Owning a car will soon be a thing of the past | John Harris

As cities clamp down on vehicle use, technology is putting a utopian vision in reach, writes Guardian columnist John Harris

If ours is an age in which no end of institutions and conventions are being disrupted, it shouldnt come as a surprise that one of the most basic features of everyday life seems under serious threat. If you are fortunate enough to live in a house with a drive, look outside and you will probably see it: that four-wheeled metal box, which may well be equipped with every technological innovation imaginable, but now shows distinct signs of obsolescence.

To put it another way: after a century in which the car has sat at the heart of industrial civilisation, the age of the automobile of mass vehicle ownership, and the idea (in the western world at least) that life is not complete without your own set of wheels looks to be drawing to a close. Top Gear is a dead duck. No one writes pop songs about Ferraris any more. The stereotypical boy racer appears a hopeless throwback. And in our cities, the use of cars is being overtaken by altogether greener, more liberating possibilities.

The sale of diesel and petrol cars is to be outlawed in the UK from 2040. But only 10 days ago Oxford announced that it is set to be the first British city to ban all petrol and diesel cars and vans from a handful of central streets by 2020, extending to the entire urban centre 1o years later. Paris will ban all non-electric cars by 2030, and is now in the habit of announcing car-free days on which drivers have to stay out of its historic heart. In the French city of Lyon, car numbers have fallen by 20% since 2005, and the authorities have their sights set on another drop of the same magnitude. London, meanwhile, has shredded the idea that rising prosperity always triggers rising car use, and seen a 25% fall in the share of journeys made by car since 1990.

Last week, highlighting the increasingly likely arrival of driverless vehicles, General Motors announced that it will soon begin testing autonomous cars in the challenging conditions of New York City, apparently the latest step in the companys rapid and handsomely funded move towards building a new fleet of self-driving taxis. Earlier this year, forecasters at Bank of America tentatively claimed that the US may have reached peak car, acknowledging that transportation is costly and inefficient, making the sector ripe for disruption. Their focus was on ride-sharing services, car-pool apps and the collective use of bikes: what they were predicting had the sense of a reality that is already plain to see.

Sinitta laments having a boyfriend who cares more about his Ferrari, in her 1987 hit GTO

There are caveats to all this, of course. Although cities in the worlds rising economies are just as fond of car-sharing and bike use as anywhere in the west, car ownership in India and China is rising vertiginously. And as one of the 25,000 residents of a West Country town that is expanding fast and now prone to gridlock, I can confirm that in swaths of this country, the idea that we will soon surrender our vehicles can easily look rather far-fetched. The recent farcical launch by Great Western Railway of its new intercity trains (plagued by technical problems, and now taken out of service) highlights how our public transport remains woeful. Even if it brings regular twinges of guilt, there is currently little alternative to owning a car, and using it every day.

But deep social trends do point in another direction. In 1994 48% of 17- to 20-year-olds and 75% of 21- to 29-year-olds had driving licences. According to the National Travel Survey, by 2016 these figures had dropped respectively to 31% and 66%. Some of this, of course, is down to the deep financial insecurities experienced by millennials, and the stupid costs of car insurance. But in the context of technological change, it looks like it might have just as much to do with the likely shape of the future. If you buy most of your stuff online, the need to drive to a supermarket or shopping centre dwindles to nothing; if you are in daily touch with distant friends and family online, might a time-consuming visit to see them feel that bit less urgent? Meanwhile, at the other end of the demographic spectrum, an ageing population will soon have equally profound consequences for levels of car ownership, and the demand for alternatives.

Many huge social changes creep up on us, and the fact that politicians tend to avert their eyes from incipient revolutions often serves to keep them out of public discourse. But this one is surely huge. I am from a generation for whom the promise of your own car represented a kind of personal utopia. Go-faster stripes were signifiers for aspiration; Margaret Thatchers reputed claim that a man who, beyond the age of 26, finds himself on a bus can count himself as a failure chimed with the newly discovered joys of conspicuous consumption. Now, even if some of this lingers on, it does not feel nearly as culturally powerful. The rising global emergency focused on fatal levels of air pollution confirms the motor industrys dire environmental impacts; and concerns about the sub-prime loans that now define a huge swath of the car market suggest that the supposed joys of driving might be unsustainable in plenty of other ways.

Traffic
Traffic in Oxford Street, central London, in 1965. Photograph: Powell/Getty Images

The birth pangs of something better are inevitably messy, as evidenced by the stink currently surrounding Uber an archetypal example of those modern disruptors who point to the future, while obscuring their visions in a great cloud of arrogance. But whatever Ubers failings (and it has to be said: in a city as diverse as London, the idea of traditional black cabs, mostly driven by white British men, representing a comparatively progressive option seems flimsy, to say the least), its innovations are hardly going to be put back in their box. In the US, the average cost per mile of the UberX service is put at around $1.50; In New York City, car ownership works out at around $3 a mile. As and when Uber and Lyft and whatever ride-hailing services either join or displace them go driverless in cities and suburbs across the planet, the financial maths will become unanswerable.

At a time of all-pervading gloom, make no mistake: this is good news. At the heart of it all are amazingly emancipatory prospects: mobility no longer dependent on a huge cash outlay and on the organised extortion of motor insurance; everybody, regardless of age or disability, able to access much the same transport. With the requisite political will, dwindling numbers of cars will bring opportunities to radically redesign urban areas. The environmental benefits will be self-evident. And as cities become more and more car-free, towns will cry out for their own changes. Neglected railway branch lines may well come back to life; the hacking-down of bus services that came with austerity will have to be reversed. With any luck, the mundane term public transport will take on a new vitality.

Is this utopian? No more, surely, than the dreams of the people whose visions of a car outside very house and busy highways eventually came true, with no end of grim consequences. The remains of the old must be decently laid away; the path of the new prepared, said Henry Ford. How ironic that the same wisdom now applies to the four-wheeled dreams he created, and their final journey to the scrapyard.

John Harris is a Guardian columnist

Read more: https://www.theguardian.com/commentisfree/2017/oct/23/owning-car-thing-of-the-past-cities-utopian-vision

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‘186m needless emails’: NHS-wide test message (and replies) crash system

Some users prevented from accessing email system after IT contractor at Croydon NHS messages all 1.2 million employees

Sending an email to everyone in the company is usually a guaranteed way of making yourself unpopular, but the potential for annoyance is even greater if you have 1.2 million colleagues.

On Monday, NHS staff complained on Twitter about a test email sent by an IT contractor at Croydon NHS to everyone in the organisation, as well as replies to all in response to the message, leading to claims that the entire email system had crashed.

One health service statistician estimated that at least 186m emails, including replies to all asking to be taken off the distribution list, had been sent, clogging up peoples inboxes. NHS digital said 840,000 accounts were affected.

Gavin (@68_gavin)

Another waste of a working day due to some pillick in #nhsmail sending email to entire directory, unable to connect and do my job #epicfail

November 14, 2016

James Andrews (@aptaim)

Hmmmm… wonder if this is why I can’t log in to #NHSmail at the moment ?! https://t.co/wBvuREsB6X

November 14, 2016

Project iHypE (@PIhype)

If you’re trying to get in touch with us today, please be patient, it seems #NHSmail has gone down for the time being. We’ll reply ASAP. A

November 14, 2016

Colin McDonnell (@Malignanthero)

Slow handclap for the individual that sent a test email to the entire NHSMail user base, and bravo to those that “replied to all”… pic.twitter.com/zkg5uG7t2M

November 14, 2016

Graham Hyde (@GrahamHyde)

#nhsmail 1.2 million people have received approx 151 emails in error this morning. That’s 186 million needless emails so far today.

November 14, 2016

A message to NHSmail users described the global email as a high severity service incident. It said: An issue with a distribution list has meant that several test emails have been widely received by users. This has been exacerbated by recipients replying in response and increasing the volume of emails associated with the list.

The impact of this issue has meant that some users are unable to access OWA [Outlook web access] due to the volume of emails being circulated. The distribution list has been removed and associated emails are being traced and cleared. In the meantime, users will experience slow performance with OWA and email delivery delays from internal and external sources to nhs.net addresses.

In a statement dictated over the phone due to the problems with the email system, an NHS Digital spokeswoman said: Some users have experienced short delays in the NHSmail system this morning. Action has been taken to resolve this issue.

A number of email accounts have been operating slower than normal due to an NHSmail user setting up an email distribution list which inadvertently included everyone on the NHSmail system. As soon as we became aware of the issue, we deleted the distribution list so that no one else could respond to it. We anticipate that the issue will be rectified very soon.

