CHAPTER III. THE HISTORY OF CYCLES AND CRISES. §5. ECONOMIC CRISES DURING THE EARLY PERIOD OF CAPITALISM.

Any account of the historical course of cycles and crises is always made very difficult by the fact that even for the nineteenth century, and still more for the earlier period, we are dependent upon very scrappy and inaccurate data, which are for the most part based more upon impressions than upon economic statistics. We must therefore exercise so much the more caution in attempting to interpret the mechanism and the character of the cycles and crises which occurred during the early period of capitalism. In spite of the inadequateness of these data, however, we are quite justified in considering that the crises which have been handed down to us from the seventeenth and eighteenth centuries were more or less fortuitous accidents occurring outside the actual production process, and that they lack the totality as well as the cyclical nature of the crises of the capitalist age. Accordingly, there is practically no sign of any real economic cycle during these centuries, the crises which occurred during them being always mere speculation crises, centring sometimes round the wholesale trade and sometimes round the securities market. At first these crises characteristically affected only the small capitalist superstructure of the economic system (which was, after all, feudal and pre-capitalist), but their influence extended as the superstructure grew, until finally the whole of economic activity was drawn into the stream of the capitalist economy. It is again quite in accordance with our idea of the recklessness, the greed for profits, and the love of speculation of the early period that the speculation crises of which history tells us should appear to have been unusually violent. This has always made them interesting, of course, more from the psychological and human point of view than from the economic. We shall therefore restrict our description of them to a very few references.¹

A speculation fever of classical purity and also of irresistible humour was the tulip crisis which afflicted Holland when a speculation mania broke out in the year 1637, the commodity being, curiously enough, tulip bulbs. This is probably the strangest “boom” the world has Ever seen. Less naive but much more serious was the crisis which broke out in France in 1719 when the “bubble” concerns founded by Louis XV’s Scottish financier, John Lȧw (the “Banque Genéralé” and the “Mississippi Company”), collapsed, after a period of unexampled “booming” of their shares. This speculation crisis was not isolated but was part of an international financial crash. Law’s passion for promoting enterprises was paralleled in England by the so-called “South Sea Bubble,” in which the shares of the South Sea Company played the same rôle as the Mississippi shares had done in France, with the result that the speculation mania soon spread to other doubtful objects of speculation (so-called “bubbles”). In these concerns the unscrupulousness of the promoters seems to have been surpassed only by the credulity of the public. In Holland and Hamburg also there appeared similar speculation movements at about that time, but as they were far from approaching the degree of speculative frenzy in England and France, they did not exhibit such grave crisis symptoms. All accounts of the English and French speculation mania, and the subsequent financial collapse in both countries, give one the impression that in both cases the excessive gambling must have bordered on madness. Especially did the rise and final crash of Law’s concerns in Paris make a deep impression on the memory of the time. The familiar “paper-money scene” in Part II of Goethe’s Faust was a last echo of that deep effect.

The Law boom and the subsequent crisis of 1719 is of special interest, as it reveals, in a most conspicuous manner, the inflationary origin of every boom and every crisis following a boom, a point which was curiously neglected in the older literature on the history of cycles and crises, but which has recently been brought very forcefully into the foreground by Mr. Keynes.² Of all the “one-sided interpretations of history” (other examples being the Marxian materialistic interpretation and the military interpretation),³ the monetary interpretation, which stresses inflations and deflations as the most important motive forces of the dynamics of history, contains at least as much truth as any other attempt to simplify history. It should be noted, moreover, that this is also a point of view which is very much in sympathy with the general trend of this book.

§ 6. CYCLES AND CRISES IN THE NINETEENTH CENTURY.

With the beginning of the nineteenth century we enter the second phase of the history of cycles and crises. It is characterized by the fact that it is at this time, with the development of capitalist economy, first in England, then in the other increasingly industrial States, that the phenomena of fluctuations which we have recognized as typical of our economic system, first begin to emerge. And the crises, which in the early period of capitalism were of the nature of unregulated speculative excess, now become a definite part of the general economic rhythm. Crises naturally first took on this character in England, as that country was first to develop modern industrial capitalism. Any account of the crises and cycles of the nineteenth century must therefore give most attention to the economic events in that pioneer country of capitalism.⁴

The Cycle Period up to the Crisis of 1825.

Following on the Napoleonic wars there had occurred in England in 1818 disturbances in the nature of a crisis which bear a certain resemblance to the upheavals of 1921, which were directly connected with the World War. Further similarities with our recent experiences may be found in the general boom in economic activity beginning in 1822, which ended suddenly in the crisis of 1825, just as the boom of 1925-1929 ended in the world crisis of 1930. The boom of 1822-1825 may be described as the first real capitalist boom. All that is typical of such a boom was then, for the first time, represented almost to the full extent: an initial glut in the capital market, with a low rate of interest, the resulting increase in investment and in the production of capital goods, the expansion of credit, the rise of prices, and, linked up with all this, over-speculation on the stock exchange. The objects of the increased investment activity were at that time mines, factories, ironworks, shipbuilding, and canals; railways being reserved for the next cycle period. The collapse of this boom took place in the year 1825. The fall of prices was drastic in some cases (for instance, the price of wool dropped 60%). The crisis became particularly acute with the failure of numerous provincial banks (the so-called “country banks”) and the extraordinary fall in the price of shares. It is worth noting that the Bank of England, during the whole of the boom, kept its discount rate unchanged at 4%, which forced it, at the beginning of the crisis, to adopt precipitate measures of credit rationing. Discount policy in its modern sense was then still unknown. It was first developed in England in the following decades, as the fruits of experience. It is also worth noting that in the year 1825 the Bank of France came to the help of the Bank of England with a substantial loan : the first act of international co-operation between banks of issue.

The Cycle Period from 1826 till the Crisis of 1836.

The long and heavy depression connected with the crisis of 1825 ended in 1830, and a way was thereby made open for a new period of recovery, which seems to have been greatly favoured by a series of good harvests. A decisive part was played, however, by the increase of railway construction, the building of new canals and the opening up of new coal mines. The increase in the volume of investments was accompanied as always by an increase in security issues and a renewed expansion of credits. A new and important factor was the founding of numerous new banks, not only of issuing banks (country banks) but also of joint-stock deposit banks, which were now allowed for the first time and became henceforward an increasingly important instrument for the expansion of credit and at the same time for the abuse of credit. Moreover, it was significant that parallel to the English boom there was a boom in the United States, the collapse of which gave the first impetus to the collapse in England. Railway construction, land speculation, and inflation of credit characterized the boom m the United States, which throughout the century remained a field for experiments with note-issuing banks, and in consequence a hot-bed of speculative excesses.

