Reflections on the Great Depression

Citation

Balderston, T. (2004), "Reflections on the Great Depression", International Journal of Social Economics, Vol. 31 No. 7, pp. 732-733. https://doi.org/10.1108/ijse.2004.31.7.732.1

This book records a series of interviews with “famous‐name” US economists who lived through the Great Depression, by a macroeconomist whose own research centres on that cataclysm. Paul Samuelson, Milton Friedman, James Tobin, Charles Kindleberger, Anna Schwartz and Wassily Leontief were among the 12 interviewees. An introductory chapter provides a useful narrative overview of the Great Depression itself and thumbnail sketch of the main explanatory theories.

Interviewees were asked about their experiences of the Great Depression, its effect on their professional career and theoretical development, and how far it still coloured their thinking. One could not but be struck with the slightness of the personal effect of the catastrophe on most of them (compared with the nightmarish US unemployment statistics). Members of their (mainly middle‐class) families may have suffered losses during it, but they personally seemed to have pursued their studies without hardship, and the New Deal brought many of them employment opportunities. The central theme of the interviews, however, may be said to be the eliciting of the interviewees' reactions to the various sides of the modern debate about the causes of the Great Depression. Interviewees were also asked their views on the causes of recovery from the Great Depression, and whether it could happen again; many were asked their views on the changing fortunes of “the Phillips curve” since the 1970s (presumably to elicit their views on the decline of Keynesianism); and there were questions angled at the implications of the Great Depression for capitalism: was Keynes's real aim to save capitalism, and does the survival of capitalism depended on preventing income inequalities?

Although it was a valuable exercise to record and publish the views of these great economists, there were few surprises in their responses. The “generation gap” between established and graduate‐student economists in the 1930s shone through the responses of those who had studied at East‐Coast Ivy League universities – but not through those of Chicago students – Albert Hart as well as Friedman. For the Keynesian Samuelson (paradoxically?) the causes of the Great Depression remain obscure – as they remain for Leontief and the business‐cycle theorist, Victor Zarnovitz. Most other respondents opted for the modern modified‐monetarist‐consensus explanation of the Great Depression: an ordinary business cycle worsened by the failure of the Fed, the gold standard repercussions and the intermediation collapse due to the banking crisis. Friedman and Schwartz's views were of course less modified. Except for them, most gave the Second World War as the real end to the Depression. All, without exception, gave a firmly Americano‐centric account of the Great Depression. The Eichengreen view was not rejected but was marginal to their thinking. Even though Friedman conceded that his Monetary History had neglected international dimensions, this was merely to the extent that the French were also partly to blame. And whilst many thought that Keynes's aim had been to save capitalism, none thought income inequality likely to topple it.