Complaints to the NHSmail helpdesk have trebled since the email system was introduced in May. The secure email service is approved by the Department of Health for sharing patient-identifiable and sensitive information.

Read more: https://www.theguardian.com/society/2016/nov/14/186m-needless-emails-nhs-wide-test-message-and-replies-to-all-crash-system

What the 21st century can learn from the 1929 crash | Larry Elliott

It was the biggest setback to the global economy since the dawn of the modern industrial age. But did the worlds reaction worsen the effects of the 1929 Crash? And have we learned from those mistakes?

As the summer of 1929 drew to a close, the celebrated Yale university economist Irving Fisher took to the pages of the New York Times to opine about Wall Street. Share prices had been rising all year; investors had been speculating with borrowed money on the assumption that the good times would continue. It was the bull market of all time, and those taking a punt wanted reassurance that their money was safe.

Fisher provided it for them, predicting confidently: Stock markets have reached what looks like a permanently high plateau. On that day, the Wall Street Crash of October 1929 was less than two months away. It was the worst share tip in history. Nothing else comes close.

The crisis broke on Thursday 24 October, when the market dropped by 11%. Black Thursday was followed by a 13% fall on Black Monday and a further 12% tumble on Black Tuesday. By early November, Fisher was ruined and the stock market was in a downward spiral that would only bottom out in June 1932, at which point companies quoted on the New York stock exchange had lost 90% of their value and the world had changed utterly.


A
A crowd of speculators gather in front of the New York stock exchange on Black Thursday, 24 October 1929. Photograph: Keystone-France/Gamma-Keystone via Getty Images

The Great Crash was followed by the Great Depression, the biggest setback to the global economy since the dawn of the modern industrial age in the middle of the 18th century. Within three years of Fishers ill-judged prediction, a quarter of Americas working population was unemployed and desperate. As the economist JK Galbraith put it: Some people were hungry in 1930 and 1931 and 1932. Others were tortured by the fear that they might go hungry.

Banks that werent failing were foreclosing on debtors. There was no welfare state to cushion the fall for those such as John Steinbecks Okies farmers caught between rising debts and crashing commodity prices. One estimate suggests 34 million Americans had no income at all. By mid-1932, the do-nothing approach of Herbert Hoover was discredited and the Democrat Franklin Roosevelt was on course to become US president.

Across the Atlantic, Germany was suffering its second economic calamity in less than a decade. In 1923, the vindictive peace terms imposed by the Treaty of Versailles had helped to create the conditions for hyperinflation, when one dollar could be exchanged for 4.2 trillion marks, people carted wheelbarrows full of useless notes through the streets, and cigarettes were used as money. In 1932, a savage austerity programme left 6 million unemployed. Germany suffered as the pound fell and rival British exports became cheaper. More than 40% of Germanys industrial workers were idle and Nazi brownshirts were fighting communists for control of the streets. By 1932, the austerity policies of the German chancellor Heinrich Brning were discredited and Adolf Hitler was on course to replace him.

Timeline of turmoil

https://interactive.guim.co.uk/embed/article-embeds/1930stimeline/embed.html

It would be wrong to think nobody saw the crisis coming. Fishers prediction may well have been a riposte to a quite different (and remarkably accurate) prediction made by the investment adviser Roger Babson in early September 1929. Babson told the US National Business Conference that a crash was coming and that it would be a bad one. Factories will shut down, Babson predicted, men will be thrown out of work. Anticipating how the slump would feed on itself, he warned: The vicious cycle will get in and the result will be a serious business depression.

Cassandras are ignored until it is too late. And Babson, who had form as a pessimist, was duly ignored. The Dr Doom of the 2008 crisis, New York Universitys Nouriel Roubini, suffered the same fate.


Migrant
Migrant Mother, 1936, by Dorothea Lange. Photograph: GraphicaArtis/Getty Images

F Scott Fitzgerald described the Great Crash as the moment the jazz age dived to its death. It marked the passing of a first age of globalisation that had flourished in the decades before the first world war with free movements of capital, freedom and to a lesser extent goods. In the decade or so after the guns fell silent in 1918, policymakers had been trying to re-create what they saw as a golden period of liberalism. The Great Depression put paid to those plans, ushering in, instead, an era of isolationism, protectionism, aggressive nationalism and totalitarianism. There was no meaningful recovery until nations took up arms again in 1939.

In Britain, recovery was concentrated in the south of England and too weak to dent ingrained unemployment in the old industrial areas. The Jarrow march for jobs took place in 1936, seven years after the start of the crisis. It was a similar story in the US, where a recovery during Roosevelts first presidential term ended in a second mini-slump in 1937. Sir Winston Churchill, who lost a packet in the Crash, described the period 1914 to 1945 as the second 30 years war.

Only one other financial meltdown can compare to the Wall Street Crash for the length of its impact: the one that hit a climax with the bankruptcy of Lehman Brothers in September 2008. Without the Great Depression, there would have been no New Deal and no Keynesian revolution in economics. Roosevelt might never have progressed beyond the New York governors mansion in Albany. Hitler, whose political star was on the wane by the late 1920s, would have been a historical footnote .

Similarly, without the long-lingering effects of the 2008 crash, there would have been no Brexit, Donald Trump would still be a New York City builder and Europe would not be quaking at the possibility of Marine Le Pen replacing Franois Hollande as French president.

Not since the 1930s have there been such acute fears of a populist backlash against the prevailing orthodoxy. As then, a prolonged period of poor economic performance has led to a political reaction that looks like feeding back into a desire for a different economic approach. The early 30s share with the mid-2010s a sense that the political establishment has lost the confidence of large numbers of voters, who have rejected business as usual and backed politicians they see as challenging the status quo.


Depression
Depression to Dust Bowl: a large cloud appears behind a truck travelling on Highway 59 in Colorado, May 1936. Photograph: PhotoQuest/Getty Images

Trump is not the first president to urge an America-first policy: Roosevelt was of a similar mind after he replaced Herbert Hoover in 1933. Nor is this the first time there has been such a wide gulf between Wall Street and the rest of the country. The loathing of the bankers in the 20s hardened into a desire for retribution in the 30s.

According to Lord Robert Skidelsky, biographer of John Maynard Keynes: We got into the Great Depression for the same reason as in 2008: there was a great pile of debt, there was gambling on margin on the stock market, there was over-inflation of assets, and interest rates were too high to support a full employment level of investment.

There are other similarities. The 20s had been good for owners of assets but not for workers. There had been a sharp increase in unemployment at the start of the decade and labour markets had not fully recovered by the time an even bigger slump began in 1929. But while employees saw their slice of the economic cake get smaller, for the rich and powerful, the Roaring Twenties were the best of times. In the US, the halving of the top rate of income tax to 32% meant more money for speculation in the stock and property markets. Share prices rose sixfold on Wall Street in the decade leading up to the Wall Street Crash.

Inequality was high and rising, and demand only maintained through a credit bubble. Unemployment between 1921 and 1929 averaged 8% in the US, 9% in Germany and 12% in Britain. Labour markets had never really recovered from a severe recession at the start of the 20s designed to stamp out a post-war inflationary boom.

Above all, in both periods global politics were in flux. From around 1890, the balance of power between the great European nations that had kept the peace for three quarters of a century after the battle of Waterloo in 1815 started to break down. The Ottoman and Austro-Hungarian empires were in decline before the first world war; the US, Germany and Russia were on the rise.


Brooklyn
Brooklyn Daily Eagle front page on Black Thursday. Photograph: Icon Communications/Getty

More importantly, Britain, which had been the linchpin of late 19th-century globalisation had been weakened by the first world war and was no longer able to provide the leadership role. America was not yet ready to take up the mantle.

Stephen King, senior economic adviser to HSBC and author of a forthcoming book on the crisis of globalisation, Grave New World, says: There are similarities between now and the 1920 and 1930s in the sense that you had a declining superpower. Britain was declining then and the US is potentially declining now.

King says that in the 20s, the idea of a world ruled by empires was crumbling. Eventually, the US did take on Britains role as the defender of western values, but not until the 40s, when it was pivotal in both defeating totalitarianism and in creating the economic and political institutions the United Nations, the International Monetary Fund, the World Bank that were designed to ensure the calamitous events of the 30s never happened again.

There are severe doubts about whether the US is able or willing to play the role it played in the second half of the 20th century, and thats worrisome because if the US is not playing it, who does? If nobody is prepared to play that role, the question is whether we are moving towards a more chaotic era.

Deflationary disaster

There are, of course, differences as well as similarities between the two epochs. At this years meeting of the World Economic Forum in Davos, Switzerland, held in the week of Trumps inauguration, members of the global business elite found reasons to be cheerful.

