Seven Crashes: The Economic Crises That Shaped Globalization

Image of Seven Crashes: The Economic Crises That Shaped Globalization
Release Date: 
May 16, 2023
Yale University Press
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“for anyone wanting to truly understand the historical basis for economic globalization and how it has evolved past some of the major economic crises of the last two centuries, it offers valuable insight and lessons for the future.”

Globalization is a word fraught with tension as we move into the second decade of the 21st century. Used to express both the potential of economic growth and the challenge to domestic economic and industrial interests, the growing interconnectivity of finance, commerce, and consumption in a complex web of competitive and cooperative interests has been tested by recent events.

In this new, well-blended combination of economics and history, author Harold James considers seven global crises that challenged and remade the global economy, examining their causes, short and long term impacts, and the economists and politicians that both predicted, and later analyzed them to try and understand their root causes to attempt to prevent future crises.

The author examines two crises from the 19th century—the great famine in Ireland of the 1840s and the financial crisis of 1873; three crises of the 20th century—the Great War, the Great Depression, and the Great Inflation of the 1970s; and two events from this century—the Great Recession and the Great Lockdown. Each of these events is examined not only from the economic impact, but also the downstream effects on politics and societies are examined, in particular the reforms or attempted reforms carried out by politicians and financial leaders to first correct, and then prevent such crisis from happening in the future.

Nearly all of these events were essentially caused by one of two circumstances—either the unanticipated interruptions of the supply of a critical commodity or commodities, whether it’s Irish potatoes and English grain in the 1840s or oil in the 1970s; or gross financial malfeasance, usually in the form of wild speculation on some new technology or financial creation, such as the wild growth in railroad corporations and stocks that helped create the financial panic of 1873 or the massive speculation in subprime mortgages that helped trigger the Great Recession in 2008.

The author’s examination of these seven crises shows that the world’s economy has been at some level connected since the early industrial revolution, with this interconnectedness only increasing as new forms of transportation and communications have broken down barriers of distance and time to get goods, especially agricultural goods to market. As the author notes in several of his case studies, the seemingly small banking or financial crisis in one country has caused a magnifying ripple effect across borders and markets, amplifying the impact of economic globalization, often causing blowback in the form of trade restrictions that ended up exacerbating the situation. The other factor in all these crises the author examines is the effect of bad economic policy or business decisions that had unintended consequences, particularly when the effects of those bad decisions could not be quickly contained or controlled.

In addition, Mr. James offers extensive economic analysis of the theories of key economists during the period such as John Keynes and Milton Friedman, offering a fascinating critique of both the long-term impact of their theories, especially Keynes, and how those theories have often been reinterpreted over time. Other key economic thinkers also receive a deep dive by the author, particularly recent Federal Reserve Chairman such as Ben Bernanke who were not only noted scholars, but actual policy makers who exercised profound influence over the American economy during recent crises.

Finally, the author places these financial crises into their larger societal and political context, noting the larger effect they had on change, sometimes for the better, sometimes not, yet how the overall trend toward a closer global economy moved ever forward as new technologies, business models, and financial products continued to integrate major markets in spite of disruptions, crashes, and protectionist tendencies.

The book is quite complicated at times as the author moves in and out of complex jargon that can be challenging to follow for the reader unfamiliar with basic economic terms and concepts, but for anyone wanting to truly understand the historical basis for economic globalization and how it has evolved past some of the major economic crises of the last two centuries, it offers valuable insight and lessons for the future.