Causes and Consequences of the Great Depression
The Great Depression was the most significant economic catastrophe of
modern times to affect capitalist market economies and even today most
economists regard the 1930s worldwide slump, and the consequences of that
catastrophe, as one, if not the most important single macroeconomic event of
the twentieth century. The political and economic significance of this event is
reflected in the continuous outpouring of research on this traumatic historical
event (see Temin, 1976, 1989; Bernanke, 1983, 1995, 2000; Eichengreen,
1992a; 1992b; C. Romer, 1992, 1993; Bordo et al., 1998; Hall and Ferguson,
1998; Wheeler, 1998; Krugman, 1999; Cole and Ohanian, 1999, 2002a;
Prescott, 1999; James, 2001). It is easy to see why the interwar period in
general, and the Great Depression in particular, continue to exert such an
attraction to economists and economic historians:
1. the events of this period contributed significantly to the outbreak of the
Second World War which changed the political and economic world
forever;
2. the Great Depression was by far the most severe economic downturn
experienced by the world’s industrialized capitalist economies in the
twentieth century and the nature of the causes and consequences of the
worldwide slump in economic activity are still hotly debated;
3. it is generally recognized that the Great Depression gave Keynes (1936)
the necessary impetus to write the General Theory, a book that marks the
birth of macroeconomics. According to Skidelsky (1996a), ‘the General
Theory could not have been published ten years earlier. That particular
indictment of classical economics and, indeed, of the way the economy
behaved needed the great slump to crystallise it’;
4. the Great Depression is frequently used by macroeconomists to test their
models of aggregate fluctuations, while the whole interwar period provides
an invaluable data set for macroeconomic researchers;
5. there are always some commentators who periodically ask the question
‘could such an event ever happen again?’;
6. finally, after the 1930s experience the role of government in all market
economies increased considerably, leading to a fundamental and lasting
change in the relationship between the government and the private sector.
As a result, economic institutions at the end of the twentieth century
were very different from those in place in 1929. It is therefore with
considerable justification that Bordo et al. (1998) describe the Great
Depression as the ‘defining moment’ in the development of the US
economy during the twentieth century. In the macroeconomic sphere the
modern approach to stabilization policy evolved out of the experience of
the ‘great contraction’ of the 1930s (DeLong, 1996, 1998).
Economists have generally concluded that the proximate causes of the
Great Depression involved the interaction of several factors leading to a
drastic decline in aggregate demand (see Fackler and Parker, 1994; Snowdon
and Vane 1999b; Sandilands, 2002). The data in Table 2.1 reveal convincing
evidence of a huge aggregate demand shock given the strong procyclical
movement of the price level, that is, the price level falling as GDP declines.
Note also the dramatic increase in unemployment.
Bernanke and Carey’s data also show that in the great majority of countries
there was a countercyclical movement of the real wage. This pattern would
emerge in response to an aggregate demand shock in countries where price
deflation exceeded nominal wage deflation. Hence the evidence ‘for a nonvertical
aggregate supply curve in the Depression era is strong’ (Bernanke
and Carey, 1996). In Figure 2.7 we illustrate the situation for the US economy
in the period 1929–33 using the familiar AD–AS framework. The dramatic
decline in aggregate demand is shown by the leftward shift of the AD curve
during this period. Note that a combination of a falling price level and GDP
could not arise from a negative supply shock (leftward shift of the AS curves)
which would reduce GDP and raise the price level.
In the debate relating to the causes of the Great Depression in the USA five
main hypotheses have been put forward, the first four of which focus on the
causes of the dramatic decline in aggregate demand:
1. The non-monetary/non-financial hypothesis. Here the focus is on the
impact of the decline in consumer and investment spending as well as the
adverse effect on exports of the Smoot–Hawley Tariff introduced in 1930
(see Temin, 1976; C. Romer, 1990; Crucini and Kahn, 1996); in chapter
22 of the General Theory, Keynes argued that ‘the trade cycle is best
regarded as being occasioned by a cyclical change in the marginal
efficiency of capital, though complicated and often aggravated by associated
changes in other significant short-period variables of the economic
system’, thus the ‘predominant’ determination of slumps is a ‘sudden
collapse in the marginal efficiency of capital’.
