to the British were the Americans, but American governments were not inclined to undertake such responsibility. Kindleberger points out as well, though, that there were not international financial institutions for certain key roles. For example, with private international lending withering in the Great Depression, there were nothing like the IMF or World Bank to provide capital. Kindleberger, a self-described Keynesian, clearly believes that the Great Depression could only have abrogated by aggressive American use of fiscal and monetary policy, and American led reconstruction of the world financial system. Written a number of years, some of Kindelberger's detailed discussion is pr

This book was regarded by Galbraith as the best of Depression era books. Updated not too many years before his death, Kindleberger gives a detailed account of the depression. His view differs from both Keynesian and Friedman's views. He also spells out real fact that Hoover was not as cluelss as often made to be and that inaction between the election and Roosevelt's inaguration led to the Bank Holiday crisis. Hoover had tried to get Roosevelt to work with him between November and March (before it was changed to Jan. 20) This ended with Roosevelt having to declare a bank holiday and "stress tests" applied the very day after Roosevelt took office. Hoover argued, as does Kindleberger, that the depression was worldwide and not local to the U. S. only (as Friedman claimed) He supports that with data from the globe, some added in this last edition. Kindleberger is the first time I understood that the issue of debt from WWI was a big issue for Europe and the U. S. and the failure to resolve that issue was part of the reason Hitler rose to power.

If you are anxious about the present 2008 crisis ignated by the subprime and want to think more about what will happen, you better educate yourself by reading that book about the 1929-39 crisis. It is readable by all kind of public and will inspire your thinking as much by the similarities than by the differences beetwen the two scenarii.

The main problem in most analyses of the Great Depression in the United States lays in the fact that most information regarding the global economy as a whole, and the actors there within, is largely omitted along with the political atmosphere and dominant social structures at the time - The effects of devaluations or surplus production on trading partners, for a simple example. Additionally, people tend to forget that this was a world phenomena. So, while economists of different allegiances attempt(ed) to debunk one another and focus on the domestic workings of the Capitalist mode of production confined to certain assumptive modules, Kindleberger takes on this larger problem. To say that this is not important is to say that the world itself is not complex - a folly that I suspect even zealots of the Mises institute would be hesitant to make. The difficulty of this task, and one which I believe Kindleberger tackles with finesse, is this complexity itself. Ultimately, the main point of this brilliant work is simply that, with the decline of the British Empire, no heir rose to both stabilize and legitimize the international structure. States turned inwards. Indeed, as the no-named reviewer above states, those who devalued the quickest or dumped the gold standard the earliest enjoyed the quickest recoveries. The parallels, which Kindleberger makes in subsequent works (and I believe touches on in this work as well), to political happenings are immense. The withdrawal of the states from the structured world order of the 19th and early 20th century only fostered the miscommunication and mistrust so pervasive in international relations. With the rise of beggar thy neighbor policies, largely a product of the World Depression and the withdrawal from a relatively cooperative, legitimized system, the potential for conflict was definitely magnified. This is an essential work for anyone interested in the Great Depression. Kindleberger's approach was perhaps so difficult that it is still unique in itself.