The crisis which broke out in the year 1836 was on this occasion, for the first time, ushered in by a rise in the rate of discount of the Bank of England (to prevent the flow of gold to the United States). The collapse of prices followed at the end of 1836. Simultaneously there set in a serious credit crisis which emanated from Ireland, but was very soon checked in England by the energetic support given by the Bank of England to the other English banks. By the policy of raising the rate of discount and the courageous application of measures for the immediate combating of the credit crisis, the Bank of England on this occasion, for the first time in the history of banks of issue, established that rule procedure in financial policy which has been followed ever since, on repeated occasions, in England as in other countries, in times of crisis.

The Cycle Period from 1837 till the Crisis of 1847.

In England, the United States, and to some extent also in France the crisis of 1836 was again followed by a grave and wearisome depression, which was made worse by a number of bad harvests, the collapse of a gigantic cotton speculation in America, and credit crises in France and Belgium. Germany at that time still played too slight a part in world economic affairs and was still too much at the beginning of her industrial development to be perceptibly influenced by the violent economic spasms in Western Europe and the United States. At that time Germany’s position was that of the economically cautious country with steady business trends—a position which was later to fall to France, when that country, partly under the influence of a falling birth-rate, exchanged its progressive economic activity for a cautious conservatism. Germany is a country which was very late in waking from economic and political lethargy, but which, urged on by an extraordinarily heavy increase in population, developed an economic activity, behind which many people in France are to-day inclined to detect a mysterious and typically German dynamic force, not realizing in what a short time these two countries have exchanged their economic spirit and their place in world economy under the influence of external factors. Surely this is an example of the fact that we should not theorize too much about such matters, and especially that we should not think that anything lasts for ever, and so lose our sense of historical perspective.

The long-drawn-out depression which followed the crisis of 1836 was probably one of the worst periods of distress ever suffered not only by England, but also by all the industrial countries. Unemployment at that time reached an extraordinarily high figure, and while provisions were made dearer by bad harvests and agricultural duties, public assistance was practically non-existent. The political ferment expressed itself not only in the formation of radical parties, but even in riots and acts of violence (the Chartist movement). The distress of the people was also reflected in the fact that while the marriage-rate dropped, the figures of crime rose.⁵

In England as on the Continent the recovery did not begin until the ’forties, when it was again favoured by good harvests and by the opening up of the Chinese market, as a result of the “Opium War” between England and China. The feverish activity in the promotion of new companies that now set in again chose railways with renewed zeal as its object. Connected up with this there was the expansion of the iron and steel industry and of coal mining. This upward movement in the industries concerned with producers’ goods then spread to the industries producing consumers’ goods, especially to the textile industry, which at that time had its great boom period in England. The recovery continued in spite of the bad harvests of 1845 and 1846, and did not break down until the year 1847. Germany took its full share in this boom, but was practically unaffected by the subsequent crisis, although of course the depression both increased and lengthened the political unrest of the year 1848 in Germany as well as in France.

The Cycle Period from 1848-1857.

The recovery period which began in 1852 was influenced first and foremost by the sensational discovery of gold in California in 1848 and in Australia in 1851, which opened up new overseas markets and extended the monetary basis of economic activity. It is not surprising, therefore, that this boom period should be even more than before encouraged and influenced by the stormy development of the United States. The building of railways was continued, and the steamship and the telegraph also came in. At the same time the first great commercial banks were established on the continent of Europe (the Crédit Mobilier in Paris in 1852, and the Darmstädter Bank in 1853). The Crimean War, which broke out in 1853, served rather to stimulate than to hinder the boom, which was more international than any of its predecessors. The inflationary nature of the boom was clearly expressed in the rise in prices, which, according to English statistics (Sauerbeck’s index), was about 50% for the period from 1849-1854. In Prussia the active note circulation from 1855-1856 rose from 23 to 51 million taler. The Crédit Mobilier paid out a dividend of 40% in the year 1855, and the dividends of many other companies were not far behind. For duration, international scope, and intensity it was a boom such as the capitalist world did not experience again for another fifty years. The crisis of 1857 started in August with the crash of the New York capital market, and then spread to England and the Continent and even to South America and Australia. If the boom had by its international extent already registered the ever-growing spread of capitalism, more countries than ever were now involved also in the crisis, the extensiveness of which was paralleled by its gravity and intensity.⁶ As in the crisis of 1847, the limitation on the amount of the note issue which had been imposed by the celebrated Bank Act of 1844 had again to be suspended in England.

The Cycle Period from 1858 till the Crisis of 1866.

The new boom began in 1861, and again it was characteristic that the outbreak of the American Civil War (1861-1865), while causing considerable disturbances in world economic affairs, stimulated rather than retarded economic activity. One of the worst disturbances caused by the Civil War was the “cotton famine,” which forced the cotton industry in Europe substantially to cut down production, but did not prove a lasting or serious hindrance to the boom as a whole. The effect of the famine was all the less felt as the era of free trade, which was at this time introduced into Western and Middle Europe and which lasted till the ’seventies, proved to be a recovery factor of the first rank. Again the construction of railways and the iron and steel industry were the foci of the promotion of new enterprises and of investment activity. A further outlet was now provided by building activity, especially in France.

After the boom had been interrupted in 1864 by a credit crisis, which, however, had scarcely any effect upon the movements of prices or production, a reaction set in in 1866. It was only in England that this assumed the nature of a serious crisis. It ran its course on the Continent without any marked upheavals, notwithstanding the war of 1866 in Germany.

The Cycle Period from 1867 till the Crisis of 1873.

The boom which preceded the crisis of 1873 was as remarkable as the crisis itself and once more confirmed the law of the balance of action and reaction which operates in economic fluctuations as elsewhere. If England and France had hitherto been the leaders in the cyclical movement, the storm centre now seemed to shift, and to move to Germany and the United States in proportion as these countries began to catch up with England and France in industrial development. There is, however, no doubt as to the special importance of the fact that during this period both Germany and the United States attained their national unity following on a successful war (the American Civil War of 1861-1865 and the Franco-Prussian War of 1870-1871), a fact which gave an immense impetus to their economic development. This was particularly the case in Germany, where the stimulus provided by the French war indemnity played its part, while this same circumstance greatly retarded the boom in France, and was also partly responsible for that country’s being the only one of the Great Powers to be spared the crisis of 1873.