2. The monetary hypothesis of Friedman and Schwartz (1963) attributes the
huge decline in GDP mainly to an unprecedented decline in the nominal
money supply, especially following the succession of bank failures beginning
in 1930, which the Fed failed to counter by using expansionary
monetary policies. This prevented the deflation of prices from increasing
the real money supply which via the ‘Keynes effect’ would have acted as
a stabilizing mechanism on aggregate demand. An alternative monetary
hypothesis, initially put forward by Fisher (1933b), focuses on the impact
of the debt-deflation process on the solvency of the banking system.
3. The non-monetary/financial hypothesis associated in particular with the
seminal paper of Bernanke (1983). Bernanke’s credit view takes the
Fisher debt-deflation story as its starting point. Because many banks
failed during the slump, this led to a breakdown in the financial system
and with it the network of knowledge and information that banks possess
about existing and potential customers. Many borrowers were thus denied
available credit even though their financial credentials were sound
(see also Bernanke and James, 1991).
4. The Bernanke–Eichengreen–Temin Gold Standard hypothesis. In looking
for what made the depression a ‘Great’ international event it is necessary
to look beyond the domestic mechanisms at work within the USA. ‘The
Great Depression did not begin in 1929. The chickens that came home to
roost following the Wall Street crash had been hatching for many years.
An adequate analysis must place the post-1929 Depression in the context
of the economic developments preceding it’ (Eichengreen, 1992a).
5. The non-monetary neoclassical real business cycle hypothesis. This very
recent (and very controversial) contribution is associated in particular
with the work of Cole and Ohanian (1999, 2002a) and Prescott (1999,
2002). This approach highlights the impact of real shocks to the economy
arising from ‘changes in economic institutions that lowered the normal
or steady state market hours per person over 16’ (Prescott, 1999; see also
Chapter 6).
With respect to those explanations that emphasize the decline in aggregate
demand, much of the recent research on the Great Depression has moved
away from the traditional emphasis placed on events within the USA and
focuses instead on the international monetary system operating during the
interwar period. Because the Great Depression was such an enormous international
macroeconomic event it requires an explanation that can account for
the international transmission of the depression worldwide. According to
Bernanke (1995), ‘substantial progress’ has been made towards understanding
the causes of the Great Depression and much research during the last 20
years has concentrated on the operation of the international Gold Standard
during the period after its restoration in the 1920s (see Choudri and Kochin,
1980; Eichengreen and Sachs, 1985; Eichengreen, 1992a, 1992b; Eichengreen
and Temin, 2000, 2002; Hamilton, 1988; Temin, 1989, 1993; Bernanke,
1993, 1995, 2000; Bernanke and James, 1991; Bernanke and Carey, 1996;
James, 2001).
The heyday of the Gold Standard was in the 40-year period before the First
World War. The balance of payments equilibrating mechanism operated via
what used to be known as the ‘price specie flow mechanism’. Deficit countries
would experience an outflow of gold while surplus countries would
receive gold inflows. Since a country’s money supply was linked to the
supply of gold, deficit countries would experience a deflation of prices as the
quantity of money declined while surplus countries would experience inflation.
This process would make the exports of the deficit country more
competitive and vice versa, thus restoring equilibrium to the international
payments imbalances. These were the ‘rules of the game’. The whole mechanism
was underpinned by a belief in the classical quantity theory of money
and the assumption that markets would clear quickly enough to restore full
employment following a deflationary impulse. This system worked reasonably
well before the First World War. However, the First World War created
huge imbalances in the pattern of international settlements that continued to
undermine the international economic system throughout the 1920s. In particular
the war ‘transformed the United States from a net foreign debtor to a
creditor nation’ and ‘unleashed a westward flow of reparations and war-debt
repayments … the stability of the inter-war gold standard itself, therefore,
hinged on the continued willingness of the United States to recycle its balance
of payments surpluses’ (Eichengreen, 1992a).
To both Temin (1989) and Eichengreen the war represented a huge shock
to the Gold Standard and the attempt to restore the system at the old pre-war
Keynes v. the ‘old’ classical model 81
parities during the 1920s was doomed to disaster. In 1928, in response to
fears that the US economy was overheating, the Fed tightened monetary
policy and the USA reduced its flow of lending to Europe and Latin America.
As central banks began to experience a loss of reserves due to payments
deficits, they responded in line with the requirements of the Gold Standard
and also tightened their monetary policies. And so the deflationary process
was already well under way at the international level by the summer of 1929,
and well before the stock market crashed so dramatically in October.
