The World in Depression 1929-1939 Charles P. Kindleberger 1980 REVISED AND ENLARGED EDITION Universi of California ress Beckley LosAngees LondonAn Explanation of the 1929 Depression We ret tothe original questions: What produced the work depression of 1929 and why Was itso widespread, s0 dep, slong? Was it eased by seal or monetary fairs? Did it originate in the Unie Stats, in Earope, in the primaryproducig cots of the piper. he relations emong thea? Was the fatal weakness the fate ofthe international captaist system or the way it was oper ‘Te hati the policies prsed by overaments? Were suc pol ‘et tothe extent they Were important, he consequence of igno- fance, soresightedess, ol will? Were the dept and length of the depression a election ofthe strength ofthe shock 1 eltively able system, or mee they # measure ofthe systems inna in the presence ofa blow or eis of blows of normal fre Ghowever neared? Or—to bring the issue back among Paul Samuelson, Milton and Rese Fridman, at me—was te depression a fori tous event, the consequence of deliberate and misguided monetary poy onthe pas ofthe US, Federal Reserve Boar, o were its ‘rigs complex ad ntratnal, involving both fsncia ad eal actors? Ineviably in droving the Ceadstogetir thee willbe a Conse amount of confirmation of preconceptions. I am open tothe aceusaton of having selected sates, facts, and incideas fiom the history of the decade which suppor a position chosen & pri Bot T would claim that Ihave noc knowingly suppressed AN EXPLANATION OF THE 1929 DEPRESSION 289 any facts that do no he explanation that follows, nor ignored ‘ler expantions, suchas U.S. monetary policy Risimas), mis tse ofthe gold standard (Rebhias), mistaken detaton (Keynes), Secular stagnation (Hanse), sutra daeglivium (Svensson), fd the like, The shaper ended “An Explain,” not "The Explanation” “The explanation ofthis book is thatthe 1929 depression was so wie, s dep, and 20 long because the internsional econ 5 tem was rendered unstable by Bish inability and U.S. unvwiling tess fo sume responsi for sablzing by discharging Ave funstoe = (1) sini a elatively open markt for dstess goods; (2) providing eouaecylical, ra east stable, longterm lending, (Gling a eatively sabe system of exchange rte: (@ ensuring th cordnation of macroeconomic policies; (G)seting sa fender flat reso y discounting or etherwise pox ‘ain gud in anes, “These fonctions, I blive, must be organized and caied ou by a ingle country ol assumes responsi for he system. Fis is ‘done, and expecially ifthe county serves sa ener of Ist resort in nancial ri, the ecooomie system is orn epable, in ny inion hough na in that eter, of aking adjustments to faily Serious diortion by meas ofthe market mechani, There will be times when the srt! diloean so far-reaching hat more thoroughgoing measures ar called fo, such a8 the Marsal Plan ld the Bilis loa afer the Second World Wa. D.E. Mogsridge Telioves tht tbe dislocation was so deepeuted in 1929 though 1931 ta no rescue loans fom France andthe Usted Sates to Aus ta, Gerany, and England would have served thal the spiraling 1. lic wets edtp oon ib omy a “be gens)" lk eins Heensy yom bee ‘Seo ps sa eed ar tl ces ee it Siena Ae gry Corin Dre ‘il rpm. Rxie ed ae of peti Thy we ‘Soe pe cid pnp sme een mig peat ‘va eh cme pero nme ns gen wee” pen D Ka SEs tee Cn eps = neoQ we 180 THE WORLD IN DEPRESSION collapse of curencies* The question is wheter the shocks othe sstem—overredstion in primary product, reach insistence oa ‘allecting reparations from Germany, U.S. demands fr payment of ‘ar debs, veraiaion of the pound and underahation ofthe French frac, te hing of foeiga leading by New York, he stock) {market crash andthe Lke—were so great that they would over ‘helm any set of defeses;or whee, ia the abscace of Some oun wiling at able to acta «stabilizer, any random shock to ‘he sytem above sme minimum evel could et the unstable sytem of trad depression. My cootention is thatthe dificult layin considerable Ite in stability inthe system and he absence of stabilizer. Before the Fist Worl Was, Bisinstabillaed te world by the dichage ofthe fintons listed, mor less, and with the enormous belp of gold standard mythology, which invralized both stuble exchange aes {nd coordinated macroeconomic pois. There were ocatons ‘when Britsin