The World in Depression by Kindleberger Essay

                         Title: The World in Depression by Kindleberger

Introduction

      In this book review we will attempt to provide critical commentary on the author’s thesis and major arguments, the organization and style of the book, the scholarly apparatus, and the author’s values and assumptions.  This book will also attempt to evaluate the strengths and weaknesses of the analysis made and on how arguments are supported with evidence

Analysis and Discussion

        The book as could be inferred from the table of contents included list table and figures to support the author’s conclusion.  It talked about what the world economy had done after the First World War in terms of recovery, the economic boom that was experienced, the Agricultural Depression, the 1929 Stock Market Crash, and the Slide to the Abyss and significant events in 1931.  The book proceeded to discuss about more deflation, the World Economic Conference, the Beginning of Recovery and the Gold Bloc Yields.  At the last part the author focused on the 1937 Recession, Rearmament in a Disintegrating World Economy and he finally ended with an explanation of the 1929 Depression.[1]

       The thesis of author was in support to the author’s original conclusion that the depression was international in origin rather than domestic.  He maintained that the 1929 depression “was intimately bound up commodity prices and exchange rates, factors which both Keynesians and monetarists ignore.[2][3]” He posited the depression “was so wide, so long, and so deep because there was not international lender of last resort to halt the financial liquidity squeeze and to prevent it from rolling from one country to another.”

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

        He supported his thesis with tables and exhibits in the book and by his exposition of the failure of other economists’ explanation to the causes of the depression.  He explained

“That the reason for the Depression was a lack of a stable international economic structure.  In other words, the financial structure we enjoy today simply did not exist at the time.

       His work described the financial world using a disastrous gold standard which he found to be a disaster.  He noted that Great Britain assumed significant role in the gold standard disaster.  But then depression hit and the British quickly discarded the gold standard.  In the US, Hoover rigidly stayed with the gold standard but Roosevelt then discarded it once his presidency set in, and many believe a mild recovery was felt in the US at that time.  This could be testified to that in early 1934, the recovery was felt, and at that time FDR had assumed the presidency in the early part of 1933.  Then this was followed by an economic expansion which may call mild 1935 and 1936, few years after.  Please not that the recovery was mild and the effect of depression was still there until 1939.

      This would bring readers therefore to appreciate that a full recovery from the effects of the Great Depression came only after the enormous spending of World War II.  As to the reason of taking it so long, the financial structure was not in place to affect strongly a force on the global financial system.  As stated earlier Great Britain had lost the role leadership role and there was proof that United States was yet reluctant to assume that expected leadership to put the direction of the world economy.  What happened was that the nations resorted to their own solution to the problem by turning inward

      It is posited by the Kindleberger that seeing  the weakness of  international financial system and needed some country or major economic force to force things as the free economy was not enough then or too unsafe.

     The economic activity pushed the economy forward for World War II via deficit spending in the US and from there we could see American economy pulling itself out of the depression.  It could be remembered that the US Congress was disinclined to take such dramatic steps before that, and that FDR was not fully convinced on Keynesian economics.  Being then a balanced budget, laissez-faire man before the adversity brought about by the Great Depression, result would confirmed that Roosevelt ended the degenerating or weakening effect of the depression with the mild recovery only.  But many would realize that such move failed to bring about the much required stronger measures.

       In relation to Keynes General Theory which only came out in the mid-1930, as it was yet unknown, it could be difficult to believed Friedman as he would not have develop his monetary theory at that point in time.  So this was seen only after the Great Depression had ended.

        Particularly noting is Kindleberger’s explanation of the last chapter where the author discharges of five functions by a world stabilizer, referring to the US.  These functions include: (1) maintaining a relatively open market for distress goods; (2) providing countercyclical, or at least stable, long-term lending; (3) policing a relatively stable system of exchange rates; (4) ensuring the coordination of macroeconomic policies; (5) acting as a lender of last resort by discounting or otherwise providing liquidity in financial crisis.  Kindleberger argues that a single country that assumes responsibility for the system will carry out these tasks.  Kindleberger further maintains that the depression resulted from the considerable latent instability in the system and the absence of a stabilizer.[4]

      The book I believed is organized chronologically as indicated in the table of contents and in the manner he developed his ideas. The author approached the subject from the point of view of an economist integrated into world history, hence it is fitting to classify as a world economic history.

      To understand the author and his underlying values and assumptions, it could be stated that Charles Kindleberger, is an economist as evidence with his earliest book entitled International Short-Term Capital Movements (1937).  In the course of his life, he had his record of work for several American institutions, including the Federal Reserve Bank of New York for three years, ending in 1939, the Bank of International Settlements in Switzerland about 2 years ending in 1940, and the Board of Governors of the Federal Reserve System for about 2 to 3 years ending 1942.[5]

           He served as acting Director of the Office of Economic Security Policy for about two to three year ending in 1947 and as counselor for the European Recovery Program for about two years ending in 1948).  He can be called an economic historian with his reliance on narrative exposition and knowledge of history in his works and an internationalist and he was one of those who worked for the development and launching of the famous Marshall Plan.

           The book is well written as I could see the orderly connection of his analysis and as seen in the structure of his work.

      As to any additional understanding, I would say that it added to my stock of knowledge about status of the world economy that something must happened in the past as a result of present events.  I enjoyed the book of the benefit of understanding in studying the field of economic in a broader perspective.

        I have the book, of Galbraith entitled The Affluent Society[6]  and the work of the Kindleberger did show close relevance of the conclusions made by Galbraight.  The latter’s book which outlined his view that an ingredient of future success in the World War II, the US should make large investments including those of highways and education with funds coming from general taxation.  The ideas of the two seemed to require making more investments as these are expansionary that could benefit many.

Conclusion:

              Present events have deep connections with the past.  An understanding of the past states of the US economy brings a fresh outlook of what is happening today.  Only by having a good analysis of what happened in past could prevent the present economy to may be prevent another depression as what happened from1929-1939.  Understanding the experience that happened brings also much light as to how to bring the world more economically sound for the present generation.  If the world then needed America to as stabilizer, after the war, there is basis to the present feeling that a sneeze in the American economy affect the whole world.

Works Cited:

Galbraith, the Affluent Society, Houghton Mifflin Company (1998) New York, USA,   1958

Kindleberger, The World in Depression, 1929-1939, Revised and Enlarged edition         (History of the World Economy in the Twentieth Century), University of California Press; Rev Enl edition, 1986

Wikipedia, Kindleberger, 2007 {www document}URL             http://en.wikipedia.org/wiki/Charles_P._Kindleberger , Accessed April 5,2007

[1] Kindleberger, The World in Depression, 1929-1939
[2] Ibid
[3] Ibid
[4] Kindleberger, The World in Depression, 1929-1939, paraphrasing made
[5] Wikipedia, 2007, Kindleberger, paraphrasing made
[6] Galbraith, The Affluent,