Eichengreen and Temin (2000) argue that once the international economic
downturn was under way it was the ‘ideology, mentalité and rhetoric of the
gold standard that led policy makers to take actions that only accentuated
economic distress in the 1930s. Central bankers continued to kick the world
economy while it was down until it lost consciousness.’ Thus the ultimate
cause of the Great Depression was the strains that the First World War
imposed on the Gold Standard, followed by its reintroduction in a very
different world during the 1920s. No longer would it be relatively easy, as it
had been before 1914, to engineer wage cuts via deflation and unemployment
in order to restore international competitiveness. The internal politics of
capitalist economies had been transformed by the war, and the working
classes were increasingly hostile to the use of monetary policies that were
geared towards maintenance of the exchange rate rather than giving greater
priority to employment targets. Hence the recession, which visibly began in
1929, was a disaster waiting to happen.
The Gold Standard mentalité constrained the mindset of the policy makers
and ‘shaped their notions of the possible’. Under the regime of the Gold
Standard, countries are prevented from devaluing their currencies to stimulate
exports, and expansionary monetary policies on a unilateral basis are also
ruled out because they would undermine the stability of a country’s exchange
rate. Unless the governments of Gold Standard countries could organize a
coordinated reflation, the only option for countries experiencing a drain on
their gold reserves was monetary contraction and deflation. But as Eichengreen
(1992a) points out, political disputes, the rise of protectionism, and incompatible
conceptual frameworks proved to be an ‘insurmountable barrier’ to
international cooperation. And so the recession, which began in 1929, was
converted into the Great Depression by the universal adoption of perverse
policies designed to maintain and preserve the Gold Standard. As Bernanke
and Carey (1996) argue, by taking into account the impact on economic
policy of a ‘structurally flawed and poorly managed international gold standard’,
economists can at last explain the ‘aggregate demand puzzle of the
Depression’, that is, why so many countries experienced a simultaneous
decline in aggregate demand. It was the economic policy actions of the gold
bloc countries that accentuated rather than alleviated the worldwide slump in
economic activity. Incredibly, in the midst of the Great Depression, central
bankers were still worried about inflation, the equivalent of ‘crying fire in
Noah’s flood’! In order to restore the US economy to health, President Herbert
Hoover was advised by Treasury Secretary Andrew Mellon to ‘liquidate
labour, liquidate stocks, liquidate the farmers, liquidate real estate … purge
the rottenness out of the system’ and as a result ‘people will work harder, and
live a more moral life’ (quoted by Eichengreen and Temin, 2000). Ultimately
these policies destroyed the very structure they were intended to preserve.
During the 1930s, one by one countries abandoned the Gold Standard and
devalued their currencies. Once they had shed their ‘golden fetters’, policy
makers were able to adopt expansionary monetary policies and reflate their
economies (the UK left the Gold Standard in the autumn of 1931, the USA in
March 1933, Germany in August/September 1931; and France in 1936).
Thus, while Friedman and Schwartz (1963) and others have rightly criticized
the Fed for not adopting more expansionary monetary policies in 1931,
Eichengreen (1992b) argues that, given the constraints imposed by the Gold
Standard, it is ‘hard to see what else could have been done by a central bank
committed to defending the fixed price of gold’. Research has shown that
economic recovery in the USA was largely the result of monetary expansion
(C. Romer, 1992) and also that those countries that were quickest to abandon
their golden fetters and adopt expansionary monetary policies were the first
to recover (Choudri and Kochin, 1980; Eichengreen and Sachs, 1985).
The Bernanke–Eichengreen–Temin hypothesis that the constraint imposed
by the Gold Standard prevented the use of expansionary monetary policies
has not gone unchallenged. Bordo et al. (2002a) argue that while this argument
is valid for small open economies, it does not apply to the USA, which
‘held massive gold reserves’ and was ‘not constrained from using expansionary
policy to offset banking panics’. Unfortunately, by the time the more
stable democracies had abandoned their ‘golden fetters’ and begun to recover,
the desperate economic conditions in Germany had helped to facilitate
Hitler’s rise to power. Thus, it can be argued that the most catastrophic result
of the disastrous choices made by economic policy makers during the interwar
period was the slaughter of humanity witnessed during 1939–45
(Eichengreen and Temin, 2002).