wae either not ivolved or stood aside, ae in 1873 ‘wien Cental Bope and the United States shared along depres son” In 1890, after ve year of scclerted frlgn lending, the Lnson capil marhetsoerly stopped. The system was #963, after depesin lasting fom 1890 01885, by a deus ex machina in the form ofa substi flow of gold fom the Rand mines ofthe ‘Teasval, discovered in 1886 In 1929, 1930, and 1981 Briain ould not ac as a sable, and the United States would nat. When ‘Set hs tc free eee af al, wos, nd {etal devices dato” Ss hs "De ira Ge oar {ete Wing ne en en oa” 2-0 oy ad, eins Ven Sena wt pp ‘ston of “sr ora” we tes Maal Ps Sng ‘ats at gow te ee ae ih ae ee ‘wala ton sds nner” Sen a Dlr Sg, 09. 3-8 ora at pli a th wo psu a tof ee ps. ter ihr Cc 5 My Te Too Pes ms i ‘ir Sy Tne Camry Bop I, wh omnes Sp 1 Ser andes py Me, 3. Seem Mona ac ae erp 2 4 Seem “tran Popeson of Pcl Cas, ANEXPLANATION OP THE 1929 DEPRESSION 291 ‘every country tamed to protest its national private interest the ‘wo pubic intrest wet down tbe dain, and with it the private Inert of 3 Matting + marke for distress goods Mainaning a make for dsess goods canbe regarded as another form of Baacing. Free unde has two dimensions (1) © adap do- ‘metic resources to changes in productive capacities abroad and 2) {o keep the import market open in peiods of stess. The fist Is ‘wore readily dove by a rapidly growing country which needs 10 transfer resources out of es productive ocepations ad is willing ‘embrace the competion of imports. By holding fm to free tade srg deprston a Some short ua coat to resources in ingot ‘competing tines, the second provides a market foe surplses acu ‘mulated abroad. Bein clung to fre wade fom 1846 (or some year ‘hereaflr,such as 1860, when all ris bt thse for revenve ad teen distant) unl 1916. After 1873, albough oot growing ap- ‘ly, comined to adhere to re trad since ts declining ids. tres wer exports eather than import competers. Brin’ tenacity In adhering to fee tae in deression may have Been bor of cu- tural ag ad the fre wade wattion of Adam Smith rather than of ‘conscious service tothe world economy. "The consis withthe Smoot Hawley aif Act of 1930. At the fit hint of wouble in aplele, Hoover reached for the Repub can household remedy, a Schumpeter characterized i a the face ‘ofa recommendation ofthe World Economie Conference of 1927 ‘hat nations of the werd should adopt atari truce. The action was ‘portals fos impact on the U.S. balaace of payinents, or a8 conduct enbecoming a ereditr nation, than for is iesponsbliy. ‘The congressional mbble enlaged protection from agieule to primary prodets and manicures of all kinds, and Hoover, de- Spite mote than shiny formal pote from other counties tod the ‘vice of 1,000 economists, signe the bill into I. This gave rise {0 (or eas did thing to stop) a headlong stampede to protection ‘nd reariton on import, each country ying to wad of efaton- Sy prestue of imports, and all opeher ensuring sich presire through matual esiction of expors. As with exchange depeia- tion aie domestic prices, the gin for one country was a los for all, With tariff reliation and Competitive depreciation, msl292. THE WORLD IN DEPRESSION losses were cersin. The focal of tariff truce and exchange sai zation proposed forthe World Bconomic Confrence of 1933 of fered no postive meant of sing prices o expanding employment. Te would oneteless fave Ben sigiiant asa means of slowing further decline. With 0 major country proving market fr dix treat goods or willing o tolerate appreciation, nbc les olfting to furnish longterm eaptl or discounting facties to cotes su fering from payment ificaltes, the fallacy of compoioa withthe ‘whole estan the sum of ie prt ensured that defation would ol Counter lending In the nineizentn century Great Britain tended to lend abroad on 2 ‘countereyetel bass, with some exceptions such asthe 1890 epi: ode already refered to. But by and large, and especialy ater tmi-cenny foreign and domestic Tending were maintained in ‘counterpoint, Domes ection stimulated foreign lending, while boom at home caused bot lending oe cu back and imports to be expanded, providing an export stimulus abroad in place of do- mes investment with borowed funds. Coustercycial lending lied the system, Tn the 1920s, US, foreign leoing was