Some took comfort from technology: the idea that Facebook, Snapchat and Google have shrunk the world. Others said slapping tariffs on imported goods in an era of complex international supply chains would push up the cost of exports and make it unthinkable even for a country as big as the US to adopt a go-it-alone economic strategy. Roberto Azevdo, managing director of the World Trade Organisation said: The big difference between the financial crisis of 2008 and the early 1930s is that today we have multilateral trade rules, and in the 30s we didnt.

The biggest difference between the two crises, however, is that in the early 1930s blunders by central banks and finance ministries made matters a lot worse than they need have been. Not all stock market crashes morph into slumps, and one was avoided just about in the period after the collapse of Lehman Brothers.


A
A Hooverville collection of unemployed peoples shack dwellings in Seattle, Washington, in 1933. Photograph: AP

Early signs from data for industrial production and world trade in late 2008 showed declines akin to those during the first months of the Great Depression. Policymakers have been rightly castigated for being asleep at the wheel while the sub-prime mortgage crisis was gestating, but knowing some economic history helped when Lehman Brothers went bust. In the early 30s, central banks waited too long to cut interest rates and allowed deflation to set in. There was a policy of malign neglect towards the banks, which were allowed to go bust in droves. Faced with higher budget deficits caused by higher unemployment and slower growth, finance ministers made matters worse by raising taxes and cutting spending.

The response to the Crash, according to Adam Tooze in his book The Deluge, was deflationary policies were pursued everywhere. The question that critics have asked ever since is why the world was so eager to commit to this collective austerity. If Keynesian and monetarist economists can agree on one thing, it is the disastrous consequences of this deflationary consensus.

At the heart of this consensus was the gold standard, the strongly held belief that it should be possible to exchange pounds, dollars, marks or francs for gold at a fixed exchange rate. The system had its own automatic regulatory process: if a country lived beyond its means and ran a current account surplus, gold would flow out and would only return once policy had been tightened to reduce imports.

After concerted efforts by the Bank of England and the Treasury, Britain returned to the gold standard in 1925 at its pre-war parity of $4.86. This involved a rise in the exchange rate that made life more difficult for exporters.

What the policymakers failed to realise was that the world had moved on since the pre-1914 era. Despite being on the winning side, Britains economy was much weaker. Germanys economy had also suffered between 1914 and 1918, and was further hobbled by reparations. America, by contrast, was in a much stronger position.

This changing balance of power meant that restoring the pre-war regime was a long and painful process, and by the late 20s the strains of attempting to do so were starting to become unbearable in just the same way as the strains on the euro the closest modern equivalent to the gold standard have become evident since 2008.

Instead of easing off, policymakers in the early stages of the Great Depression thought the answer was to redouble their efforts. Peter Temin, an economic historian, compares central banks and finance ministries to the 18th-century doctors who treated Mozart with mercury: Not only were they singularly ineffective in curing the economic disease; they also killed the patient.

Skidelsky explains that in Britain, the so-called automatic stabilisers kicked in during the early stages of the crisis. Tax revenues fell because growth was weaker while spending on unemployment benefits rose. The public finances fell into the red.


Supporters
Supporters of the New Deal agency march through New York in protest at corporate layoffs, January 1937. Photograph: New York Times Co/Getty Images

Instead of welcoming the extra borrowing as a cushion against a deeper recession, the authorities took steps to balance the budget. Ramsay MacDonalds government set up the May committee to see what could be done about the deficit. Given the membership, heavily weighted in favour of businessmen, the outcome was never in doubt: sterling was under pressure and in order to maintain Britains gold standard parity, the May committee recommended cuts of 97m from the states 885m budget. Unemployment pay was to be cut by 30% in order to balance the budget within a year.

The severity of the cuts split the Labour government and prompted the formation of a national government led by MacDonald. Philip Snowden, the chancellor, said the alternative to the status quo was the Deluge. Financial editors were invited to the Treasury to be briefed on measures being taken to protect the pound, and when one asked whether Britain should or could stay on the gold standard, the Treasury mandarin Sir Warren Hastings rose to his feet and thundered: To suggest we should leave the gold standard is an affront not only to the national honour, but to the personal honour of every man or woman in the country.

The show of fiscal masochism failed to prevent fresh selling of the pound, and eventually the pressure became unbearable. In September 1931, Britain provided as big a shock to the rest of the world as it did on 23 June 2016, by coming off the gold standard.

The pound fell and the boost to UK exports was reinforced six months later when the coalition government announced a policy of imperial preference, the erection of tariff barriers around colonies and former colonies such as Australia and New Zealand.

Britain was not the first country to resort to protectionism. The now infamous Smoot-Hawley tariff had been announced in the US in 1930. But America had a recent history of protectionism it had built up its manufacturing strength behind a 40% tariff in the second half of the 19th century. Britain, as Tooze explains, had been in favour of free trade since the repeal of the corn laws in 1846.

Now it was responsible for initiating the death spiral of protectionism and beggar-thy-neighbour currency wars that would tear the global economy apart.


An
An elderly woman sits by a shop window full of adverts for cigarettes, 1935. Photograph: General Photographic Agency/Getty Images

Britains 1931 exit from the gold standard meant it secured first-mover advantage over its main rivals. For Germany, the pain was especially severe, since the countrys mountain of foreign debt ruled out devaluation and left Chancellor Brnings government with the choice between default and deflation. Brning settled for another round of austerity, not realising that for voters there was a third choice: a party that insisted that national solutions were the answer to a broken international system.

The reason borrowing costs were slashed in 2008 is that central bankers knew their history. Ben Bernanke, then chairman of Americas Federal Reserve, was a student of the Great Depression and fully acknowledged that his institution could not afford to make the same mistake twice. Interest rates were cut to barely above zero; money was created through the process known as quantitative easing; the banks were bailed out; Barack Obama pushed a fiscal stimulus programme through Congress.

But the policy was only a partial success. Low interest rates and quantitative easing have averted Great Depression 2.0 by flooding economies with cheap money. This has driven up the prices of assets shares, bonds and houses to the benefit of those who are rich or comfortably off.

For those not doing so well, it has been a different story. Wage increases have been hard to come by, and the strong desire of governments to reduce budget deficits has resulted in unpopular austerity measures. Not all the lessons of the 1930s have been well learned , and the over-hasty tightening of fiscal policy has slowed growth and caused political alienation among those who feel they are being punished for a crisis they did not create, while the real villains get away scot-free . A familiar refrain in both the referendum on Brexit and the 2016 US presidential election was: there might be a recovery going on, but its not happening around here.

Authoritarian solutions

Internationalism died in the early 30s because it came to be associated with discredited policies: rampant speculation, mass unemployment, permanent austerity and falling living standards.

Totalitarian states promoted themselves as alternatives to failed and decrepit liberal democracies. Hitlers Germany was one, Stalins Soviet Union another. While the first era of globalisation was breaking up, Moscow was pushing ahead with the collectivisation of agriculture and rapid industrialisation.

Whats more, the economic record of the totalitarian countries in the 30s was far superior to that of the liberal democracies. Growth averaged 0.3% a year in Britain, the US and France, compared with 3.1% a year in Germany, Italy, Japan and the Soviet Union.

Erik Britton, founder of the consultancy Fathom , says: The 1920s saw the failure of liberal free-trade, free-market policies to deliver stability and growth. Alternative people came along with a populist stance that really worked, for a while.

There is, Britton says, a reason mainstream parties are currently being rejected: It is not safe to assume you can deliver unsatisfactory economic outcomes for a decade without a political reaction that feeds back into the economics.


A
A car goes on sale for $100 after the Wall Street Crash. Photograph: PPP

Economic devastation caused by the Great Depression did eventually force western democracies into rethinking policy. The key period was the 18 months between Britain coming off the gold standard in September 1931 and Roosevelts arrival in the White House in March 1933.

Under Hoover, US economic policy had been relentlessly deflationary. As in Germany the other country to suffer most grievously from the Depression there was a dogged insistence on protecting the currency and on balancing the budget.

That changed under FDR. Policy became both more interventionist and more isolationist. If London could adopt a Britain-first policy, then so could Washington. Roosevelt swiftly took the dollar off the gold standard and scuppered attempts to prevent currency wars. Wall Street was reined in; fiscal policy was loosened. But it was too late. By then, Hitler was chancellor and tightening his grip on power. Ultimately, the Depression was brought to an end not by the New Deal, but by war.

King says the world is already starting to become more protectionist in terms of movement of capital and labour. Trump has been naming and shaming US companies seeking to take advantage of cheaper labour in the emerging countries, while Brexit is an example of the idea that migration needs to be controlled.