The Great Depression was the most significant economic catastrophe of
modern times to affect capitalist market economies and even today most
economists regard the 1930s worldwide slump, and the consequences of that
catastrophe, as one, if not the most important single macroeconomic event of
the twentieth century. The political and economic significance of this event is
reflected in the continuous outpouring of research on this traumatic historical
event (see Temin, 1976, 1989; Bernanke, 1983, 1995, 2000; Eichengreen,
1992a; 1992b; C. Romer, 1992, 1993; Bordo et al., 1998; Hall and Ferguson,
1998; Wheeler, 1998; Krugman, 1999; Cole and Ohanian, 1999, 2002a;
Prescott, 1999; James, 2001). It is easy to see why the interwar period in
general, and the Great Depression in particular, continue to exert such an
attraction to economists and economic historians:
1. the events of this period contributed significantly to the outbreak of the
Second World War which changed the political and economic world
forever;
2. the Great Depression was by far the most severe economic downturn
experienced by the world’s industrialized capitalist economies in the
twentieth century and the nature of the causes and consequences of the
worldwide slump in economic activity are still hotly debated;
3. it is generally recognized that the Great Depression gave Keynes (1936)
the necessary impetus to write the General Theory, a book that marks the
birth of macroeconomics. According to Skidelsky (1996a), ‘the General
Theory could not have been published ten years earlier. That particular
indictment of classical economics and, indeed, of the way the economy
behaved needed the great slump to crystallise it’;
4. the Great Depression is frequently used by macroeconomists to test their
models of aggregate fluctuations, while the whole interwar period provides
an invaluable data set for macroeconomic researchers;
5. there are always some commentators who periodically ask the question
‘could such an event ever happen again?’;
6. finally, after the 1930s experience the role of government in all market
economies increased considerably, leading to a fundamental and lasting
change in the relationship between the government and the private sector.
As a result, economic institutions at the end of the twentieth century
were very different from those in place in 1929. It is therefore with
considerable justification that Bordo et al. (1998) describe the Great
Depression as the ‘defining moment’ in the development of the US
economy during the twentieth century. In the macroeconomic sphere the
modern approach to stabilization policy evolved out of the experience of
the ‘great contraction’ of the 1930s (DeLong, 1996, 1998).
Economists have generally concluded that the proximate causes of the
Great Depression involved the interaction of several factors leading to a
drastic decline in aggregate demand (see Fackler and Parker, 1994; Snowdon
and Vane 1999b; Sandilands, 2002). The data in Table 2.1 reveal convincing
evidence of a huge aggregate demand shock given the strong procyclical
movement of the price level, that is, the price level falling as GDP declines.
Note also the dramatic increase in unemployment.
Bernanke and Carey’s data also show that in the great majority of countries
there was a countercyclical movement of the real wage. This pattern would
emerge in response to an aggregate demand shock in countries where price
deflation exceeded nominal wage deflation. Hence the evidence ‘for a nonvertical
aggregate supply curve in the Depression era is strong’ (Bernanke
and Carey, 1996). In Figure 2.7 we illustrate the situation for the US economy
in the period 1929–33 using the familiar AD–AS framework. The dramatic
decline in aggregate demand is shown by the leftward shift of the AD curve
during this period. Note that a combination of a falling price level and GDP
could not arise from a negative supply shock (leftward shift of the AS curves)
which would reduce GDP and raise the price level.
In the debate relating to the causes of the Great Depression in the USA five
main hypotheses have been put forward, the first four of which focus on the
causes of the dramatic decline in aggregate demand:
1. The non-monetary/non-financial hypothesis. Here the focus is on the
impact of the decline in consumer and investment spending as well as the
adverse effect on exports of the Smoot–Hawley Tariff introduced in 1930
(see Temin, 1976; C. Romer, 1990; Crucini and Kahn, 1996); in chapter
22 of the General Theory, Keynes argued that ‘the trade cycle is best
regarded as being occasioned by a cyclical change in the marginal
efficiency of capital, though complicated and often aggravated by associated
changes in other significant short-period variables of the economic
system’, thus the ‘predominant’ determination of slumps is a ‘sudden
collapse in the marginal efficiency of capital’.
