Column : Beware the populists

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: ‘Read no history—nothing but biography for that is life without theory’—so wrote Benjamin Disraeli. Liaquat Ahamed’s book ‘The Lords of Finance—the bankers who broke the world’ is not a typical biography. It is not the life story of one individual. But a fascinating read about four powerful, brilliant, idiosyncratic and willful central bankers who dominated the economies of the US, UK, France and Germany in the 1920s; the interrelations between these men and the ‘series of misjudgements’ that pushed the world towards the Great Depression. It is a narrative that communicates the enormous power of political and economic decision makers and the enduring damage that they can wreak through incompetence, and a lack of economic understanding.

This article is not a review of Liaquat’s book but a summary of a couple of themes which I believe have contemporary relevance.

Liaquat makes the point that the Great Depression of 1929-1931 was not foreordained. It was not the culmination of an inexorable economic process—‘an act of God or the result of some deep-rooted contradictions in capitalism’. It was rather the direct result of a chain of decisions taken by the individuals in power. Some of these decisions were taken in the 1920s; others after the initial crisis began to unfold. But the cumulative impact of these decisions was the greatest economic meltdown of recent times.

Liaquat’s essential point is that the economic catastrophe of the Great Depression happened because people made the wrong decisions—either because of a misreading of the dynamics of the economy or because of lack of ‘intellectual will’ or because of ego and incompetence.