HALL OF MIRRORS

A distinguished economic historian examines the remarkable parallels and the significant differences between the Great Depression of the 1930s and the Great Recession of 2008-2009.

Faced with the greatest economic disaster in 80 years, policymakers of the waning George W. Bush and the incoming Barack Obama administrations quite understandably looked to the last great crisis for lessons on how to cope. According to Eichengreen (Economics and Political Science/Univ. of California; Exorbitant Privilege: The Rise and Fall of the Dollar and the Failure of the International Monetary System, 2011, etc.), they got a lot right and, thus, avoided another full-blown depression, but by failing to do more once the emergency passed, they weakened the recovery and virtually ensured another crisis at some point. The author’s dual-track narrative alternates between the two historic episodes, the run-up, the breakdown, the response and the denouement. A powerful plus ça change vibe courses through his comparison, as he discusses each era’s major players and events—e.g., the grifters (Charles Ponzi vs. Bernie Madoff), the reparative legislation (Glass-Steagall Act vs. Dodd-Frank), the economic advisers (FDR’s brains trust vs. Obama’s team), the institutional collapses (Union Guardian Trust vs. Lehman Brothers) the bubbles (the Florida land boom vs. the subprime mortgage loans), the panicked electorate and the nervous politicians. Eichengreen leavens his wide-angle treatment of complex issues—he devotes almost equal time to economic developments in Europe during each era—with capsule portraits of the major players, with becoming modesty about his own assessments (notwithstanding his obvious intellect) and even with occasional humor. He reminds us, too, that economic analyses of causes or cures are insufficient, that there’s a human dimension to any economic crisis and that implementing policy is always a matter of politics. A helpful 25-page dramatis personae concludes the volume.

A formidable challenge for general readers but a must for specialists and those interested in how the past informs the present and how the present alters our understanding of the past.