2. The monetary hypothesis of Friedman and Schwartz (1963) attributes the
huge decline in GDP mainly to an unprecedented decline in the nominal
money supply, especially following the succession of bank failures beginning
in 1930, which the Fed failed to counter by using expansionary
monetary policies. This prevented the deflation of prices from increasing
the real money supply which via the ‘Keynes effect’ would have acted as
a stabilizing mechanism on aggregate demand. An alternative monetary
hypothesis, initially put forward by Fisher (1933b), focuses on the impact
of the debt-deflation process on the solvency of the banking system.
3. The non-monetary/financial hypothesis associated in particular with the
seminal paper of Bernanke (1983). Bernanke’s credit view takes the
Fisher debt-deflation story as its starting point. Because many banks
failed during the slump, this led to a breakdown in the financial system
and with it the network of knowledge and information that banks possess
about existing and potential customers. Many borrowers were thus denied
available credit even though their financial credentials were sound
(see also Bernanke and James, 1991).
4. The Bernanke–Eichengreen–Temin Gold Standard hypothesis. In looking
for what made the depression a ‘Great’ international event it is necessary
to look beyond the domestic mechanisms at work within the USA. ‘The
Great Depression did not begin in 1929. The chickens that came home to
roost following the Wall Street crash had been hatching for many years.
An adequate analysis must place the post-1929 Depression in the context
of the economic developments preceding it’ (Eichengreen, 1992a).
5. The non-monetary neoclassical real business cycle hypothesis. This very
recent (and very controversial) contribution is associated in particular
with the work of Cole and Ohanian (1999, 2002a) and Prescott (1999,
2002). This approach highlights the impact of real shocks to the economy
arising from ‘changes in economic institutions that lowered the normal
or steady state market hours per person over 16’ (Prescott, 1999; see also
Chapter 6).
With respect to those explanations that emphasize the decline in aggregate
demand, much of the recent research on the Great Depression has moved
away from the traditional emphasis placed on events within the USA and
focuses instead on the international monetary system operating during the
interwar period. Because the Great Depression was such an enormous international
macroeconomic event it requires an explanation that can account for
the international transmission of the depression worldwide. According to
Bernanke (1995), ‘substantial progress’ has been made towards understanding
the causes of the Great Depression and much research during the last 20
years has concentrated on the operation of the international Gold Standard
during the period after its restoration in the 1920s (see Choudri and Kochin,
1980; Eichengreen and Sachs, 1985; Eichengreen, 1992a, 1992b; Eichengreen
and Temin, 2000, 2002; Hamilton, 1988; Temin, 1989, 1993; Bernanke,
1993, 1995, 2000; Bernanke and James, 1991; Bernanke and Carey, 1996;
James, 2001).
The heyday of the Gold Standard was in the 40-year period before the First
World War. The balance of payments equilibrating mechanism operated via
what used to be known as the ‘price specie flow mechanism’. Deficit countries
would experience an outflow of gold while surplus countries would
receive gold inflows. Since a country’s money supply was linked to the
supply of gold, deficit countries would experience a deflation of prices as the
quantity of money declined while surplus countries would experience inflation.
This process would make the exports of the deficit country more
competitive and vice versa, thus restoring equilibrium to the international
payments imbalances. These were the ‘rules of the game’. The whole mechanism
was underpinned by a belief in the classical quantity theory of money
and the assumption that markets would clear quickly enough to restore full
employment following a deflationary impulse. This system worked reasonably
well before the First World War. However, the First World War created
huge imbalances in the pattern of international settlements that continued to
undermine the international economic system throughout the 1920s. In particular
the war ‘transformed the United States from a net foreign debtor to a
creditor nation’ and ‘unleashed a westward flow of reparations and war-debt
repayments … the stability of the inter-war gold standard itself, therefore,
hinged on the continued willingness of the United States to recycle its balance
of payments surpluses’ (Eichengreen, 1992a).
To both Temin (1989) and Eichengreen the war represented a huge shock
to the Gold Standard and the attempt to restore the system at the old pre-war
Keynes v. the ‘old’ classical model 81
parities during the 1920s was doomed to disaster. In 1928, in response to
fears that the US economy was overheating, the Fed tightened monetary
policy and the USA reduced its flow of lending to Europe and Latin America.
As central banks began to experience a loss of reserves due to payments
deficits, they responded in line with the requirements of the Gold Standard
and also tightened their monetary policies. And so the deflationary process
was already well under way at the international level by the summer of 1929,
and well before the stock market crashed so dramatically in October.