If we now turn to the development of the United States, we find that the most striking event is the rapid expansion towards the Far West which set in after the Civil War and was accomplished in an astonishingly short time. The most important aid to this expansion was the construction of the great transcontinental railways, among the first of which was the Union Pacific, completed in the year 1869. The railways again caused a mania of speculation, in which vicious promoting and stock-exchange manœuvres played a great part. The railway mileage was a little more than doubled between 1860 and 1873. The output of pig-iron in America increased from 1.6 million tons in 1870 to 2.5 million tons in 1873. The industries in the North-east of the United States sprang up rapidly and gave a still greater stimulus to the investment and promoting fever. The improvement and cheapening of the production of steel by Bessemer (Bessemer’s converter) did the rest, by making it possible to use steel rails in the construction of railways. In Pennsylvania, where the first petrol wells were sunk, petroleum entered upon its triumphant career through the world. The crash came dramatically in September 1873, when one of the banks connected with the railway-promoting companies in Philadelphia had to close its doors. On 19th September came “Black Friday” on the New York Stock Exchange, which had to remain closed for ten days. In the space of one year there were 5000 bankruptcies. A period of stagnation followed, which lasted for half a decade.

As far as the simultaneous development in Germany is concerned, it would be false to try to impute it solely or even principally to the economic and spiritual effects of the successful war. The boom had already set in before the war, and was international in character. The particular degree of the boom as well as of the crisis must, however, be traced to those effects of the war. The extent of the boom can be judged from the single fact that the consumption of iron per head was more than doubled from 1866 to 1873. This period was characterized by the orgy—unrestrained also from the moral point of view—of company-promoting, which earned it the lasting name of “the golden age of the company promoter.” All the childish ailments which England had already suffered and overcome in earlier epochs now afflicted Germany—over-speculation and that credulity of the public which, accompanied by its greed for profits, drove it into the arms of unscrupulous swindlers. This delirium was centred round railways and the iron and steel industry. The rise in pig-iron production is shown in the following table :—

The output of pig-iron in Germany in

1840	was	143,000	tons
1850	”	208,000	”
1860	”	529,000	”
1870	”	1,391,000	”
1873	”	2,241,000	”

Speculation in real estate and building was rife, and there sprang up those ill-famed edifices which were to remind later generations of the bad taste of the “golden age of the company promotor.” Luxury and rich living became the order of the day. The Viennese at that time used to pay 200-300 gulden to hear one performance by Madame Patti!

It was also from Vienna that the first sign of the collapse came, when on 9th May 1873 the speculation on the Stock Exchange collapsed in panic fashion. From there the crisis spread at once to Germany, burying the new enterprises beneath it in shoals. Huge sums were involved in this crash of 1873, which was the gravest crisis recorded up till then by capitalist history. Indeed, it remained the gravest until it was far surpassed by the world crisis in 1930.

The Cycle Period up till the End of the Century.

The extraordinary gravity of the crisis of 1873 was matched by the gravity of the depression which followed it and which kept the economic systems of almost every country in a state of exhaustion for years. For ten years there was no real recovery, and accordingly there is no real, i.e., complete, crisis to report for that period; except that at the beginning of the ’eighties France became involved in a belated fever of promoting and speculation, which started with the Union Générale, one of the banks founded by Bontoux. (These events in Paris formed the basis of Emile Zola’s novel, L’Argent.) The Bontoux crisis of 1882, however, remained fundamentally a purely French event, just as a crisis in the United States in 1884 remained purely American. Corresponding to the depression prevailing in industry at that time there was the agrarian crisis which has already been mentioned in other connexions (see p. 21). The scarcity of gold, caused by the decrease in the production of gold and the increase in the demand for it (due to the spread of the gold standard), also played an important part. It was only at the end of the ’eighties that business began perceptibly to improve. The European stock markets showed a lively interest in overseas, especially South-American, issues. It was here also that a crisis originated which struck a heavy blow to the London market in the year 1890 through the failure of the Bank of Messrs. Baring Bros., a firm which was engaged in Argentinian business. 1891 to 1894 were again years of depression everywhere. It was only in the year 1895 that a recovery set in and put an end to this long period of stagnation, during which many changes had taken place in the structure of economic life (reform of company law, formation of trusts and cartels, protection, social insurance, colonial policy, &c.); and, finally, the forces had gathered for a new and violent upward trend in the development of capitalism.

§ 7. ECONOMIC DEVELOPMENT UP TILL THE OUTBREAK OF THE WORLD CRISIS OF 1929.

The year 1895, in which a new and vigorous upward movement begins, also introduces a new phase in the history of economic cycles and crises. If up till then it had seemed as though the violent crisis of 1873 and the chronic depression which followed it had fulfilled the gloomy prophecies of the Marxist theory of the break down, it now appeared that the promoting crash was nothing but a severe “growing pain” of capitalism, which was only just beginning to develop, and that the period of chronic depression had been nothing but a long period of readjustment, rest, and gathering of strength. And it was only now that capitalism entered upon the epoch of its most stupendous growth, and right up till the outbreak of the World War it remained unshaken by disturbances of equilibrium and of growth anything like as severe as the great promoting crisis of 1873. The crises did not become more and more severe, as Marx had foretold, but more gentle, and even the alternation from boom to depression became less violent than before. The period from 1895 until the outbreak of the World War was a period of very great development for the economic forces of the world—the value of world trade had exactly doubled itself between 1900 and 1913—but this development proceeded along much more restrained and subdued lines than before, thanks mainly to the improvement in the monetary and credit system of the principal countries (the conquest of the world by the gold standard and the general introduction of the central banking system). Thus the gloomy prospect of crises becoming graver and graver, as the promoting crisis had seemed to indicate, could give place to the hope that the rhythm of economic life would become gentler and gentler and thus reduce the “total” economic crisis to a thing of the past. The inner development of the economic system during this period was such as fully to justify this hope, until the outbreak of the World War destroyed the political hypotheses on which it was based, and introduced decades of the gravest disturbances and upheavals ever recorded by the history of modern times. These reached their peak in the world crisis which broke out in the late autumn of 1929, and the end of which is not yet in sight in 1936. If we realize that the economic system has been invaded by a policy which follows its own laws—or rather its own lawlessness—we see clearly that the events since 1914 do not mean a process of self-disintegration of capitalism, but the threatening of capitalism by forces and powers fundamentally alien to it.

The Period from 1895 till the Turn in 1900.