positively corel with domestic inverimen, ot counterpived. The boo ofthe 1920s ‘war sccorpanied hy foreign lending: the depression ofthe 19208 ‘aw the capital low revere, In The United States andthe World ‘Economy, wen in 1943, Hal Lary recorded the fndamestl fot thatthe United States cu dwn on nports an lending at the sane time, The ct a endig actually preceded the stock market crash investors were dived from the boom in fregn bonds dat fl- lowed the Daves Joa tothe boom in domestic socks dang fom the spring of 1928. The deitionry pressure on Germany ay be ‘ete; the pressure onthe lee developed counties atthe periph fy i clearcut As Table I shows, moreover, Briain joined the ‘Unite State ia seducing ite lending in 1929 over 1928, ne ny te [AN EXPLANATION OF THE 1929 DEPRESSION 293 [Exchange ats were tbl nthe sietenth century because of the {01 standard. The peice of gold wos ed in Bran in 1717 and in France in 1726 and mainaited, with meeps for war aod et ‘rant 1931 snd 1928, respectively. Mos economists believe that ‘he gold standard was manage bythe Bank of England, with oca- ional lp from the Bank of France, the Bank of Hamburg nd he State Bank of Rosia, The system was accepted as an objective fact, aly subject oaleraion, Ke was tral and ths legion ‘When after the lafaons ofthe Fit Word War, exchange rates wee elher restored o adjusted, twas important to get them fed tequila level. Atenton was devoted othe problem. Ia most ‘ouues, economists worked at calculating purchasing power pt fis, without however, always miking aque allowance for Structrl changes, such 5 te loss of oversea sets by Briain or the lrg volume of French api at in 1926 was waiting abroad forthe eppertice rome toretuen tits normal habit Taly chose tn exchange rate based almost ently on pesge. The resting ter of ts pt sess onthe sytem. "Then came he depression snd the response of many countries 08 the periphery, cut of fom borrowing ad facing sharply declining export prices and values, to depreciate their cence. A certain mount of congettve exchange depreciation took place. Briain ‘4d not cae ow fa he pound san, but iterated the Exchange Egalzation Account to Kep i from rising. The response of mor ‘tary authorities tothe chaotic Behavior of exchange rates i the 193s wa to adopt ed aes at Breton Woods in 1944 asa san- ard to preven Degarahy-eighor tacts, When the set of res ‘ue under stress couse pursued independent macroeconomic police, ay economists came oat fn fever of floating. Te was ‘rig thought by mar, andi Sl widely maintained by mooe- Tarte, that ely xb exchange rates provie insulation from ‘wold condone of ntbily Tora glen cunt. Experience both in the 1930 and ia the 1970s, however, seems to indies other tise Ina word of dfation, ab inthe 1930s, feibe exchange cs with overshooting ae deflationary. Depreciation leaves domes- tie prices eocanged and reduces pices in counties where eX ‘change mites have appreciated. Ina wold of inition, om the ober| \ { © © {29 THE WORLD IN DEPRESSION and, a in the 1970s, the rtcet wks inthe opposite sense: de- resation raises domestic prices, appreciation leaves foreign prices tncbanged Ecos have yet to agree on how best 0 achieve the optimal degre of exchange rate stabil steady in the short fun, adjusted In the log ts stature changes ae called for and macroeconomic policies diverge. Nori it clear bow leadership would provide i to ‘iy, hough the United States dominated the Breton Woods insti tins una te aly 19705 Coordination of macroeconomics Like exchange ries, microsconomic policies were coordinated ‘more or less stomaclly inthe ineteenth century under the gold ‘Mandar, The Bank of England bd gradually developed vechagues for management ofthe London money and capital markets, which ‘communicated monetary policy to the rest ofthe country and the Srl, Fea policy seacly existed ina word of balanced peace- tie budges, except a te shape of tes changed. Soch changes tree designe for resource allocation an income redstbuion, not {or maintaining stability of atonal incre “The gld standard Basically broke down ithe iter peiod when the United Stats and France, accumulating gol, sterilized i ‘Monetary policy was conoctd largely for domestic purposes, ex: cep for te episode of 1927, which was later regarded a & mistake ‘German ination in 