The US supported the post-war global instutional framework: the UN, IMF and European Union, through the Marshall plan. It tried to create a framework in which individual countries could flourish, King adds. But I dont see that [happening again] in the future, which creates difficulties for the rest of the world.


<source media=”(min-width:” 480px) and (-webkit-min-device-pixel-ratio: 1.25), (min-width: 480px) and (min-resolution: 120dpi)” sizes=”605px” srcset=”https://i.guim.co.uk/img/media/30444e832e67acb8296d3f39789a0110d6a4f88f/30_18_3137_2311/master/3137.jpg?w=60Read more: https://www.theguardian.com/society/2017/mar/04/crash-1929-wall-street-what-the-great-depression-reveals-about-our-future

What the 21st century can learn from the 1929 crash | Larry Elliott

It was the biggest setback to the global economy since the dawn of the modern industrial age. But did the worlds reaction worsen the effects of the 1929 Crash? And have we learned from those mistakes?

As the summer of 1929 drew to a close, the celebrated Yale university economist Irving Fisher took to the pages of the New York Times to opine about Wall Street. Share prices had been rising all year; investors had been speculating with borrowed money on the assumption that the good times would continue. It was the bull market of all time, and those taking a punt wanted reassurance that their money was safe.

Fisher provided it for them, predicting confidently: Stock markets have reached what looks like a permanently high plateau. On that day, the Wall Street Crash of October 1929 was less than two months away. It was the worst share tip in history. Nothing else comes close.

The crisis broke on Thursday 24 October, when the market dropped by 11%. Black Thursday was followed by a 13% fall on Black Monday and a further 12% tumble on Black Tuesday. By early November, Fisher was ruined and the stock market was in a downward spiral that would only bottom out in June 1932, at which point companies quoted on the New York stock exchange had lost 90% of their value and the world had changed utterly.


A
A crowd of speculators gather in front of the New York stock exchange on Black Thursday, 24 October 1929. Photograph: Keystone-France/Gamma-Keystone via Getty Images

The Great Crash was followed by the Great Depression, the biggest setback to the global economy since the dawn of the modern industrial age in the middle of the 18th century. Within three years of Fishers ill-judged prediction, a quarter of Americas working population was unemployed and desperate. As the economist JK Galbraith put it: Some people were hungry in 1930 and 1931 and 1932. Others were tortured by the fear that they might go hungry.

Banks that werent failing were foreclosing on debtors. There was no welfare state to cushion the fall for those such as John Steinbecks Okies farmers caught between rising debts and crashing commodity prices. One estimate suggests 34 million Americans had no income at all. By mid-1932, the do-nothing approach of Herbert Hoover was discredited and the Democrat Franklin Roosevelt was on course to become US president.

Across the Atlantic, Germany was suffering its second economic calamity in less than a decade. In 1923, the vindictive peace terms imposed by the Treaty of Versailles had helped to create the conditions for hyperinflation, when one dollar could be exchanged for 4.2 trillion marks, people carted wheelbarrows full of useless notes through the streets, and cigarettes were used as money. In 1932, a savage austerity programme left 6 million unemployed. Germany suffered as the pound fell and rival British exports became cheaper. More than 40% of Germanys industrial workers were idle and Nazi brownshirts were fighting communists for control of the streets. By 1932, the austerity policies of the German chancellor Heinrich Brning were discredited and Adolf Hitler was on course to replace him.

Timeline of turmoil

https://interactive.guim.co.uk/embed/article-embeds/1930stimeline/embed.html

It would be wrong to think nobody saw the crisis coming. Fishers prediction may well have been a riposte to a quite different (and remarkably accurate) prediction made by the investment adviser Roger Babson in early September 1929. Babson told the US National Business Conference that a crash was coming and that it would be a bad one. Factories will shut down, Babson predicted, men will be thrown out of work. Anticipating how the slump would feed on itself, he warned: The vicious cycle will get in and the result will be a serious business depression.

Cassandras are ignored until it is too late. And Babson, who had form as a pessimist, was duly ignored. The Dr Doom of the 2008 crisis, New York Universitys Nouriel Roubini, suffered the same fate.


Migrant
Migrant Mother, 1936, by Dorothea Lange. Photograph: GraphicaArtis/Getty Images

F Scott Fitzgerald described the Great Crash as the moment the jazz age dived to its death. It marked the passing of a first age of globalisation that had flourished in the decades before the first world war with free movements of capital, freedom and to a lesser extent goods. In the decade or so after the guns fell silent in 1918, policymakers had been trying to re-create what they saw as a golden period of liberalism. The Great Depression put paid to those plans, ushering in, instead, an era of isolationism, protectionism, aggressive nationalism and totalitarianism. There was no meaningful recovery until nations took up arms again in 1939.

In Britain, recovery was concentrated in the south of England and too weak to dent ingrained unemployment in the old industrial areas. The Jarrow march for jobs took place in 1936, seven years after the start of the crisis. It was a similar story in the US, where a recovery during Roosevelts first presidential term ended in a second mini-slump in 1937. Sir Winston Churchill, who lost a packet in the Crash, described the period 1914 to 1945 as the second 30 years war.

Only one other financial meltdown can compare to the Wall Street Crash for the length of its impact: the one that hit a climax with the bankruptcy of Lehman Brothers in September 2008. Without the Great Depression, there would have been no New Deal and no Keynesian revolution in economics. Roosevelt might never have progressed beyond the New York governors mansion in Albany. Hitler, whose political star was on the wane by the late 1920s, would have been a historical footnote .

Similarly, without the long-lingering effects of the 2008 crash, there would have been no Brexit, Donald Trump would still be a New York City builder and Europe would not be quaking at the possibility of Marine Le Pen replacing Franois Hollande as French president.

Not since the 1930s have there been such acute fears of a populist backlash against the prevailing orthodoxy. As then, a prolonged period of poor economic performance has led to a political reaction that looks like feeding back into a desire for a different economic approach. The early 30s share with the mid-2010s a sense that the political establishment has lost the confidence of large numbers of voters, who have rejected business as usual and backed politicians they see as challenging the status quo.


Depression
Depression to Dust Bowl: a large cloud appears behind a truck travelling on Highway 59 in Colorado, May 1936. Photograph: PhotoQuest/Getty Images

Trump is not the first president to urge an America-first policy: Roosevelt was of a similar mind after he replaced Herbert Hoover in 1933. Nor is this the first time there has been such a wide gulf between Wall Street and the rest of the country. The loathing of the bankers in the 20s hardened into a desire for retribution in the 30s.

According to Lord Robert Skidelsky, biographer of John Maynard Keynes: We got into the Great Depression for the same reason as in 2008: there was a great pile of debt, there was gambling on margin on the stock market, there was over-inflation of assets, and interest rates were too high to support a full employment level of investment.

There are other similarities. The 20s had been good for owners of assets but not for workers. There had been a sharp increase in unemployment at the start of the decade and labour markets had not fully recovered by the time an even bigger slump began in 1929. But while employees saw their slice of the economic cake get smaller, for the rich and powerful, the Roaring Twenties were the best of times. In the US, the halving of the top rate of income tax to 32% meant more money for speculation in the stock and property markets. Share prices rose sixfold on Wall Street in the decade leading up to the Wall Street Crash.

Inequality was high and rising, and demand only maintained through a credit bubble. Unemployment between 1921 and 1929 averaged 8% in the US, 9% in Germany and 12% in Britain. Labour markets had never really recovered from a severe recession at the start of the 20s designed to stamp out a post-war inflationary boom.

Above all, in both periods global politics were in flux. From around 1890, the balance of power between the great European nations that had kept the peace for three quarters of a century after the battle of Waterloo in 1815 started to break down. The Ottoman and Austro-Hungarian empires were in decline before the first world war; the US, Germany and Russia were on the rise.


Brooklyn
Brooklyn Daily Eagle front page on Black Thursday. Photograph: Icon Communications/Getty

More importantly, Britain, which had been the linchpin of late 19th-century globalisation had been weakened by the first world war and was no longer able to provide the leadership role. America was not yet ready to take up the mantle.

Stephen King, senior economic adviser to HSBC and author of a forthcoming book on the crisis of globalisation, Grave New World, says: There are similarities between now and the 1920 and 1930s in the sense that you had a declining superpower. Britain was declining then and the US is potentially declining now.

King says that in the 20s, the idea of a world ruled by empires was crumbling. Eventually, the US did take on Britains role as the defender of western values, but not until the 40s, when it was pivotal in both defeating totalitarianism and in creating the economic and political institutions the United Nations, the International Monetary Fund, the World Bank that were designed to ensure the calamitous events of the 30s never happened again.