The unusually vigorous upward movement which set in in 1895, and was especially strong in Germany, was doubtless favoured externally by the more liberal trade policy and by the new discovery of gold in the Transvaal. In Germany it was principally fostered by the electrical industry. It reached its peak, however, as usual in the development of the iron and steel industry in which the general upward trend in economic activity is usually focused. The boom also showed a certain strength in the United States and Belgium, while it was less marked in France and England. Its intensity in Germany can be judged by this fact among others, that from being an emigration country, Germany became an immigration country, and that despite the rapid increase in its own native population. The production of coal rose from about 79 million tons in 1895 to about 102 million tons in 1899, while the production of pig-iron rose in the same space of time from about 5.5 million tons to 8.1 million tons. The capital of the five greatest German shipping companies increased from 142 million marks in 1896 to 267 million marks in 1900 and the tonnage of the German merchant fleet from 1.3 to 1.86 million gross register tons.

The turn of the tide began in the autumn of 1899 with a panic in Russia, which led at the end of the year to the Reichsbank’s raising its rate of discount to 7%. By the following year the depression had become general, and was rendered much more acute by the failure of mortgage banks.

The Period up till the Turn in 1907.⁷

The depression continued in England, Germany, and France until 1903, when there began a new boom period which lasted till 1907. This was substantially supported on the agrarian side by good harvests and by the recovery from the agrarian crisis. Once more the movement was strongest in Germany, until it was surpassed after 1905 by the American boom.

The reaction which set in in 1907 took the form of crisis—if we neglect the smaller countries—only in the United States, where it was extremely grave. Its repercussions on the money and capital market have already been described (p. 36).

The Cycle Period from 1908 to the Outbreak of the World War.⁸

Following the turn of the economic tide in 1907-1908 there was a depression which lasted till 1910, and which in Germany was for the first time rendered perceptibly more acute by the keeping up of cartel prices. The beginning of the boom in 1910 was already darkened by the shadows gathering on the political horizon. Thus the Morocco crisis of September 1911 (caused by the sending of the gunboat “Panther” to Agadir) led to a collapse of prices on the Berlin Stock Exchange. The confusion in the Balkans was also an element of tension of the first rank which acted as a check on the boom in 1912. Added to this was the fact that on the Continent the rising prices of provisions meant that the masses shared in the general improvement in social conditions less than in previous boom periods. Thus all the symptoms seemed to indicate that hard times were about to take the place of growing prosperity and politically undisturbed economic development. It is true that the depression of 1913, which in Germany was once more made very much worse by the rigid price policy of the cartels and trusts, was of comparatively short duration, but before a normal boom could develop, the World War, which had for many years been looked upon as almost inevitable, broke out in August 1914.

If the decisive sign of a boom is the mobilization of the productive reserves of the economic system leading to a maximum of employment, with prices tending to rise, the World War deserves the title in every sense of the term. This point must be well borne in mind, since, in this respect, the World War has the merit of being the most stupendous example of the gigantic heights to which the productive forces of capitalism can rise under circumstances which occur also, on a smaller scale, during every boom period, i.e., whenever the capitalist system is subjected to very high pressure from the demand side. It will be remembered that before, and at the outbreak of the Great War, most people were strongly convinced that a war on the modern scale could not last more Than a few months, because no country could stand the enormous economic strain longer than that, and it is with an indulgent smile that we think of the many people in Germany who at that time attributed great importance even to the war treasure of a little over one hundred million marks in gold kept at the famous Juliusturm in Spandau. All these notions merely betray a total lack of understanding of the real dynamics of capitalism, but though the Great War has at least had the one merit of having shown it through a magnifying glass, minor errors of this kind are always recurring, proving that the mysteries of capitalism are very rarely understood. What we have to face is the plain fact that while the Great War lasted not just a few months but four and a half years, the economic system was not only able to “finance” this greatest consumption of all times and to provide for the new industrial investments necessary for the production of war materials, but was also able to sustain the population at a level not so much inferior as is commonly supposed (at least up to 1917, and outside of Germany and Austria), and all this with the majority of the male population of the most productive ages busy killing each other; nor, until the very last stage of the war, was the monetary strain unbearable. The case was most conspicuous in the United States, who were able, by way of the Allied purchases of 1915-1916, to send abroad several billion dollars’ worth of goods and to add substantially to their industrial plant, in addition to having more real income left for domestic consumption than ever before.⁹ The fact that spending sometimes augments the total social product more than saving is corroborated by recurrent experiences and, in the normal course of events, by every major boom. It constitutes a real problem, which might aptly be called the Paradox of Capitalism, and which has to be faced by every economist no matter how orthodox his views.¹ It is, as it were, almost a case not only of eating one’s cake and having it but of having even more of it—notwithstanding the grave digestive troubles that are sure to follow!

What we have said about the war boom was of course not said in order to eulogize the war or even the boom phenomenon, but only to stress a point which is most important for the theme of this book. The vast difference between the war boom and any normal boom must be obvious to everybody. The difference is that in the war the great effort to produce goods did not lead to an increase in material prosperity, but to unbounded impoverishment and loss of capital, and upset the economic equilibrium in the world for decades. These destructive effects of the war are imprinted on the economic development of the post-war period and are still playing a very great part in the world economic crisis of to-day.

Economic Development after the War is characterized up till about 1925 by the fact that there were rifts in economic international relationships, the extent of these rifts being proportionate to the different directions taken by the currency development in the various countries. This explains the characteristic contrast between the economic development in the inflation countries of Central Europe and that in the majority of the other countries in the world, so far as they attempted, during the first post-war years, to normalize their currency systems which had fallen into disorder during the war. This disruption of the international homogeneity of cycles after the war is a confirmation of what has been said earlier (p. 18) about the forces working for this homogeneity.

Outside the inflation countries the boom continued till 1920, thanks mainly to the credit expansion in the United States and to the famine in goods which made itself felt in Europe directly after peace had been declared. As a result of this famine in goods in Europe the overseas countries which produce raw materials were particularly fortunate in enjoying a good run of business from May, 1919, till March, 1920. People set to work feverishly to repair the fabric of world economy shattered by the war, and this showed itself especially in the extraordinary increase in shipbuilding, which in 1919 reached more than double the figure of 1913. Over-speculation and over-production were unusually pronounced when at the beginning of 1920 fate intervened in the shape of the first great world economic crisis of post-war times.