1923 rendered that county paranoid about in- Maton. Posie fecal polly was fllowedprctally nowhere, not ten in Sweden, And monetary policies went uocoocinaed it as dv ake the hindst” oF sae gu pet Lender tat ert “The lender of last resort function has two dimensions, one domes- icy one international. On the domes rat, i received timely at tention, Montag Noonan ofthe Bank of England rescued the Wil- liam Deacons Bank in January 1929. In October of tht yar, George Harrison ofthe Federal Reserve Bank of New York roshed fm the breach with open market operations well in excess ofthe Tinie asigned im ty the Feral Reserve Board in Washington i an effort o shore up the light of the New Yor market. In aly AN EXPLANATION OF THE 1929 DEPRESSION. 295 «variety of tanks were saved secre in 1930, well before the fst tank pai in the United State in November and December of that deat, The German recor was lest pose. A Social Demecratic memorandum inJaly 1951 argued thatthe Reichibank should us tertke anew ine of banknotes without regard tothe legal its Imposed by is gold and foreign exchange reserves, svoling the danger of ifton by sing the dicount ate. Iundenook th lat {er but not the forme” And the Dnatbsnk wat alowed to fal, ‘Se of ‘omission. repsrded incomprehensible from today+ pecectves rs, however, in th international dimension hat the leader of lus resort war most conspicuously missing. The tsk isa dificult fea bes, but Briain od, vp othe lst 0 lon scbiligs for ‘Auer in ane 1931, when the rest of the world had backed ot ‘Afr that setback, Bain sood aside fom a lon to Germany ‘nil the French and Americans wertookone—"too hte and 10 fate," not fo mention the stingent Pench political conditions ‘Wen it came Englan’ tum to seek help, the United Sts and France proceeded with one laa ata ine—salami tactics, when the Bagshot prescription was t lend frely—and alached economic ‘condition othe second Joan 0 Severe that the bough the Labour foverment down. Continaliy in resus loans raised i Third ‘Word negotiations wih the IMF today is no anew problem Bria aden ‘Not ui 1931 wat lear hat Britain could ot provide the lead ‘rahip. Inthe early 1920s here were League of Nations programs forthe sbilizaton ofthe comencis of Avstia and Hungary. These ‘weet «considerable exer British in spit with help of experts from Setoinavia, the Low Coustes and the Gominions soch as ulfed the Leage of Nations Economic, Financ, and Tasit De- partner, Later the Daves and Young pian 6 setle German ropa fatloes were dominated by Belish expe, wit Americans ving 4 font men to foster the British hope of tying reparations 1 war ‘ete, By 1931 Brith aps for leadership had gooe. In small 2. Haigh, “Abn Henge Weep ie der Wi ne kes od Wbtaiungol”p2715 236 THE WORLD IN DEPRESSION pat it had been dissipated in peril cetal bank quae between ‘Rowman and Morea, although moch of the competion for domi Iaion ove he snl central banks of Europe was he product of Morca's imagination. (Beajamin Stong ted hard 10 arbi these quatels and bis death 1928 was alos for the stat of {he sytem) More sigan ws he burden of Freeh steing tale licen, which inhibited Briain at lender of last est. At the ‘ork Boonomie Confereace in 1933 it was clear that Britain had turned sway fom e lading word ole, cultivating the Common ‘wealth and redo o manage sting, and largely leaving ito the United Sates to devise a work progr. Lack of US. leaderstip Revisions historian, suchas Wile A. Willams, insist that the nied States undenook a leading world roe, under Chases E. Hughes, seal asthe Disarmament Confereceof 192.” Iti i feult of imposible o find auppot for this position inthe ld of International economics, which ols with the conventional wisdom fof such historians a8 EH, Car, tat “in 1918, word leadership tras offered, by soe universal consent, othe United States [an] war declined.” There was terest in the alas of Earoe in New York inthe Federal Reeve Bank of New York under Strong, td Harisoe, and inthe financial eomaanity represented by such people ws Dwight Morr, Thomas Lamoot and Norman Davi. A ew no New Yorkers, such a Chases G. Daves aad Andrew Mel qn, were brought in international Lance and diplomacy. On the tebe, however, the toi expresed by Henry Cabot Lodge Tnteaing the reetion of te Verses ety and U.S. abeence 