There are severe doubts about whether the US is able or willing to play the role it played in the second half of the 20th century, and thats worrisome because if the US is not playing it, who does? If nobody is prepared to play that role, the question is whether we are moving towards a more chaotic era.

Deflationary disaster

There are, of course, differences as well as similarities between the two epochs. At this years meeting of the World Economic Forum in Davos, Switzerland, held in the week of Trumps inauguration, members of the global business elite found reasons to be cheerful.

Some took comfort from technology: the idea that Facebook, Snapchat and Google have shrunk the world. Others said slapping tariffs on imported goods in an era of complex international supply chains would push up the cost of exports and make it unthinkable even for a country as big as the US to adopt a go-it-alone economic strategy. Roberto Azevdo, managing director of the World Trade Organisation said: The big difference between the financial crisis of 2008 and the early 1930s is that today we have multilateral trade rules, and in the 30s we didnt.

The biggest difference between the two crises, however, is that in the early 1930s blunders by central banks and finance ministries made matters a lot worse than they need have been. Not all stock market crashes morph into slumps, and one was avoided just about in the period after the collapse of Lehman Brothers.


A
A Hooverville collection of unemployed peoples shack dwellings in Seattle, Washington, in 1933. Photograph: AP

Early signs from data for industrial production and world trade in late 2008 showed declines akin to those during the first months of the Great Depression. Policymakers have been rightly castigated for being asleep at the wheel while the sub-prime mortgage crisis was gestating, but knowing some economic history helped when Lehman Brothers went bust. In the early 30s, central banks waited too long to cut interest rates and allowed deflation to set in. There was a policy of malign neglect towards the banks, which were allowed to go bust in droves. Faced with higher budget deficits caused by higher unemployment and slower growth, finance ministers made matters worse by raising taxes and cutting spending.

The response to the Crash, according to Adam Tooze in his book The Deluge, was deflationary policies were pursued everywhere. The question that critics have asked ever since is why the world was so eager to commit to this collective austerity. If Keynesian and monetarist economists can agree on one thing, it is the disastrous consequences of this deflationary consensus.

At the heart of this consensus was the gold standard, the strongly held belief that it should be possible to exchange pounds, dollars, marks or francs for gold at a fixed exchange rate. The system had its own automatic regulatory process: if a country lived beyond its means and ran a current account surplus, gold would flow out and would only return once policy had been tightened to reduce imports.

After concerted efforts by the Bank of England and the Treasury, Britain returned to the gold standard in 1925 at its pre-war parity of $4.86. This involved a rise in the exchange rate that made life more difficult for exporters.

What the policymakers failed to realise was that the world had moved on since the pre-1914 era. Despite being on the winning side, Britains economy was much weaker. Germanys economy had also suffered between 1914 and 1918, and was further hobbled by reparations. America, by contrast, was in a much stronger position.

This changing balance of power meant that restoring the pre-war regime was a long and painful process, and by the late 20s the strains of attempting to do so were starting to become unbearable in just the same way as the strains on the euro the closest modern equivalent to the gold standard have become evident since 2008.

Instead of easing off, policymakers in the early stages of the Great Depression thought the answer was to redouble their efforts. Peter Temin, an economic historian, compares central banks and finance ministries to the 18th-century doctors who treated Mozart with mercury: Not only were they singularly ineffective in curing the economic disease; they also killed the patient.

Skidelsky explains that in Britain, the so-called automatic stabilisers kicked in during the early stages of the crisis. Tax revenues fell because growth was weaker while spending on unemployment benefits rose. The public finances fell into the red.


Supporters
Supporters of the New Deal agency march through New York in protest at corporate layoffs, January 1937. Photograph: New York Times Co/Getty Images

Instead of welcoming the extra borrowing as a cushion against a deeper recession, the authorities took steps to balance the budget. Ramsay MacDonalds government set up the May committee to see what could be done about the deficit. Given the membership, heavily weighted in favour of businessmen, the outcome was never in doubt: sterling was under pressure and in order to maintain Britains gold standard parity, the May committee recommended cuts of 97m from the states 885m budget. Unemployment pay was to be cut by 30% in order to balance the budget within a year.

The severity of the cuts split the Labour government and prompted the formation of a national government led by MacDonald. Philip Snowden, the chancellor, said the alternative to the status quo was the Deluge. Financial editors were invited to the Treasury to be briefed on measures being taken to protect the pound, and when one asked whether Britain should or could stay on the gold standard, the Treasury mandarin Sir Warren Hastings rose to his feet and thundered: To suggest we should leave the gold standard is an affront not only to the national honour, but to the personal honour of every man or woman in the country.

The show of fiscal masochism failed to prevent fresh selling of the pound, and eventually the pressure became unbearable. In September 1931, Britain provided as big a shock to the rest of the world as it did on 23 June 2016, by coming off the gold standard.

The pound fell and the boost to UK exports was reinforced six months later when the coalition government announced a policy of imperial preference, the erection of tariff barriers around colonies and former colonies such as Australia and New Zealand.

Britain was not the first country to resort to protectionism. The now infamous Smoot-Hawley tariff had been announced in the US in 1930. But America had a recent history of protectionism it had built up its manufacturing strength behind a 40% tariff in the second half of the 19th century. Britain, as Tooze explains, had been in favour of free trade since the repeal of the corn laws in 1846.

Now it was responsible for initiating the death spiral of protectionism and beggar-thy-neighbour currency wars that would tear the global economy apart.


An
An elderly woman sits by a shop window full of adverts for cigarettes, 1935. Photograph: General Photographic Agency/Getty Images

Britains 1931 exit from the gold standard meant it secured first-mover advantage over its main rivals. For Germany, the pain was especially severe, since the countrys mountain of foreign debt ruled out devaluation and left Chancellor Brnings government with the choice between default and deflation. Brning settled for another round of austerity, not realising that for voters there was a third choice: a party that insisted that national solutions were the answer to a broken international system.

The reason borrowing costs were slashed in 2008 is that central bankers knew their history. Ben Bernanke, then chairman of Americas Federal Reserve, was a student of the Great Depression and fully acknowledged that his institution could not afford to make the same mistake twice. Interest rates were cut to barely above zero; money was created through the process known as quantitative easing; the banks were bailed out; Barack Obama pushed a fiscal stimulus programme through Congress.

But the policy was only a partial success. Low interest rates and quantitative easing have averted Great Depression 2.0 by flooding economies with cheap money. This has driven up the prices of assets shares, bonds and houses to the benefit of those who are rich or comfortably off.

For those not doing so well, it has been a different story. Wage increases have been hard to come by, and the strong desire of governments to reduce budget deficits has resulted in unpopular austerity measures. Not all the lessons of the 1930s have been well learned , and the over-hasty tightening of fiscal policy has slowed growth and caused political alienation among those who feel they are being punished for a crisis they did not create, while the real villains get away scot-free . A familiar refrain in both the referendum on Brexit and the 2016 US presidential election was: there might be a recovery going on, but its not happening around here.

Authoritarian solutions

Internationalism died in the early 30s because it came to be associated with discredited policies: rampant speculation, mass unemployment, permanent austerity and falling living standards.

Totalitarian states promoted themselves as alternatives to failed and decrepit liberal democracies. Hitlers Germany was one, Stalins Soviet Union another. While the first era of globalisation was breaking up, Moscow was pushing ahead with the collectivisation of agriculture and rapid industrialisation.

Whats more, the economic record of the totalitarian countries in the 30s was far superior to that of the liberal democracies. Growth averaged 0.3% a year in Britain, the US and France, compared with 3.1% a year in Germany, Italy, Japan and the Soviet Union.

Erik Britton, founder of the consultancy Fathom , says: The 1920s saw the failure of liberal free-trade, free-market policies to deliver stability and growth. Alternative people came along with a populist stance that really worked, for a while.

There is, Britton says, a reason mainstream parties are currently being rejected: It is not safe to assume you can deliver unsatisfactory economic outcomes for a decade without a political reaction that feeds back into the economics.


A
A car goes on sale for $100 after the Wall Street Crash. Photograph: PPP

Economic devastation caused by the Great Depression did eventually force western democracies into rethinking policy. The key period was the 18 months between Britain coming off the gold standard in September 1931 and Roosevelts arrival in the White House in March 1933.

Under Hoover, US economic policy had been relentlessly deflationary. As in Germany the other country to suffer most grievously from the Depression there was a dogged insistence on protecting the currency and on balancing the budget.

That changed under FDR. Policy became both more interventionist and more isolationist. If London could adopt a Britain-first policy, then so could Washington. Roosevelt swiftly took the dollar off the gold standard and scuppered attempts to prevent currency wars. Wall Street was reined in; fiscal policy was loosened. But it was too late. By then, Hitler was chancellor and tightening his grip on power. Ultimately, the Depression was brought to an end not by the New Deal, but by war.