The World Economic Crisis of 1920 began in those overseas countries which had also been the main seat of the boom. After the fall in prices had already set in in the United States under the influence of a deflationary credit policy on the part of the Federal Reserve Banks, a real crisis, which forced the stock exchange to close, broke out in Japan in March, as the result of the failure of two banks which were involved in a great silk speculation. Soon every state, whether industrial or whether engaged in the production of raw materials—the whole world, indeed, with the exception of the inflation countries—was drawn into the crisis, which may be described as a deflationary and contracting process of the very first rank. Why then do we hesitate to call it a “deflation crisis”? Simply because every economic crisis would deserve this name for reasons which will be discussed later on. At the same time, however, the efforts of countries to re-establish the pre-war purchasing power of their currencies were fundamentally different from the type of credit deflation which generally starts and accompanies every crisis. The success of these strivings for normalization, which was particularly disastrous to production, was expressed by the fact that the index figures of prices (taking July 1914=100) from April 1920 to April 1921 fell in the United States from 266 to 154, in Great Britain from 323 to 206 and in France from 600 to 354. The economic development of the individual countries (always excepting the inflation countries) reveals numerous deviations during the following years, and thus no longer admits of general description. If we confine ourselves to the economic development of the United States, which has become more and more important since that time, we shall see that the basic direction of the development from the time the depression was overcome in 1922 till the end of 1929 was on the whole upward (“structural prosperity”), but was at several points subjected to manifold oscillations, corresponding to the fluctuating tendencies in the credit policy of the Federal Reserve Banks, which was more and more guided by the intention of deliberately reducing the upward and downward movements of economic variations.² Thus during that period the Federal Reserve Banks made several successful efforts to nip in the bud a boom that was attaining dangerous dimensions.

With the stabilization of the disorganized currencies in Central Europe the even pace of international economic activity was gradually restored from 1924 onwards, and Germany was brought back into international economic affairs, although the course of economic development in that country did not lose certain distinctive depressing elements (reparations, capital losses resulting from the inflation, and the direct and indirect effects of the unsuccessful war and the peace treaty). The same was true of England, which, in addition to the weakening of her economic position through the changes that took place in world economic affairs at that time, had, after the restoration of the gold standard in 1925, to suffer from a too high level of costs (relatively to the external value of the pound), until in the autumn of 1931 she got rid of this disparity by going off the gold standard.³ With these reservations, to which we must add an indication of the peculiar course of economic events in France connected with the currency developments there, we may describe the period from 1925 to 1929 as a time of international prosperity which from 1927 onwards passed into a boom.

Although the economic tendencies in the individual countries sometimes ran counter to each other, there can be no doubt that during the time from 1925 to 1929 the productive powers of the world had grown to an extraordinary extent. That this growth was not organic, but was accomplished amidst tremendous economic and, particularly, political tensions, was one of the main causes of the collapse at the end of 1929. World production and world trade increased from year to year and finally surpassed the pre-war level. An ever-broadening stream of credits poured from the countries with a surplus of capital (the United States, England, France, Holland, Switzerland, and Sweden) to the parts of the world where capital was scarce, Germany and South America being in the forefront of the latter. The advance of technical knowledge with its tendency to reduce production costs put everything that had gone before in the shade. The increase in investment activity, which on this occasion also was the chief characteristic and chief stimulus of the boom, was due principally to the new industries connected with the production of durable consumption goods (the automobile industry, the electrical industry, &c.), and to the activity in building. This growth was matched by a widespread tense optimism which in the end deteriorated into lack of perspective and discipline. This optimism went so far in places that people began to believe that there was such a thing as “permanent prosperity,” and that economic crises could be eliminated. It reached its peak in the United States, but even on this side of the ocean people were not quite insensible to it. It is a dreadful irony that a time which surpassed all previous boom periods in exuberant optimism should have been followed by an economic crisis of hitherto unparalleled gravity and duration. When we think to-day of that period of growing prosperity and unshakable trust in the future that came so suddenly to an end in 1929, we may feel a kind of emotion similar to that of the visitor to the ruins of Pompeii, who thinks of the days before the wholly unexpected eruption of Vesuvius which annihilated that gay city one August day in A.D. 79. Eight years after the end of the Great War the world seemed to be healed of those terrific wounds received in the course of the struggle; and for several years this belief had held sway. The immediate destructive consequences of the war had long since been wiped out and people were now concerned with making good the more remote devastation it had caused. With production and trade increasing month by month throughout the world the moment actually seemed in sight when social problems would be solved by prosperity for all; and the feeling that the dreadful past was being left behind, together with the psychological reflexes induced by a state of universal plenty, went far to create an atmosphere of goodwill, broadmindedness, and tolerance which made the air during that period almost everywhere more breathable than at any previous time. Thinking back to those “gay ’twenties,” we cannot help but be inclined to regard them as one of the most remarkable and astonishing periods in modern history. Probably economic history had never before beheld such a speed, or such a scale of material progress and improvement in the technique of production and organization. It is a curious token of human fickleness that ten years later men are simply wallowing in abuse of that period and are decrying its spirit almost as a strange abomination, an attitude which is all the more curious and even tragic as this total reversal of atmosphere is one of the main reasons for the persistence of the present depression.

§ 8. THE WORLD ECONOMIC CRISIS SINCE 1929.

The present world economic crisis started in the United States, that being the country in which the curve of the upswing reached its highest peak. After several months of speculation in stocks and shares, which grew more and more unrestrained and was fed with speculative funds from all over the world, there followed on 24th October, 1929 (“black Thursday”) a first violent drop in prices on the New York Stock Exchange. This was soon followed by further shocks, which put an end to all initial hopes on the part of the “bulls” of a recovery and drew security quotations on every exchange throughout the world after them. How tremendous the effect of this collapse of prices was may be shown by a few examples. The shares of General Motors fell from a maximum of 91¾ dollars in the year 1929 to a minimum of 31½ in the year 1930, Chrysler shares from 135 to 14 and the shares of the General Electric Company from 403 to 41½. If the expectation that this was only a temporary setback proved false, the hope that the crisis would be confined to the Stock Exchange also vanished gradually. Actually in 1930 the crisis expanded with uncanny inexorability into a disaster from which, in the end, scarcely a country or a single branch of economic activity escaped, and the sad result was a crisis which in completeness, intensity, and spaciousness surpassed all previous historical examples. We shall see later, when we come to examine the causes of the world economic crisis, that the crisis on the New York Stock Exchange was not the cause of it, but was merely an event which set it in motion. That the explosion in New York did have this effect and that it must be cited first in the chronological order of events, cannot be doubted.⁴

The effects of the crisis on the most varied spheres of economic activity give some idea of the devastation which it wrought. Particularly striking, apart from the already-mentioned collapse of share prices, is the fall in the prices of some important raw materials in world trade. Agriculture throughout the world was particularly affected by the fact that the price of wheat fell to a previously inconceivable level, and by the middle of 1931 had already lost about 60% of what had been the prevailing average price in 1928. The pre-war price had been far higher. For instance, wheat on the Chicago Exchange in 1913 averaged 91 cents per bushel (= about 60 lbs.) while the price in 1932 hovered around 60 cents. This fall in the price of wheat was eclipsed, however, by the fall in the prices of other commodities. Thus the gold price of rubber fell to 13% of the price in January, 1929, while that of silk dropped to about 23% of that level. Maize, meat, wool, cotton and metals also fell to an extent that would at one time have been considered inconceivable. Naturally the overseas agrarian countries and those producing raw materials (South America, Australia, Canada, and Africa) were specially hard hit by this drop in the price of raw materials, while its effect upon the individual industrial countries depended on the relationship between the profit resulting from the lower cost of raw materials and the loss caused by the weakening of the overseas markets. The catastrophic effect of the drop in the prices of raw materials upon the countries producing these raw materials may be illustrated by the extreme example of the Gold Coast, which was thrown into such poverty by the depreciation of cocoa that her imports of the chief necessities and luxuries declined by 50-70%. The fact also that in Chile in 1930 the value of exports declined by 42% compared with the previous year speaks volumes.