2. Se: time, Win Ape Wns, Th apd ef Ars pn 8p th te Lage lan” Me Wins Mat ‘ei hin, sc “ore i ot pup at at Be pein a Teeside caps enon ca rs ing el wo a Sema oe em {Sec elo eon hin ald oh ie ic epee end et oe oma sc ee sont oth Sady of natal Reto, 8B AN EXPLANATION OF THE 1929 DEPRESSION 297 to the League of Nations (pied the dominant seatiment, The United Stats was uncer i is itesationa le I fet hatte British were shewdr, more sophisticated, more devious in thie epoising lactis, a0 thatthe United Stats came out of intern tinal conferences Toes. Stimson would have been willing 0 Genta 2 major dacounting operation to rescue te Reichs Jy 1931; Hoover, Mellon, and (hoogh from New Yor) Mil ‘wet opposed to vending good money afer bad, as dncounting calls Tor In 1933 James Warburg, Moly, and presumably Woon aed Roosevelt stil vested sending good money afer bad. Proposals for {yoni interational monetary funds wee legion, and even Brit in presented one oficial. They were wifey tuned down wih {Tegtureon how much the United States bad aleady lost in unpaid Weer debs ad the Sandal Agroemen" wasnt until 1942 tht Hany D. White began preparing a world plan for discussion a Breton Woods—togeer withthe plan of Lord Keynes-—a wot lan for limited scouring. Cooperation Cash's contusion tht central bank cooperation as maintained tp 10 mi1928 bat filed thereafer has already teen deat with a Sine deal In sum, such operation as dee was on mates {och as hegemony over sll ental banks or the choice of a ex fis exchange ate was inadeqate before 1926, andthe Bank of France supported the pound loyally (ad expensively) inthe ate ‘Summer of 1931 A deeper question is wheies cooperation a och trould have been sufteat. In Americas Role he World Econ Tiny alvin Hansen prescribed forthe United States polices of ‘malttenanceof fll employment at hore al cooperation within {Eenloeal eft a fee tae, reorag cpil movement, in provement ofthe world monetary system, and so on. With the ten ame hig ot 191 the Sates frit alae sr a aoe nd (yar Und Ss Beng Pet 98952" Bz wey ‘Recent Sup 20809 Tanne! Pree ecm ptt fved l medetier m 993 Ae al oi ESSE Que Une rw tg i ee soem pros na” 12 avin He, Ari's alt te Wr Em 1.oe Ss 296 THE WORLD IN DEPRESSION Vantage of hindsight, it appears that more thin cooperation was ‘rovided—namely,ledebip—ad that mere coopetation would ot have bik the nsations and pois of the Organization for eonomie Cooperation and Develops, Group of Ten, Bank for Tnzermational Setemeats,Ineraution) Monetary Fund, otras tional Benk, General Agreement on Tare and Trade, and so on ‘Aran sogutetance on the Inertional Moneiary Fund sta pu it (dnitedly to an American), ifthe United States did no tae the Teaderip, nothing happened. Leadeship may lack flloverip, tnd folich or evn sensible proposals may be defeated hough lek ‘of supp, Butte most sensible proposals emstatig fom small ‘counties are valeless if they Ick the eapaciy 10 cary them out fd fall teat the couse that do. The Weld Economic Confer- ‘nce of 1933 di ot nk des, that of 1927 ses to ave done. ‘Bat the one country capable of ieaderhip was bemused by domestic ‘concerns and ood aie, ‘One special form of cooperation would have been joint Anglo- ‘American leadership inthe economic affies of te world. The 1980s equivalent i the fequeny proposed toka of Germany, J- pan, andthe United State, which could fish the word leader. hip needed toy now tat Anserican capacity or wil 0 provide it ‘lone hasbeen dissipated, However, economist and political si iste usually age tat sich arrangements, whetheduoply or Falmer monopoly, ae unstable. Cat sates explicitly hat the Bope for Pax AngloSoxoies was romantic and thal Put Amina ‘Nould bean ear contingency"? Varta, etang tothe ‘Standtll agreements andthe Gena ozcopaton ofthe inland, wrote apropos ofthe World Economic Conference: "When action tras reuied wo ear eater, the two goverumens (Brith and ‘Ateican] sbeltered Behind eachother like the Besh and French foverments tre years Ite"™ Wiha daumimt, a tro, ‘lightly wide forms of collective responsibilty such ashe Summit ‘of Seven or the Grp of Ten, he buck has wo place stop. ‘Changing eners Frieden and Schwartz make a great deal of he role in the great ‘eprestion ofthe sit of monetary leseship inthe Unied Stes 1 ca 2 ya Ci 19-9 2-2 AN EXPLANATION