King says the world is already starting to become more protectionist in terms of movement of capital and labour. Trump has been naming and shaming US companies seeking to take advantage of cheaper labour in the emerging countries, while Brexit is an example of the idea that migration needs to be controlled.

The US supported the post-war global instutional framework: the UN, IMF and European Union, through the Marshall plan. It tried to create a framework in which individual countries could flourish, King adds. But I dont see that [happening again] in the future, which creates difficulties for the rest of the world.


<source media=”(min-width:” 480px) and (-webkit-min-device-pixel-ratio: 1.25), (min-width: 480px) and (min-resolution: 120dpi)” sizes=”605px” srcset=”https://i.guim.co.uk/img/media/30444e832e67acb8296d3f39789a0110d6a4f88f/30_18_3137_2311/master/3137.jpg?w=60Read more: https://www.theguardian.com/society/2017/mar/04/crash-1929-wall-street-what-the-great-depression-reveals-about-our-future

What the 21st century can learn from the 1929 crash | Larry Elliott

It was the biggest setback to the global economy since the dawn of the modern industrial age. But did the worlds reaction worsen the effects of the 1929 Crash? And have we learned from those mistakes?

As the summer of 1929 drew to a close, the celebrated Yale university economist Irving Fisher took to the pages of the New York Times to opine about Wall Street. Share prices had been rising all year; investors had been speculating with borrowed money on the assumption that the good times would continue. It was the bull market of all time, and those taking a punt wanted reassurance that their money was safe.

Fisher provided it for them, predicting confidently: Stock markets have reached what looks like a permanently high plateau. On that day, the Wall Street Crash of October 1929 was less than two months away. It was the worst share tip in history. Nothing else comes close.

The crisis broke on Thursday 24 October, when the market dropped by 11%. Black Thursday was followed by a 13% fall on Black Monday and a further 12% tumble on Black Tuesday. By early November, Fisher was ruined and the stock market was in a downward spiral that would only bottom out in June 1932, at which point companies quoted on the New York stock exchange had lost 90% of their value and the world had changed utterly.


A
A crowd of speculators gather in front of the New York stock exchange on Black Thursday, 24 October 1929. Photograph: Keystone-France/Gamma-Keystone via Getty Images

The Great Crash was followed by the Great Depression, the biggest setback to the global economy since the dawn of the modern industrial age in the middle of the 18th century. Within three years of Fishers ill-judged prediction, a quarter of Americas working population was unemployed and desperate. As the economist JK Galbraith put it: Some people were hungry in 1930 and 1931 and 1932. Others were tortured by the fear that they might go hungry.

Banks that werent failing were foreclosing on debtors. There was no welfare state to cushion the fall for those such as John Steinbecks Okies farmers caught between rising debts and crashing commodity prices. One estimate suggests 34 million Americans had no income at all. By mid-1932, the do-nothing approach of Herbert Hoover was discredited and the Democrat Franklin Roosevelt was on course to become US president.

Across the Atlantic, Germany was suffering its second economic calamity in less than a decade. In 1923, the vindictive peace terms imposed by the Treaty of Versailles had helped to create the conditions for hyperinflation, when one dollar could be exchanged for 4.2 trillion marks, people carted wheelbarrows full of useless notes through the streets, and cigarettes were used as money. In 1932, a savage austerity programme left 6 million unemployed. Germany suffered as the pound fell and rival British exports became cheaper. More than 40% of Germanys industrial workers were idle and Nazi brownshirts were fighting communists for control of the streets. By 1932, the austerity policies of the German chancellor Heinrich Brning were discredited and Adolf Hitler was on course to replace him.

Timeline of turmoil

https://interactive.guim.co.uk/embed/article-embeds/1930stimeline/embed.html

It would be wrong to think nobody saw the crisis coming. Fishers prediction may well have been a riposte to a quite different (and remarkably accurate) prediction made by the investment adviser Roger Babson in early September 1929. Babson told the US National Business Conference that a crash was coming and that it would be a bad one. Factories will shut down, Babson predicted, men will be thrown out of work. Anticipating how the slump would feed on itself, he warned: The vicious cycle will get in and the result will be a serious business depression.

Cassandras are ignored until it is too late. And Babson, who had form as a pessimist, was duly ignored. The Dr Doom of the 2008 crisis, New York Universitys Nouriel Roubini, suffered the same fate.


Migrant
Migrant Mother, 1936, by Dorothea Lange. Photograph: GraphicaArtis/Getty Images

F Scott Fitzgerald described the Great Crash as the moment the jazz age dived to its death. It marked the passing of a first age of globalisation that had flourished in the decades before the first world war with free movements of capital, freedom and to a lesser extent goods. In the decade or so after the guns fell silent in 1918, policymakers had been trying to re-create what they saw as a golden period of liberalism. The Great Depression put paid to those plans, ushering in, instead, an era of isolationism, protectionism, aggressive nationalism and totalitarianism. There was no meaningful recovery until nations took up arms again in 1939.

In Britain, recovery was concentrated in the south of England and too weak to dent ingrained unemployment in the old industrial areas. The Jarrow march for jobs took place in 1936, seven years after the start of the crisis. It was a similar story in the US, where a recovery during Roosevelts first presidential term ended in a second mini-slump in 1937. Sir Winston Churchill, who lost a packet in the Crash, described the period 1914 to 1945 as the second 30 years war.

Only one other financial meltdown can compare to the Wall Street Crash for the length of its impact: the one that hit a climax with the bankruptcy of Lehman Brothers in September 2008. Without the Great Depression, there would have been no New Deal and no Keynesian revolution in economics. Roosevelt might never have progressed beyond the New York governors mansion in Albany. Hitler, whose political star was on the wane by the late 1920s, would have been a historical footnote .

Similarly, without the long-lingering effects of the 2008 crash, there would have been no Brexit, Donald Trump would still be a New York City builder and Europe would not be quaking at the possibility of Marine Le Pen replacing Franois Hollande as French president.

Not since the 1930s have there been such acute fears of a populist backlash against the prevailing orthodoxy. As then, a prolonged period of poor economic performance has led to a political reaction that looks like feeding back into a desire for a different economic approach. The early 30s share with the mid-2010s a sense that the political establishment has lost the confidence of large numbers of voters, who have rejected business as usual and backed politicians they see as challenging the status quo.


Depression
Depression to Dust Bowl: a large cloud appears behind a truck travelling on Highway 59 in Colorado, May 1936. Photograph: PhotoQuest/Getty Images

Trump is not the first president to urge an America-first policy: Roosevelt was of a similar mind after he replaced Herbert Hoover in 1933. Nor is this the first time there has been such a wide gulf between Wall Street and the rest of the country. The loathing of the bankers in the 20s hardened into a desire for retribution in the 30s.

According to Lord Robert Skidelsky, biographer of John Maynard Keynes: We got into the Great Depression for the same reason as in 2008: there was a great pile of debt, there was gambling on margin on the stock market, there was over-inflation of assets, and interest rates were too high to support a full employment level of investment.

There are other similarities. The 20s had been good for owners of assets but not for workers. There had been a sharp increase in unemployment at the start of the decade and labour markets had not fully recovered by the time an even bigger slump began in 1929. But while employees saw their slice of the economic cake get smaller, for the rich and powerful, the Roaring Twenties were the best of times. In the US, the halving of the top rate of income tax to 32% meant more money for speculation in the stock and property markets. Share prices rose sixfold on Wall Street in the decade leading up to the Wall Street Crash.

Inequality was high and rising, and demand only maintained through a credit bubble. Unemployment between 1921 and 1929 averaged 8% in the US, 9% in Germany and 12% in Britain. Labour markets had never really recovered from a severe recession at the start of the 20s designed to stamp out a post-war inflationary boom.

Above all, in both periods global politics were in flux. From around 1890, the balance of power between the great European nations that had kept the peace for three quarters of a century after the battle of Waterloo in 1815 started to break down. The Ottoman and Austro-Hungarian empires were in decline before the first world war; the US, Germany and Russia were on the rise.


Brooklyn
Brooklyn Daily Eagle front page on Black Thursday. Photograph: Icon Communications/Getty

More importantly, Britain, which had been the linchpin of late 19th-century globalisation had been weakened by the first world war and was no longer able to provide the leadership role. America was not yet ready to take up the mantle.

Stephen King, senior economic adviser to HSBC and author of a forthcoming book on the crisis of globalisation, Grave New World, says: There are similarities between now and the 1920 and 1930s in the sense that you had a declining superpower. Britain was declining then and the US is potentially declining now.