The drop in prices in the raw-material markets of the world was accompanied by a less marked decline in the general price level in every country. Thus the level of wholesale prices in Germany at the end of 1931 had already reached the level of 1913, while in 1929 it had been still a third above that level. The prices of the so-called cyclically sensitive commodities were even at this time far below pre-war prices, while retail prices and monopoly prices of all kinds followed the general price movement only very hesitatingly. If we take an international average for the end of 1931, we can say that at that time the economic crisis had on the whole restored the pre-war price level, and thereby raised the purchasing power of money about 30% compared with 1929. It is therefore obvious that we are dealing here with a large-scale deflation.

But the saddest and most obvious expression of the world crisis is to be found in the shrinkage of production throughout the world. If we take the volume of industrial production in 1928 at 100, the chief countries had reached the following figures in June, 1932:⁵ Germany, 60.7; Great Britain, 89.4; U.S.A., 53.2; Sweden, 76.9; and France, 73·2. And the shrinkage of production in particular branches of economic activity falls far below this average. Thus building activity both in Germany and the United States had fallen at the end of 1931 to half of what it had been in 1929, while the level of employment in the German machine industry had fallen in November, 1931, to 34% of the nominal figure, and the volume of automobile production in the United States went down to 49% of the average of 1929.

Even more sensational than the shrinkage of production has been the continuous decline of world trade since 1929. If this decline is expressed as a percentage of the gold value of world trade in 1929, we get the following figures:—

Percentage Decline in the Value of World Trade, 1929-1934.⁶

1929	-	-	-	100
1930	-	-	-	81
1931	-	-	-	58
1932	-	-	-	39
1933	-	-	-	35
1934	-	-	-	34

These figures, however, need some explanation. First we must remark that they give a grossly exaggerated picture of the extent to which world economic relations may legitimately be said to have broken down. The decline in value terms reflects not only the shrinkage of the volume of international trade but also the heavy fall of prices, measured in gold, which is especially important since this fall has been most pronounced in the case of raw materials, which bulk so largely in international trade. It is not surprising, therefore, to find that if the influence of falling prices is eliminated, the decline of world trade in quantity terms appears to be far from sensational (slightly over 25 per cent. between 1929 and 1934). Even this, of course, is bad enough, but it certainly does not warrant the wild statements now current about the end of international trade. A second conclusion to be drawn from the above table is the interesting fact that the full brunt of the crisis has fallen on world trade only at an advanced stage of the depression, while in the years from 1930 to 1932 the decline in world trade was markedly less than the decline in world production (and even slightly less than the decline in the industrial production of the world). As in accordance with previous experiences, foreign trade served, in the first years of the depression, as a partial outlet for the countries first and hardest hit by the crisis, while, later on, the full effect of the trade restrictions, which had progressively increased since 1931, made itself more and more felt. These new trade restrictions, with their ruthless suppression of the normal course of foreign trade (higher tariffs, quota systems, foreign exchange control, clearing agreements, import boards, foreign trade monopolies, tampering with currency, &c.) must also be regarded as one of the most conspicuous and most ominous results of the world depression. Another feature of the later phases of the depression, which has added greatly to the decline of world trade, has been the almost complete breakdown of international credit, brought about by the international credit crisis of 1931, and the consequent abandonment of the gold standard in most countries. In view of these terrific obstacles, it really seems almost a miracle that world trade—even if reckoned in gold prices—has not actually sunk to still greater depths.

If we want to probe fully into the tragedy of the present depression in terms of human misery, we must, of course, revert to the statistics of unemployment and of the destitution connected with it. Despite the well-known difficulties of calculations of this kind, we may safely say that the great depression condemned twenty to thirty millions, together with their families, to keep their hands idly in their pockets (when not raised in threats against our economic and social system!) and to go without food except to the extent to which they get it from private benevolence or public expenditure, and this at a moment when gigantic masses of raw materials and foodstuffs are glutting the markets and so much industrial plant is lying idle—materials which could convert bitter want into prosperity if the world’s economic organization were again restored to orderly operation. While wage rates have shown a very significant power of resistance in the leading countries, the total earned incomes, and still more the total income of the working classes of those countries declined heavily in face of the mass unemployment. Earned incomes fell most heavily in the United States (to almost one-third of the quarterly average of 1929, by the beginning of 1933) and in Germany (to almost one-half by the beginning of 1933), and much less in Great Britain (to 87 per cent. by the third quarter of 1932). So far as the standard of living is concerned, the effect of the decline in nominal incomes was, of course, partially offset by the declining cost of living. The decline in consumption has been, however, very substantial, which may be illustrated by the significant examples of beer consumption in Germany, and of the consumption of silk fabrics in the United States, both of which reached their lowest point at about 50% of the pre-depression consumption. The same story is told by the fact that sales in the retail trade in Germany declined in 1933 to 60% of those of 1928.⁷ Sad as all this is, however, it must be noted that it is again a tribute to the elasticity of our economic system and to the richness of its resources that it has been able to carry along its millions of unemployed for such a long time at a level of sustenance which has certainly not been inferior (if, indeed, it has not been actually superior) to the standard of living of the average Russian worker employed during these years. Alongside the example of world trade already discussed, here is again a fact which before the depression only the most sanguine optimists would have thought possible. This is not said to belittle the human tragedy of unemployment, but it seems certain that, bad as it is, the material significance of unemployment is, on the whole, surpassed by its moral and psychological effects.