OF THE 1929 DEPRESSION 259 from New York to Washington. They suggest dha this sounds fr fetched, since iti “sound gene principe that great events have reat orgie,” ot noe tat sal eats ames have large conse ‘Guences through cain reactions and cumulative fre. The univer- Sali ofthe aseted principe seems dubious to Us absense” the ‘heeraton tht sits of te lous of leadership giv rie to insta Vilty does not, Had they not focused so exclusively on monetary condons inthe United Stes, Friedman and Schwartr might have ‘noted the acenuation ofthe depression that came with he ansfer ‘tthe presidency from Hoover to Roosevelt oscuting after the ‘money supply had been geal ealarged) andthe sill mor signi ‘at (a my fdgmen atte of leadership ln the word economy from Whitehall te White Hoae. “This notion ofthe insblity of « Boancl system with two cen ters or of ne where Inder i nth proce of bei droped by one an picked up by another, is cited by Edward Nevin as crv ‘al othe colle of he pld standard ig 1931. He quotes Si Ex test Harveys teinoay before the Macmillan Commits: “such leadership ae we poses has ben affected by the postion which “Amerinhtgned,” making 2 change inthe ancient syste as st ‘ut inthe Maclin Report, ander which the bask eats regulated the reterve pola ofthe United Kingdom, and oer counties ad jted their postions to that of Briain. He then went on 10 sy “eter that emetocar ould bein charge of «poor dive thn a two gute excellent drivers who are perpetually fighting to ain con- tol af he vice" The analogy of two excellent divers fighting for on! of the whee! may be more gropic than appoite. The Inability seems raher to have come fom te growing weakess of ‘ne diver andthe lack offen interest inthe other. William ‘Adams Brown, J, describes the gold standard of the peed as “without a focal point,” meaning that had two, but the conclu sp Fim Sas, A Mery ity of ds, 107- TK Ct Bnei Fann Mai Pd Ph Rehr ae, 178 te lr ofa hr oo Tr ee, he hchnin f Cep owsana ant aeean ranean ata ase EES ELIE 6o 30, ‘THE WORLD IN DEPRESSION sioas of his monumental work nt dell on this rita spect of the word caso Rate fhe smal ogre and France ‘One passenger inthe vehicle which dnt lac Interest was France ‘And one group which lacked respoasiiy—to diconinve the Ineapor, or perhaps they should Be regarded as pasienges in the bh seat—conssted ofthe smaller countries: Belg, the Net frlands, Switzerland, and Scandinavia. The smaller counties en be diposed of fist They are rometimes Hamed, 2 in Bor's trays, for having ated frespoasibly i, say, converting steing ino gold inthe surkmerof 1931 or rasing tars with alacrity afer 1930 Thess, however, o universally accepted standard of bea for for stall countries, On one showing, they lack power toast the outcome of eat events and are therefore pileged to lok aller the private national terest rather than concem themselves ‘ith the public good of tab in te word economy a a whole ‘On somewhat higher ethical level, the small counties maybe be tothe Kantian ealegoriealimperaive, which enjoins them toast Cooly im ways that can be generalized, In such circumstances, of ouse, they would not have withdrawn credits from Asti ia the Speing of 1931, nor fromm Germany and Britain in the summer, n0¢ ffom the United Stats in the aut. The economist chooses be- tween these standards pehape on the basis of omparave cost. the Netherlands had known the cost of leaving its sting uncon ‘ered into gol, it semn unlikely that ic would have done s, even 1 the isk of accelerating the colapse ofthe pound al deepeing the world depression. It maybe that such counties as Sweden, Can- ‘sa end New Zealand tha st high tandars of international con- dct~in foreign id, cotbatons to United Nations peaekeeping fission, eto 3 solely fr ethical reasons; or they ny chose timong ocestons to take largely the opportunist are relay 1p it “ine co teres tonal ort 28 {ot ta 1s nto wen ewes ne al te arb ts ‘nr nl ye sm Ps of Lato an Re eh, 286 Sore A ete Oi [AN EXPLANATION OF THE 1929 DEPRESSION 201 ‘heap. One may this noe that the sal countries conte sub Stanly to the defiation by the speed with which the cu imports, ‘opiates, of converted stein and dors into god, bt find it bard to Bane tem frit. "Tre i another aspect tothe ole of small counties: they could offer