Lessons of the Great Depression
By Arnold Kling
In this essay, I summarize what I have been reading about the Great Depression and its implications for today.
The Depression certainly was an era of displacement. In fact I have borrowed the very term “displacement” from the late economic historian Charles Kindleberger, author of Manias, Panics, and Crashes and one of the eminent economists interviewed by Parker. Kindleberger’s theory of manias, such as the Tulip Mania, the South Sea Bubble, or the Internet craze, is that they are triggered by a major change in the economic or geopolitical environment. The change creates new opportunities and sudden wealth, leading to greed and overspeculation. Kindleberger views the 1929 stock market boom and subsequent crash as a classic example of this theory. The geopolitical realignment following World War I, and the rapid growth of industries in automobiles and electronic communications, created displacement.
For Discussion. The essay argues that there are parallels between the 1930’s and today, except that contemporary economic policy is better. Are there other important differences?