Special mention must be made of the effects of the crisis on the money and capital markets of the individual countries, because they introduce anomalies which are essential to the understanding of the crisis. We have already referred to the extraordinary fall of share prices. In the United States this amounted on the average to 60% from September, 1929, till June, 1931; in Holland, to the same figure from March, 1929, till June, 1931; in Germany, to 61·7% in April, 1927, till June, 1931; and in France, to 55·7% from February, 1929, till June, 1931. In hardly any of the countries did the rate of interest for long-term investments show a marked tendency to drop during the greater part of the depression. On the other hand, the interest rate for short-term investments (the interest rate on the money market) in the principal creditor countries fell to quite an extraordinary extent (in some countries like England and Switzerland even approaching zero).

The banking statistics are of special interest in this connexion, since they reflect the process of credit contraction (deflation) underlying the more general process of business contraction.⁸ Especially significant in this respect are the figures of the decrease of bank credits and advances, of the turnover of bank deposits (velocity of circulation of bank deposits), and of the volume of bank clearings. Bank credits and advances had dropped in 1932 in Germany (Big Berlin Banks) and in Austria to almost one-half compared with 1929, in France and Holland to two-thirds, and in the United States, England and Wales, and Italy to about three-quarters. The velocity of circulation of bank deposits (ratio of bank debits to the average of bank deposits) declined, in the United States, from the peak rate of 3 in October, 1929, down to the rate of about 1 at the end of 1932 and in the first months of 1933.⁹ The percentage of bank clearings in 1932 as compared with the average of 1929 was: in the United States (New York City) 27·9, in the United States (outside New York City) 46·4, in Switzerland 37·7, in Holland (Girotransfers at the Central Bank) 39·5, in Germany 43·7, in the United Kingdom (Metropolitan) 69·7, in France 72·4, and in Sweden 87·5. The position of banking has been very different in the several countries and during the progress of the depression. While the banking systems of a number of countries (especially of Germany, Austria, and the United States, to some extent also of Italy) were temporarily paralysed by the waves of credit crises, the process of increasing liquidity, normal to every major depression, went on without marked interruption in the other countries, especially in Holland, Switzerland (until 1933), and in the United Kingdom. It has been calculated that in the United Kingdom the commercial banks’ advances, which in more normal times were estimated at 50-55 per cent. of their total deposits, had fallen to 38.2 per cent, in January, 1934, leaving a margin for about 200 million pounds worth of new investments before the traditional ratio would be reached.¹ At the same time, there was a large amount of hoarding of cash and of gold in most countries and a universal slackening of the velocity of circulation of cash (as distinct from the velocity of circulation of bank money shown in the above figures of the turnover of bank deposits in the United States). The amount of new gold hoarding (minus dishoarding) which took place in 1933 alone has been estimated by the Bank for International Settlements at more than 3 milliard Swiss francs. It is mainly due to the hoarding of cash that the volume of notes in circulation did not fall off in most countries proportionately to the actual degree of deflation and in some countries (France, Belgium, Holland, United States, and Switzerland) even increased.

A particularly disastrous feature of the present depression have been the international financial troubles and the crises of the balance of payments of numerous countries. Several factors concurred to bring this about. In the first instance, a huge amount of international short-term funds had been piled up which was estimated by the Bank for International Settlements for the beginning of 1931 as at least $10,000 million,² and this avalanche came down in the summer of 1931 with most fatal consequences, though it is again to the credit of our economic system that it proved possible to mobilize and transfer about one-half of this enormous amount of indebtedness within one year. Another strain, increasing year by year, was the international long-term indebtedness which had also reached sky-high dimensions, especially on account of the political indebtedness (reparations and inter-allied debts) and its implications. With the declining volume of world trade and the complete collapse of the prices of raw materials, the burden of this foreign indebtedness became increasingly unbearable for the greater part of debtor countries, especially for the countries producing raw materials. This, in turn, had disastrous effects on the banking systems of the creditor countries. So it was that numerous bank failures in the United States were closely connected up with the South-American failures. In addition to all this, irregular movements of capital, directed by the motive of security rather than by the motive of economic yield, gained an importance unheard of hitherto. The most fatal case, in this respect, was perhaps the flight of capital from Germany after the rise of political radicalism had become appallingly manifest by the sweeping victory of the National-Socialist Party at the end of 1930. Considering the ultimate effects of the breakdown of the German financial system, it is not too much to say that the triumph of the Nazi movement has been one of the heaviest blows to economic conditions not only in Germany but also in the world at large. Later on, with the waning number of stable currencies, political insecurity as a factor making for irregular capital movements was supplemented by the instability of currencies. In view of all these extraordinary circumstances, it is not to be wondered at that the monetary and financial system of the world went thoroughly out of order. One of the most conspicuous effects of this development—not its cause, as it is sometimes believed—has been the grossly unequal distribution of the world’s gold reserves among the different countries, a factor which, in turn, has gone far to intensify the economic crisis. At the end of 1934, the central banks and treasuries of all countries held nearly 700 million fine ounces of gold, but of this total nearly 400 millions was held by the United States and France alone while the United Kingdom, in spite of her pre-eminence in world trade and finance and the position of sterling as a basis for other currencies, held less than one-fourteenth of the total, and no other country held more than about one-eighth of the quantity held by France alone.³ It goes without saying that this distribution is absolutely out of harmony with the share of the different countries in the world’s trade and finance and that it is a sure symptom of the world’s financial mechanism being thoroughly out of gear.

Inadequate as this account of the present world crisis must of necessity be, it surely suffices to show that it has, in a rather short time, developed into dimensions which are at once catastrophic and unique in economic history. True, the depressions after the Napoleonic wars and after 1873, in their tenacious duration and their intensity, come very near the present depression, but all statistical comparisons show convincingly that this latter depression has outrun all previous examples. On the other hand, it has to be noted that, at the present moment, there is some evidence that the worst may be over so long as the rather insecure basis of the recovery which has been recorded since 1933 should not give rise to a new recession, especially in those countries where, as for instance in Germany, some real concern in this respect is warranted. The figures showing the increase of industrial activity and the decrease of unemployment since 1933 are, on the surface, quite impressing, and in some countries as in Great Britain and in Sweden the actual recovery seems sound enough. But nobody can fail to feel uneasy in comparing these figures with the still crumbling world trade, the still growing obstacles to international commerce, the persisting monetary troubles, the crude and haphazard socialism rampant everywhere and thriving under different political colours, and—last but not least—with the political atmosphere so incongruous with that spirit of confidence, optimism, and easiness without which all recovery programmes will rest on sandy ground.

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¹Cf. W. Sombart, Der moderne Kapitalismus, 4th ed., vol. 2, half-vol. 1, Munich and Leipzig, 1921, from p. 213; A. Spiethoff, Art. “Krisen,” op. cit.; Max Wirth, Geschichte der Handelskrisen, 3rd ed., Frankfort, 1883.