programe fr resvery because they knew thatthe majo cost ‘of programs adopted would fll on other counties, Proposal for an {bron iterations monetary fund in te Wasingon discus ‘Sons preceding the Wald Eeonomie Conference of 1933 were pat forwatd by Foland, Tukey, Belgium, te TLO, and one was made by Bala, hough hie Inter was quiely withdrawn when the United States frowned on i. Lacking reoures 10 make these schemes efectve, small counies were reduced fo advisory roles ‘ritout conviction, even when he poposls were sound. An esea- Ua ingen of allonership isto convince the lear tat hei the Sor of th ides that ree the use of is esoures, "The ease of France is diflerent, France sought power iis own ational inet, withoot adequately taking ino acount the eepe ‘Cusions offs poitlns on world economic o political tabi Is intransigence inthe mater of reparations or the atempt to attach politcal conditions 1 ie second Ausra ert of June 1931 ot the contempt German loan of July ofthat yar Masta the po- on. Hirt in the depreciation of sterling in September, te Bank fof France, under song pollcal pressure at home, conveted its lars into gol athe pvt atonal interest ring 193132, all the wile protesting cooperation and concern fo he interest of the Unied Stats, The rivalry between the Bank of France andthe Beak of England over which shoud tke over the leaderhip i = “oiog independence to cea banks and sabiizaton of eutences in Basten Europe would be patti, hadi ot run sks of instar bili for he system a whole when the French threatened to with- draw bance from London Not ite big enough 10 ave responsibility forced on small eoogh 1 afford the lunryof responsiblity, the reach po- 19, ermine be i of it ie hid eat oer et Nera eh x Optic et Ang ‘Peano at toy pi ‘Spent unease slg opt ma gts Slpalttayuret ogi do nea ung eS 2 ‘3 THE WORLD IN DEPRESSION sition in he interwar petiod was unenvahe It ad the power oa 51 destabillae, but it was insuficiedy powesul (0 stabilize.” oreat Britain athe United Sates togeer were te active ews that replaced the single eae of preva days, ut he postion {dl policy of France actively aed heir musa as wel a ic pin relatons tote oslying counties." In these eecumstanoes France could be (and wa) blamed for upsetting the system wea She had wo capacity to ke oer and ru iin he presence of to Taree poner, one feeble, the ober responsible, Pub esas private interest (Cynicism suggests hat leadership i fully rewarded fo its pins in ‘resi and that no mater bow much protests is commitnent to the public well, fundamental concern is privat. Bismarck in Sted tht He tae mis the weapon of he dominant economy 2 fous to preven otber from following in its path. "The white man's burden" i an expression esd today any tn mockery. A country Tike France deliberately sting out aciee prestige suggests tht those with concem for problem solving are either perfious or sellecciving. Nevers, the isa diflrence betwen accent Ing and declining responsi for the way de sytem is ron, The Bish secepted respoosibii,alinough, a the SO milion seiing Toanexphsszes, they were unable to discharge it.The reach and the United Sues were unwiling to underwrite stability. Uader Coolidge and Hoover the United States refusod to commit itself © Sry progam of foreign reconsuuction or currency stabil, Tenving these queton tothe Federal Reserve System. Thee was ‘nly any improvement Roosevelt's commitment wo the world conony tail dy in 1936, ate tine of the Tepaite Mone tary Pet, and timely duriag te Second World Wa. Inside Fane, as between France and the oer leading powers, “all ‘pou thovpt their opponent more united and dedicated than they tere and concer forte general interest was virally absent.” iit 126 ew 0" 9. EU WA ee etn Ca en eter 22. Cane, ni Sen. 28 pi Sli ee ie pro AN EXPLANATION OF THE 1929 DEPRESSION. 