King says that in the 20s, the idea of a world ruled by empires was crumbling. Eventually, the US did take on Britains role as the defender of western values, but not until the 40s, when it was pivotal in both defeating totalitarianism and in creating the economic and political institutions the United Nations, the International Monetary Fund, the World Bank that were designed to ensure the calamitous events of the 30s never happened again.

There are severe doubts about whether the US is able or willing to play the role it played in the second half of the 20th century, and thats worrisome because if the US is not playing it, who does? If nobody is prepared to play that role, the question is whether we are moving towards a more chaotic era.

Deflationary disaster

There are, of course, differences as well as similarities between the two epochs. At this years meeting of the World Economic Forum in Davos, Switzerland, held in the week of Trumps inauguration, members of the global business elite found reasons to be cheerful.

Some took comfort from technology: the idea that Facebook, Snapchat and Google have shrunk the world. Others said slapping tariffs on imported goods in an era of complex international supply chains would push up the cost of exports and make it unthinkable even for a country as big as the US to adopt a go-it-alone economic strategy. Roberto Azevdo, managing director of the World Trade Organisation said: The big difference between the financial crisis of 2008 and the early 1930s is that today we have multilateral trade rules, and in the 30s we didnt.

The biggest difference between the two crises, however, is that in the early 1930s blunders by central banks and finance ministries made matters a lot worse than they need have been. Not all stock market crashes morph into slumps, and one was avoided just about in the period after the collapse of Lehman Brothers.


A
A Hooverville collection of unemployed peoples shack dwellings in Seattle, Washington, in 1933. Photograph: AP

Early signs from data for industrial production and world trade in late 2008 showed declines akin to those during the first months of the Great Depression. Policymakers have been rightly castigated for being asleep at the wheel while the sub-prime mortgage crisis was gestating, but knowing some economic history helped when Lehman Brothers went bust. In the early 30s, central banks waited too long to cut interest rates and allowed deflation to set in. There was a policy of malign neglect towards the banks, which were allowed to go bust in droves. Faced with higher budget deficits caused by higher unemployment and slower growth, finance ministers made matters worse by raising taxes and cutting spending.

The response to the Crash, according to Adam Tooze in his book The Deluge, was deflationary policies were pursued everywhere. The question that critics have asked ever since is why the world was so eager to commit to this collective austerity. If Keynesian and monetarist economists can agree on one thing, it is the disastrous consequences of this deflationary consensus.

At the heart of this consensus was the gold standard, the strongly held belief that it should be possible to exchange pounds, dollars, marks or francs for gold at a fixed exchange rate. The system had its own automatic regulatory process: if a country lived beyond its means and ran a current account surplus, gold would flow out and would only return once policy had been tightened to reduce imports.

After concerted efforts by the Bank of England and the Treasury, Britain returned to the gold standard in 1925 at its pre-war parity of $4.86. This involved a rise in the exchange rate that made life more difficult for exporters.

What the policymakers failed to realise was that the world had moved on since the pre-1914 era. Despite being on the winning side, Britains economy was much weaker. Germanys economy had also suffered between 1914 and 1918, and was further hobbled by reparations. America, by contrast, was in a much stronger position.

This changing balance of power meant that restoring the pre-war regime was a long and painful process, and by the late 20s the strains of attempting to do so were starting to become unbearable in just the same way as the strains on the euro the closest modern equivalent to the gold standard have become evident since 2008.

Instead of easing off, policymakers in the early stages of the Great Depression thought the answer was to redouble their efforts. Peter Temin, an economic historian, compares central banks and finance ministries to the 18th-century doctors who treated Mozart with mercury: Not only were they singularly ineffective in curing the economic disease; they also killed the patient.

Skidelsky explains that in Britain, the so-called automatic stabilisers kicked in during the early stages of the crisis. Tax revenues fell because growth was weaker while spending on unemployment benefits rose. The public finances fell into the red.


Supporters
Supporters of the New Deal agency march through New York in protest at corporate layoffs, January 1937. Photograph: New York Times Co/Getty Images

Instead of welcoming the extra borrowing as a cushion against a deeper recession, the authorities took steps to balance the budget. Ramsay MacDonalds government set up the May committee to see what could be done about the deficit. Given the membership, heavily weighted in favour of businessmen, the outcome was never in doubt: sterling was under pressure and in order to maintain Britains gold standard parity, the May committee recommended cuts of 97m from the states 885m budget. Unemployment pay was to be cut by 30% in order to balance the budget within a year.

The severity of the cuts split the Labour government and prompted the formation of a national government led by MacDonald. Philip Snowden, the chancellor, said the alternative to the status quo was the Deluge. Financial editors were invited to the Treasury to be briefed on measures being taken to protect the pound, and when one asked whether Britain should or could stay on the gold standard, the Treasury mandarin Sir Warren Hastings rose to his feet and thundered: To suggest we should leave the gold standard is an affront not only to the national honour, but to the personal honour of every man or woman in the country.

The show of fiscal masochism failed to prevent fresh selling of the pound, and eventually the pressure became unbearable. In September 1931, Britain provided as big a shock to the rest of the world as it did on 23 June 2016, by coming off the gold standard.

The pound fell and the boost to UK exports was reinforced six months later when the coalition government announced a policy of imperial preference, the erection of tariff barriers around colonies and former colonies such as Australia and New Zealand.

Britain was not the first country to resort to protectionism. The now infamous Smoot-Hawley tariff had been announced in the US in 1930. But America had a recent history of protectionism it had built up its manufacturing strength behind a 40% tariff in the second half of the 19th century. Britain, as Tooze explains, had been in favour of free trade since the repeal of the corn laws in 1846.

Now it was responsible for initiating the death spiral of protectionism and beggar-thy-neighbour currency wars that would tear the global economy apart.


An
An elderly woman sits by a shop window full of adverts for cigarettes, 1935. Photograph: General Photographic Agency/Getty Images

Britains 1931 exit from the gold standard meant it secured first-mover advantage over its main rivals. For Germany, the pain was especially severe, since the countrys mountain of foreign debt ruled out devaluation and left Chancellor Brnings government with the choice between default and deflation. Brning settled for another round of austerity, not realising that for voters there was a third choice: a party that insisted that national solutions were the answer to a broken international system.

The reason borrowing costs were slashed in 2008 is that central bankers knew their history. Ben Bernanke, then chairman of Americas Federal Reserve, was a student of the Great Depression and fully acknowledged that his institution could not afford to make the same mistake twice. Interest rates were cut to barely above zero; money was created through the process known as quantitative easing; the banks were bailed out; Barack Obama pushed a fiscal stimulus programme through Congress.

But the policy was only a partial success. Low interest rates and quantitative easing have averted Great Depression 2.0 by flooding economies with cheap money. This has driven up the prices of assets shares, bonds and houses to the benefit of those who are rich or comfortably off.

For those not doing so well, it has been a different story. Wage increases have been hard to come by, and the strong desire of governments to reduce budget deficits has resulted in unpopular austerity measures. Not all the lessons of the 1930s have been well learned , and the over-hasty tightening of fiscal policy has slowed growth and caused political alienation among those who feel they are being punished for a crisis they did not create, while the real villains get away scot-free . A familiar refrain in both the referendum on Brexit and the 2016 US presidential election was: there might be a recovery going on, but its not happening around here.

Authoritarian solutions

Internationalism died in the early 30s because it came to be associated with discredited policies: rampant speculation, mass unemployment, permanent austerity and falling living standards.

Totalitarian states promoted themselves as alternatives to failed and decrepit liberal democracies. Hitlers Germany was one, Stalins Soviet Union another. While the first era of globalisation was breaking up, Moscow was pushing ahead with the collectivisation of agriculture and rapid industrialisation.

Whats more, the economic record of the totalitarian countries in the 30s was far superior to that of the liberal democracies. Growth averaged 0.3% a year in Britain, the US and France, compared with 3.1% a year in Germany, Italy, Japan and the Soviet Union.

Erik Britton, founder of the consultancy Fathom , says: The 1920s saw the failure of liberal free-trade, free-market policies to deliver stability and growth. Alternative people came along with a populist stance that really worked, for a while.

There is, Britton says, a reason mainstream parties are currently being rejected: It is not safe to assume you can deliver unsatisfactory economic outcomes for a decade without a political reaction that feeds back into the economics.


A
A car goes on sale for $100 after the Wall Street Crash. Photograph: PPP

Economic devastation caused by the Great Depression did eventually force western democracies into rethinking policy. The key period was the 18 months between Britain coming off the gold standard in September 1931 and Roosevelts arrival in the White House in March 1933.

Under Hoover, US economic policy had been relentlessly deflationary. As in Germany the other country to suffer most grievously from the Depression there was a dogged insistence on protecting the currency and on balancing the budget.

