Political Factors of the Great Depression

Charles Kindleberger, in The World in Depression: 1929-1939, has essentially argued that there is no single explanatory cause for the Great Depression. However, he has stressed the fact that the reason the 1929 downturn was so wide, so deep, and so long was because the international economic system was rendered unstable due to British inability and U.S. unwillingness to assume responsibility for stabilizing it (Kindleberger, 1973, pp. 291-308). Thus, Kindleberger introduces into the cauldron of conflicting interpretations of the causes of the Great Depression the international political dimension: the appropriate leadership role of a great nation in a time of economic crisis.

The analysis which follows will first briefly present the historical economic evidence Kindleberger and others marshall to support this perspective. It will then attempt to abstract from this economic history the standards of political leadership which Kindleberger believes are necessary to avert economic catastrophe in a time of international economic instability. Finally, this inquiry will evaluate whether Kindleberger's assessment is an adequate understanding of the causes and duration of the Great Depression.

In the 19th century the American economy had borrowed extensively from Europe and had remained a net borrower until 1914. But by 1918, as Kindleberger points

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de stability but was itself a source of instability which quickly broke down during the depression. To follow Kindleberger's line of reasoning (pp. 128-144), Britain's economic weakness and U.S. hesitancy to use the full force of its growing economic power to bolster the international economy were important sources for the weakness of the interwar gold standard. Gold standard restoration was then destroyed by the stock market crash and the gathering international depression. The German and Austrian economies were particularly vulnerable to financial crisis because of the size of their short-term foreign obligations. The depression led to a drying-up of international capital and a decline in prices, production, and income that placed bands and governments in an increasingly precarious position, with the danger of a cumulative financial panic becoming more likely. The failure in May of 1931 of Austria's largest commercial bank that had sizable short-term debts to Britain, the U.S., and Germany made this threat clear. What was now in place was a chain of deposit withdrawals, the beginnings of panicky runs on banks and moratoriums that would spread from Austria and Germany to Britain and the U.S. Kindleberger's Standards for Po
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Approximate Word count = 3140
Approximate Pages = 13 (250 words per page)

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