303 Unable to cope withthe obtic good, the British more and more tued tc energy to the pvt. Keynes's advocacy ofa tariff and the refusal to conemplat sabllzaton ater 1931 are examples ‘Onc may find abt or two fhe documents ht he nitive care ftom the Jonnions rater than Belin Fraime, unl well after the wat the Beitsh economics profsion and pblc almost drew the len tha each country shoul take eae of sel without egard foetal ees. ‘fhe potat i ilstated in the memorandum writen by Hsbert Hendeton at the BriishTratuy in 1943, ened “Iterational conor History of the Interear Pid." This summarizes the ‘rae view tat the depression esl from nationalism and tails, {he collapse of word tade,bstealism and preferences, and dae fad of the advice ofthe League of Nations, leading othe coneli- mth after the wat there sod forte wld tobe more resote {voiding economic aioli and tempting 1 constuct a {ely working econo system with iterations ced, th re ‘action of tae bart, and the oun of qualitative regula fon Henderson sales a the istry of te interwar pesod pro- ‘ide no suppot fortis view. He opposes exchange depreciation: “>There canbe lite doubt hat the depreciation of the pound was ia ‘par responsible forthe sharper fal in gold prices, ad dsilusion Fant general in the United Kingdom at sil ore in the United ‘Sats onthe power of exchange deprecation © promote national ‘ut the convention] view eal inal essential espects. The it nermatonal onder bas beoken own for good. Nahin Dat 24 Sr Damn tes re 92-9 0. 3, Sree sn nd par Cmte Pe inte Bese ae ee rdmy reas emia fence to to ‘SESESA ty her ue ef fer eas” Th on Seen ee ps aae mca Sr og feral etc wri 9 ‘Ein, te eng Enon Pte 17-19 Senna essa, Te Ira a ond ier Pps, 185, ai 3 RE St est, 20: “ae eps wi ite a ronal ape eb i oe peed wae wet at oe tee eh3 40 THE WORLD IN DEPRESSION Aocity and frst can come fom theater 1 ge it oP fui fa ois mate ee ease eto agi Ted ecey wing conto of capital PONE, mente ees Pee mH ‘sea pol “Ths Toot-dgeing, which Keynes shared during the 19305 and ‘uu ee nthe ais nderstandable Tt iss the man leson of Pa pcewar yar, however tht forte word economy 10s ‘uize, tere st be a stablier—oe stables Reteance tthe 198 and 1905 Laden is «word wih negative comoraons nthe 1980s, when veoicpur in econ makings rezaied as Poe ws ariciptosyctnes of der Fre and it Duce rms, Bat i Mach pve houg of ste provision of the pubic good of eT er hn expt of fllowes x the pete Ee seen tremula poste Wea, ray ne dy be poste 6a to int the apc of spas cout 225 vee ne gecral tres ssh poting vial sind 08) ‘erin be functors pened 1 sabe the wold economic 5 in sor hth Basel rangement for saps and sorter ed: tc ch pening a wold cena bank, serve as a world reli sia In tis area, and in he word fer tae anda iberel fw of capital and aa eer arp secs nthe absence of Select aa ma at ofthe United Sates slipping. 1 oot yt lar autor ne tengih of Eafe in an eared Buopest Eo a iyo of Japan wl be accompanied by 0 aetion a cau in providing a market for stressor agressive goods, aera th eeratinal Row of apt o in proving & i aa hina frei. Presumably the Basel arangeent or Sean es cade, There ae nations hat the Eropean mast I Jn renin empl xcept in gitar WA a 1 ee crcpion fo 2 wend viewport some de Por wo go abliz the Row of capital contre. re S, exannmic Ieaderahp in te work economy fle and ewe andTapan gaerseengih, the ontcomes =f polit a a,c usable. Among ie sabe outcomes a conti AN EXPLANATION OF THE 1929 DEPRESSION 305, ted or evived U.S leaerhip, afer he exchange cons of 1963, ved ovine cent wave of protectionism have beet reversed; 1 oy of lendessip and assumption of responsbity for the a aneTet pe won sysem by Europ, Tapa or SNH scum ena Bao a elie ceo of en ected ir amy to inereationa iaitons; «wad central om er ap ae, anda effecve General Agreement be und Trae. The last the most tractive, ut esha, it two alterna became ipomable cizen soo be contest wth eer, ipping tes es ifthe hd aleraive proves unable, singty Toei the undesirable alernives rode comes to be voided because of thi nab ae carte Unc Staes, Japa, andthe EEC wing for eae of te omy (2) one ule to ead ad the hers Unwin oo TORS, and @) each retiing a vo vet programs of #5 i 1929 Rogen of fe ster without sein 1 ee poms of sown Te aces of cement of eI, esis Pera Fund (IMF) wee stp t provide the United ao ane vet action opposed. 18 the 1969 reform tht Sit ne addon of Speci braving Rights SDE) © the eile ecm, quts of he IMF were nese 1 provide eto ancy lt Tas eaves open te posit of stlemat, 88 to ed ons Secirry Coun, when 90 moe powers are aa ae Inthe crcomaances ofthe Security Counc thee aan erat regesive spa int war the anlage im he c£0- one elds talemate—and depression eB ve aerate of ination institute with eal wthoriy end sovereignty reais Pressing