² J. M. Keynes, A Treatise on Money, London, 1930, vol. 2, chap. xxx. Mr. Keynes draws attention also to the very interesting investment boom of 1692-1695 in England, largely instigated by the recovery of a Spanish treasure ship. As we shall see later, the machinery for starting a boom has been much modified since.

³Cf. Paul Barth, Die Philosophie der Geschichte als Soziologie, 2nd ed., Leipzig, 1915; Brooks Adams, The Law of Civilization and Decay, London, 1895; M. Herzfeld, “Die Geschichte als Funktion der Geldbewegung,” Archiv für Sozialwissenschaft, vol. 56, 1926, pp. 654-686. On the military interpretation of history something may be found in my own paper “Wehrsystem und Wirtschaftssystem,” Die Friedenswarte, Geneva, No. 1, 1935.

⁴ References (partly also on the general history of cycles and crises): M. v. Tugan-Baranowski, Studien zur Theorie und Geschichte der Handelskrisen in England, Jena, 1901 (also translated into French, Paris, 1913); M. Bouniatian, Geschichte der Handelskrisen in England, 1640-1840, Munich, 1907; Otto C. Lightner, The History of Business Depressions, New York, 1922; W. L. Thorp, Business Annals, New York, 1926; L. Lescure, Des Crises Générates et Périodiques de Surproduction, 3rd ed., Paris, 1923.

⁵ On these and similar consequences of cycles and crises cf. Dorothy S. Thomas, Social Aspects of the Business Cycle, London, 1925; and Maurice B. Hexter, Social Consequences of Business Cycles, Boston and New York, 1925.

⁶Cf. H. Rosenberg, Die Weltwirtschaftskrise von 1857-1859, Stuttgart, 1934.

⁷Cf. J. Esslen, Konjunktur und Geldmarkt 1902-1908, Stuttgart and Berlin, 1909.

⁸Cf. A. Feiler, Die Konjunkturperiode 1907-1913 in Deutschland, Jena, 1914; A. H. Hansen, Cycles of Prosperity and Depression in the U.S., Great Britain, and Germany, Madison, 1921; W. C. Schluter, The Pre-War Business Cycle, 1907 to 1914, New York, 1923.

⁹ J. M. Clark, “Aggregate Spending by Public Works,” American Economic Review, March 1935, p. 15.

¹ This theme will be developed more fully later on (§ 14 and § 15).

²Cf. “Recent Economic Changes in the United States,” Report of the Committee on Recent Economic Changes, 2 vols., New York and London, 1929; W. R. Burgess, Reserve Banks and the Money Market, New York, 1928; H. L. Reed, Federal Reserve Policy, 1921-1930, New York, 1930; Hearings before the Committee on Banking and Currency (Stabilization), H.R. 7895, Washington, 1927; F. A. Hayek, “Die Währungspolitik der Vereinigten Staaten seit der Ueberwindung der Krise von 1920,” Zeitschrift für Volkswirtschaft und Sozialpolitik (Vienna), vol. 1, 1926, pp. 254-317.—Generally speaking, it has to be remarked that the American boom up to 1929 has not yet been entirely satisfactorily treated in economic literature. There are still many points the obscurity of which has not been sufficiently elucidated.

³ It may safely be assumed that what can be said, within the compass of this book, on the English post-war depression will not add greatly to the knowledge of the reader. The position of the author is the more fortunate since the literature on the subject is not only abundant, but also, on the average, particularly instructive and penetrating, so that we are now quite clear about the main points. It seems to be generally agreed now that the discrepancy between the external value of the pound and the internal cost structure, held rigid by the wage policy and other factors, constituted the heaviest strain on the economic equilibrium of Great Britain, supplemented by a number of international and internal dislocations. The reader is specially referred to H. Clay, The Post-War Unemployment Problem, London, 1929; A. Loveday, Britain and World Trade, London, 1931; Sir William Beveridge, Unemployment, new ed., London, 1930; L. Robbins, The Great Depression, London, 1934, pp. 76-96; Report of the Committee on Finance and Industry (Macmillan Report) Cmd. 3897 of 1931; “Britain in Depression: A Record of the Trade Depression since 1929,” prepared by a Research Committee of the Economic Science and Statistics Section of the British Association, London, 1935. References on the cyclical development in Germany : Carl T. Schmidt, German Business Cycles, 1924-1933, New York, 1934; C. Bresciani-Turroni, “Considerazioni sui Barometri Economici,” Giornale degli Economisti (Rome), January, May, and July 1928; Vierteljahrshefte zur Konjunkturforschung, ed. by the Institut für Konjunkturforschung (Berlin); Reports of the Reichskredit Gesellschaft (half-yearly); Annual Economic Surveys of the Frankfurter Zeitung. The structural changes of the German economy after the war have been analysed in numerous volumes in “Verhandlungen und Berichte des Enquête-Ausschusses “of which a short summary has been published under the title “Erzeugungs- und Absatzbedingungen der deutschen Wirtschaft “(Berlin, 1931). The most reliable source of information on business conditions in France is the yearly supplement of the Revue d’Economie Politique, La France Economique, Annuaire de la vie économique française (since 1922).

⁴Cf. J. Vernier, Les crises boursières et leur répercussions économiques (L’exemple des Etats-Unis à la fin de 1929), Paris, 1932; Francis W. Hirst, Wall Street and Lombard Street, The Stock Exchange Slump of 1929 and the Trade Depression of 1930, London, 1932.

⁵ Taken from World Economic Survey, third year, 1933-1934 (by J. B. Condliffe), Publication of the League of Nations, Geneva, 1934, p. 90. These annual surveys of the League of Nations which were started in 1931 by Prof. Ohlin’s The Course and Phases of the World Economic Depression, give an admirable account of the development of the present crisis. A more detailed treatment may be found in another publication of the League : World Production and Prices, 1925-1933, Geneva, 1934.

⁶World Economic Survey, 1934-1935, p. 157. The available data for 1935 show a further slight decline, measured in gold.

⁷ “Deutschlands wirtschaftliche Lage an der Jahreswende, 1934-1935.” Report of the Reichskredit-Gesellschaft, p. 34.

⁸ A detailed account is to be found in the illuminating publication of the League of Nations, Commercial Banks 1925-1933, Geneva, 1934.

⁹ Robbins, The Great Depression, p. 217.

¹World Economic Survey, 1933-1934, p. 279.

² The figure given by the Berlin Institut für Konjunkturforschung is still higher (about $12,000 million). The normal pre-war volume of the international short-term indebtedness has been estimated by the Institut as 2-3,000 million dollars.

³Monthly Review of the Midland Bank, April-May 1935, p. 4.