That changed under FDR. Policy became both more interventionist and more isolationist. If London could adopt a Britain-first policy, then so could Washington. Roosevelt swiftly took the dollar off the gold standard and scuppered attempts to prevent currency wars. Wall Street was reined in; fiscal policy was loosened. But it was too late. By then, Hitler was chancellor and tightening his grip on power. Ultimately, the Depression was brought to an end not by the New Deal, but by war.

King says the world is already starting to become more protectionist in terms of movement of capital and labour. Trump has been naming and shaming US companies seeking to take advantage of cheaper labour in the emerging countries, while Brexit is an example of the idea that migration needs to be controlled.

The US supported the post-war global instutional framework: the UN, IMF and European Union, through the Marshall plan. It tried to create a framework in which individual countries could flourish, King adds. But I dont see that [happening again] in the future, which creates difficulties for the rest of the world.


<source media=”(min-width:” 480px) and (-webkit-min-device-pixel-ratio: 1.25), (min-width: 480px) and (min-resolution: 120dpi)” sizes=”605px” srcset=”https://i.guim.co.uk/img/media/30444e832e67acb8296d3f39789a0110d6a4f88f/30_18_3137_2311/master/3137.jpg?w=60Read more: https://www.theguardian.com/society/2017/mar/04/crash-1929-wall-street-what-the-great-depression-reveals-about-our-future

UK nuclear power stations ‘could be forced to close’ after Brexit

Leaving Euratom treaty will shut down nuclear industry if international safety agreements are not made in time, MPs told

Nuclear power stations would be forced to shut down if a new measures are not in place when Britain quits a European atomic power treaty in 2019, an expert has warned.

Rupert Cowen, a senior nuclear energy lawyer at Prospect Law, told MPs on Tuesday that leaving the Euratom treaty as the government has promised could see trade in nuclear fuel grind to a halt.

The UK government has said it will exit Euratom when article 50 is triggered. The treaty promotes cooperation and research into nuclear power, and uniform safety standards.

Unlike other arrangements, if we dont get this right, business stops. There will be no trade. If we cant arrive at safeguards and other principles that allow compliance [with international nuclear standards] to be demonstrated, no nuclear trade will be able to continue.

Asked by the chair of the Commons business, energy and industrial strategy select committee if that would see reactors switching off, he said: Ultimately, when their fuels runs out, yes. Cowen said that in his view there was no legal requirement for the UK to leave Euratom because of Brexit: Its a political issue, not a legal issue.

The UK nuclear industry would be crippled if new nuclear cooperation deals are not agreed within two years, a former government adviser told the committee.

Euratom explainer

There is a plethora of international agreements that would have to be struck that almost mirror those in place with Euratom, before we moved not just material but intellectual property, services, anything in the nuclear sector. We would be crippled without other things in place, said Dame Sue Ion, chair of the Nuclear Innovation and Research Advisory Board, which was established by the government in 2013.

She said movement of the industrys best intellectual talent was made easier by the UKs membership of Euratom.

The government said it was working on alternative arrangements to Euratom. Describing the notification of withdrawal as a regrettable necessity when article 50 is triggered, energy minister Jesse Norman said that the UK saw clear routes outside of Euratom to address issues such as the trade of nuclear materials.

We take this extremely seriously and are devoting serious resources [to looking at new arrangements], he told the Lords science and technology committee on Tuesday.

Tom Greatrex, chief executive of the Nuclear Industry Association, said there was a lot to be done to put in place transitional measures replacing Euratom.

What were collectively warning about is the potential for there to be a very hard two-year period during which there are lots of other things the government has to deal with, that could leave it in a position where some of these things arent in place, he said. Greatrex said one possible option was an associate membership of Euratom.

Over the weekend, the GMB union called on ministers to reconsider their foolhardy rush to leave the treaty, claiming it could endanger the UKs entire nuclear future.

But the Office for Nuclear Regulation argued there could even be be some positives to leaving Euratom, such as a reduction in bureaucracy. If we relinquish Euratom there would be reduced burden from not having to comply with directives, said David Senior, an ONR executive.

Norman also promised a decision was due soon on the next stage of a delayed multimillion-pound government competition for mini nuclear reactors, known as small modular reactors. I love the projects and ideas but I want to be shown the value, he told the peers.

Read more: https://www.theguardian.com/business/2017/feb/28/british-nuclear-power-stations-could-be-forced-to-close-after-brexit

Recipe found in medieval mystics writings was probably for ‘dragges’

Margery Kempe was known for religious fervour, and a list in the manuscript of her pioneering autobiography has been analysed as a prescribed cure for her fits

It is a case that has intrigued historians, psychiatrists and theologians for the last 80 years, but an academic has found what may be the oldest known attempt to diagnose Margery Kempes erratic religious behaviour. A recipe for medicinal sweets, written 600 years ago in the back of the medieval mystics memoir, has been deciphered by Dr Laura Kalas Williams and the Exeter University-based researcher is convinced that it reveals an attempt to prescribe a cure for Kempes notorious fits of devotion.

Though the recipe, written in the final portfolio of the 1438 manuscript, has long been known to scholars, it had hitherto proved impossible to read. Dr Andrea Clarke, the British Librarys lead curator of medieval and early modern manuscripts, suggested multispectral-imaging technology be used to reveal its secrets. Kalas Williams and two colleagues, Professor Eddie Jones and Professor Daniel Wakelin, were then able to decipher the ingredients and discovered it was a cure for flux, defined in the Medieval English Dictionary as a pathological flowing of blood, excretions or discharges from any part of the body, or dysentery.


Roughly,
The recipe translates as containing: Sugar with aniseed, fennel seed, nutmeg, cinnamon, ginger [to make the] confection and to [then] beat them together in a mortar and heat them in the manner of food and drinks and dry first and last eat. Photograph: Board of the British Library, Dr Andrea Clarke and Christina Duffy

Kalas Williams said she was convinced the recipe was a response to the mystics various bouts of illness as well as her copious crying. I dont think [the recipe] has been written there randomly, the academic said. The book tells us that at one point, she suffered a terrible episode of flux (probably dysentery) and was given extreme unction, thinking she was going to die, so the presence of this recipe at the end seems more than a coincidence.

A middle-class mother of 14, Kempe lived in Norfolk from about 1373 to 1440. After the birth of her children, she took a vow of chastity, and for the rest of her life undertook pilgrimages to Jerusalem, Santiago de Compostela, Italy and Germany.

Described by Kalas Williams as the Marmite of medieval mystics, she was infamous for loud cries and boisterous weeping in church and dramatic displays of religious devotion, which included mystical visions that placed her at the heart of the action during the nativity and crucifixion. They also made her as many enemies during her lifetime as they did followers; she was arrested for heresy and narrowly missed being burned at the stake.

Kalas Williams admitted her thesis was controversial. Scholars have speculated about the significance of the recipe since the manuscript was rediscovered in 1934. Though medieval books often feature arbitrary jottings because parchment was expensive, no other random notes appear in the manuscript, which was dictated by the mystic between 1436 and 1440, initially to her son. There are many other annotations in the book, but all of these directly engage with the words on the page, in dialogue with the content, the academic said. This makes it improbable that the recipe is a random, thoughtless, annotation.

The
The original manuscript of The Book of Margery Kempe. It is thought to have been finished and bound between 1442 and 1450. Photograph: Board of the British Library, Dr Andrea Clarke and Christina Duffy

Initially, the recipe was thought to be for a drink to cure the flux, but the thermal imaging revealed it to be dragges herbal sweets used to refresh the palate and cure a variety of ills. The ingredients sugar, aniseed, fennel seed, nutmeg, cinnamon and ginger were luxuries at the time.

The manuscript, which is the only surviving copy of the memoir, thought to be the oldest autobiography by a woman in the English language, has proved controversial since it was rediscovered in the 1930s. Many attempts have been made to explain Kempes profuse weeping, collapsing and roaring while under the influence of her visions. As well as epilepsy, bipolar disorder and schizophrenia, it has been posited that the mystic suffered postpartum depression, as her first extreme religious experiences and demonic torment followed her first difficult pregnancy.

Kalas Williams dismissed attempts at diagnosis as anachronistic and preferred to use Kempes memoir to understand the medieval view of womens bodies and health. For me, Kempe is a tenacious figure, determined to be heard in a culture where womens voices were not supposed to be heard, and brave enough to express her emotions publicly and viscerally, added the scholar, who is writing up her findings for academic publication later this year.

Read more: https://www.theguardian.com/books/2017/feb/28/recipe-found-in-medieval-mystics-writings-was-probably-for-drugges-margery-kempe