REVIEW: Harold James: “Seven Crashes: The Economic Crises that Shaped Globalization”

A review I wrote for H-Diplo <https://networks.h-net.org/h-diplo>

A review I wrote for H-Diplo <https://networks.h-net.org/h-diplo>…

“A connected world is falling apart” is how Harold James begins his Seven Crashes: The Economic Crises that Shaped Globalization. The industrial and agricultural depressions and revolutions of 1848, the crash of 1873, World War I, the post-WWI German hyperinflation, the Great Depression of the 1930s, the Great Inflation of the 1970s, the global financial crisis and Great Recession that started in 2008, and the COVID plague. These are the subjects of Seven Crashes.

Economic shortages—especially of key food and energy resources. Famine. Disease. Social Unrest. Political upheaval. Geographic hotspots. These are the sources and expressions of Harold James’s crises. They, he believes, are “fundamental drivers that make humans more willing to reimagine how human ingenuity, and new techniques, may be used to solve problems and connect peoples across the world”. While such crises “at first sight look as if they are purely devastating, bringing death and destruction, [they] prove to be transformative”. The subject of the book is how such “transformation proceeds, and… revolutionizes thinking and reconfigures the story of globalization”.

I am very happy Harold James took the time to write this book.

James sees all of these crises as ultimately the result of adverse supply shocks: food in the 1840s, an overreaction to the opening-up of the world economy in the 1870s, the death and destruction of World War I ending in both the hyperinflation and the Great Depression, the oil shocks of the 1970s, and the lockdowns of the COVID plague as “the hammer and the dance” were ways governments tried to keep the death toll lower than it would have been had health care systems worldwide become as overwhelmed as was the system of Lombardy in the late winter of 2020. But I do not think the history really fits into that particular Procrustean Bed. The industrial-financial side of the 1840s had nothing to do with the harvest-failure side. It was not the opening-up of the world in the 1860s that was adverse, but rather the fact that speculative finance is extremely ill-constructed to accurately peer through the veils of time and ignorance without it all ending in the bankruptcy of the overspeculative, and general tears.

Whether global imbalances are managed and resolved or not hinges on political pressures and the skills of economic technocrats, not on supply-shock shortages. Only the 1970s fits the case of a systemic crisis brought on by the direct consequences of an adverse supply shock—and even then it was the intersection of the supply shock with the political and economic pressures that were ending the Bretton Woods system that brought on the decade-long slow-moving crisis of the 1970s inflation; it was not the supply shock on its own.

So what Harold James sets out as his Grand Narrative fails. But Grand Narratives always fail. And James is a wise enough historian to roll with it. The value of history for policymakers in the present and those trying to peer into the future is not that it fits into some simple structure. Rather, it should be, as Thucydides wrote:

enough… if these words… are judged useful by those who want to understand clearly the events which happened and which (human nature being what it is) will, at some time or other and in much the same ways, be repeated…. [The] work is not a piece of writing designed not to please the ear for a prize competition today, but to be a treasure for all time.

So let me spend the rest of my space praising three gems in this treasure:

First, there is James’s analysis of the consequences of the 1840s crisis and the 1848 revolutions. Yes, the revolutions failed to produce a New Jerusalem. However, there was, after 1848:

a Europewide questioning of how policy could be more effective, and how the poor might be helped…. Better, more competent institutions were needed…. Governments needed to reinvent themselves so as to see their relationship with commercial prosperity in a new way….. The events of the 1840s laid the foundation for a wave of productive institutional adaptation…. Reaction is [not] really the best way of describing the… governance that emerged in the 1850s and 1860s… ambiguous figures like Louis Napoleon (Napoleon III) and Bismarck: modernizers who built a world in conformity with a new logic…

The crisis truly was a catalyst for profound global economic and political transformation—reorienting trade relationships, accelerating industrialization, and prompting shifts in political ideologies, all of which pushed the pace of globalization forward, and reoriented mid-1800s globalization in a market-dominant direction.

Second, there is James's stepping back to assess how precisely the post-WWI hyperinflation in Germany shook society off of its foundations:

We expect each partner in a commercial transaction to believe that the price was fair, and that both sides benefit…. When prices move, I am upset by having to pay more. The innkeeper is angry because the money I have given no longer buys so many goods. We both think that we have lost out… been manipulated by some sinister force… [and] feel guilty for taking advantage of others—getting rid of our banknotes as soon as possible. We start to think that we are… speculative and grasping…. Non-Jewish Germans… thus took up activities that they associated with Jewish actions, hated themselves… and externalized that powerful emotion by blaming… finance and money… foreign Polish and Jewish traders…. [Plus] foreign (western European and American) tourists… liv[ed]… the high life… as the mark depreciated…. They too provoked resentments. The inflation destroyed ethical values, but it also corroded and undermined political structures…

It was not so much that the German hyperinflation impoverished Germany—it did not. But it did upend confidence in the traditional values of thrift and stability, and did create a profound sense of betrayal and disillusionment that left an imprint on Germany’s collective psyche that lasts to this day. But I think John Maynard Keynes put it even better:

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency…. Governments… not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some…. Arbitrary rearrangement… strikes not only at security but at confidence in the equity of the existing distribution of wealt… All permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become… utterly disordered… wealth-getting degenerates into a gamble and a lottery…. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose…

And so, third, there is James’s examination of the Great Depression, and especially of John Maynard Keynes as a magician—trying to rescue global prosperity via institutions to balance out the instability of global economic flows and the radical financial-psychological instability that Keynes saw as at the heart of most of the world’s crisis-creating vulnerabilities. It was major shocks hitting economies from the outside plus “the uncontrollable and disobedient psychology of the business world” that drove the crises, depressions, and mass unemployment that were one of what Keynes saw as the two unacceptable features of the modern global economy. (The unequal distribution of income and wealth was the second.) Just as James makes much of the financial-economic history of the mid-1800s human and accessible by presenting it through the lens of the intellectual biography of Marx, he successfully does the same for much of the financial-economic history of the mid-1800s1900s by presenting it through the lens of the intellectual biography of Keynes.

I am very happy Harold James took the time to write this book.

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References:

• James, Harold. 2023. Seven Crashes: The Economic Crises That Shaped Globalization. New Haven, CT: Yale University Press.

• Keynes, John Maynard. 1923. A Tract on Monetary Reform. London: Macmillan and Co., Limited. <https://archive.org/details/tractonmonetaryr0000keyn​​.

• Thucydides. ca. -400. The History of the Peloponnesian War. Translated by Richard Crawley. London: J. M. Dent; New York: E. P. Dutton, 1910. <https://archive.org/details/pelocrawleyr00thucuoft​>