Eichengreen and Temin (2000) argue that once the international economic
downturn was under way it was the ‘ideology, mentalité and rhetoric of the
gold standard that led policy makers to take actions that only accentuated
economic distress in the 1930s. Central bankers continued to kick the world
economy while it was down until it lost consciousness.’ Thus the ultimate
cause of the Great Depression was the strains that the First World War
imposed on the Gold Standard, followed by its reintroduction in a very
different world during the 1920s. No longer would it be relatively easy, as it
had been before 1914, to engineer wage cuts via deflation and unemployment
in order to restore international competitiveness. The internal politics of
capitalist economies had been transformed by the war, and the working
classes were increasingly hostile to the use of monetary policies that were
geared towards maintenance of the exchange rate rather than giving greater
priority to employment targets. Hence the recession, which visibly began in
1929, was a disaster waiting to happen.
The Gold Standard mentalité constrained the mindset of the policy makers
and ‘shaped their notions of the possible’. Under the regime of the Gold
Standard, countries are prevented from devaluing their currencies to stimulate
exports, and expansionary monetary policies on a unilateral basis are also
ruled out because they would undermine the stability of a country’s exchange
rate. Unless the governments of Gold Standard countries could organize a
coordinated reflation, the only option for countries experiencing a drain on
their gold reserves was monetary contraction and deflation. But as Eichengreen
(1992a) points out, political disputes, the rise of protectionism, and incompatible
conceptual frameworks proved to be an ‘insurmountable barrier’ to
international cooperation. And so the recession, which began in 1929, was
converted into the Great Depression by the universal adoption of perverse
policies designed to maintain and preserve the Gold Standard. As Bernanke
and Carey (1996) argue, by taking into account the impact on economic
policy of a ‘structurally flawed and poorly managed international gold standard’,
economists can at last explain the ‘aggregate demand puzzle of the
Depression’, that is, why so many countries experienced a simultaneous
decline in aggregate demand. It was the economic policy actions of the gold
bloc countries that accentuated rather than alleviated the worldwide slump in
economic activity. Incredibly, in the midst of the Great Depression, central
bankers were still worried about inflation, the equivalent of ‘crying fire in
Noah’s flood’! In order to restore the US economy to health, President Herbert
Hoover was advised by Treasury Secretary Andrew Mellon to ‘liquidate
labour, liquidate stocks, liquidate the farmers, liquidate real estate … purge
the rottenness out of the system’ and as a result ‘people will work harder, and
live a more moral life’ (quoted by Eichengreen and Temin, 2000). Ultimately
these policies destroyed the very structure they were intended to preserve.
During the 1930s, one by one countries abandoned the Gold Standard and
devalued their currencies. Once they had shed their ‘golden fetters’, policy
makers were able to adopt expansionary monetary policies and reflate their
economies (the UK left the Gold Standard in the autumn of 1931, the USA in
March 1933, Germany in August/September 1931; and France in 1936).
Thus, while Friedman and Schwartz (1963) and others have rightly criticized
the Fed for not adopting more expansionary monetary policies in 1931,
Eichengreen (1992b) argues that, given the constraints imposed by the Gold
Standard, it is ‘hard to see what else could have been done by a central bank
committed to defending the fixed price of gold’. Research has shown that
economic recovery in the USA was largely the result of monetary expansion
(C. Romer, 1992) and also that those countries that were quickest to abandon
their golden fetters and adopt expansionary monetary policies were the first
to recover (Choudri and Kochin, 1980; Eichengreen and Sachs, 1985).
The Bernanke–Eichengreen–Temin hypothesis that the constraint imposed
by the Gold Standard prevented the use of expansionary monetary policies
has not gone unchallenged. Bordo et al. (2002a) argue that while this argument
is valid for small open economies, it does not apply to the USA, which
‘held massive gold reserves’ and was ‘not constrained from using expansionary
policy to offset banking panics’. Unfortunately, by the time the more
stable democracies had abandoned their ‘golden fetters’ and begun to recover,
the desperate economic conditions in Germany had helped to facilitate
Hitler’s rise to power. Thus, it can be argued that the most catastrophic result
of the disastrous choices made by economic policy makers during the interwar
period was the slaughter of humanity witnessed during 1939–45
(Eichengreen and Temin, 2002).
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