The Great Crash 1929 by J.K. Galbraith

These days, economists like Professor Simon Wren-Lewis spend a lot of time writing for audiences on the net. They provide a commentary on issues of the day, while hoping to influence political behaviour. Their expertise is used to attack unproductive  austerity or misguided economic nationalism. Nevertheless, governments and individuals frequently ignore their warnings and are contemptuous of the precision of their predictions.

The interventions of Professor Simon Wren-Lewis are often ignored because of an ignorant scepticism towards experts. However, there is a deeper problem. Everyone knows that prediction is the Achilles’ heel of economics. While there is no consensus about what caused past economic events, there are many examples of respected economists making massive blunders about the future.

John Kenneth Galbraith was skilled because he could describe complex economic phenomena without patronising his readers. By looking backwards, he managed to impact on present behaviour. He could write a short book with brio and make his subject stimulating. His sense of humour enabled him to convince people of ideological points without them being fully aware of it. Hence he could explain the context of the origins of the Great Depression in a succinct, timeless and memorable manner. His aside on British economic policy is still illuminating:

“In 1925, under the aegis of the then Chancellor of the Exchequer, Mr Winston Churchill, Britain returned to the gold standard at the old or pre-World War I relationship between gold, dollars and the pound. There is no doubt that Churchill was more impressed by the grandeur of the traditional, or $4.86 pound than by the more subtle consequences of over-valuation…In 1925 began the long series of exchange crises, which like the lions in Trafalgar Square and the street walkers in Piccadilly, are now an established part of the British scene…Then, as since, gold when it escaped from Britain or Europe came to the United States. This might be discouraged if prices of goods were high and interest rates were low in this country.”


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