1918–1932: The International Great Depression (A)

38 Pages Posted: 28 Oct 2019

See all articles by Robert F. Bruner

Robert F. Bruner

University of Virginia - Darden School of Business

Abstract

In May 1932, US president Herbert Hoover and British prime minister Ramsay MacDonald called for leaders from 65 nations to attend the World Economic Conference, scheduled to occur in the winter of 1933 after the American presidential election. Hoover turned his attention to the instructions he would have to give to the American delegation about the forthcoming conference. Arguments by pundits, critics, and Hoover's advisers fell into at least three mutually exclusive camps. Some wanted the United States to assume world monetary leadership, since the world needed a financial hegemon. Others thought the United States should simply promote better financial cooperation among nations, since the world needed cooperation more than hegemony, and hegemony was costly. The third camp wanted the United States to simply let the markets equilibrate, since even mild “cooperation” might sacrifice national self-interest without much benefit. The global economic depression presented a dire situation. All the old rules of international monetary stability had been broken. Now, what new rules should Hoover aim to promote?

Excerpt

UVA-F-1902

Oct. 11, 2019

1918–1932: The International Great Depression (A)

In May 1932, US president Herbert Hoover and British prime minister Ramsay MacDonald called for leaders from 65 nations to attend the World Economic Conference, scheduled to occur in the winter of 1933 after the American presidential election. The situation was dire and required decisive actions. Hoover wrote,

[T]he world-wide collapse of finance and gold convertibility of currencies, which began with the German crisis the year before, was turning into a violent trade war between nations. In this war, depreciated currencies, “managed” currencies, increasing tariffs, other restrictions on imports, quotas, and foreign exchange controls were the weapons. The results appeared everywhere in the creeping paralysis of exports and imports and the constant fall of commodity prices. Creditor-debtor relations, both domestic and foreign, were fast becoming intolerable. It seemed to me that the time had arrived to revive the project of a world economic conference.

The president hoped that at the conference, the world leaders would commit to a plan to stabilize currencies, reduce trade barriers, and lower obstacles to economic recovery.

. . .

Keywords: Great Depression, Herbert Hoover, gold standard, gold exchange standard, financial hegemon, international trade, World War I, monetary policy, currency stabilization, nationalism, protectionism, currency instability, debt default, debt forgiveness, war reparations, Versailles Treaty, free trade, Franklin D. Roosevelt, New Deal, deflation, inflation, central bank, hot money, Federal Reserve, Benjamin Strong, Winston Churchill, John Maynard Keynes, exchange rate, Smoot-Hawley Tariff, tariffs, bank run

Suggested Citation

Bruner, Robert F., 1918–1932: The International Great Depression (A). Darden Case No. UVA-F-1902. Available at SSRN: https://ssrn.com/abstract=3475938

Robert F. Bruner (Contact Author)

University of Virginia - Darden School of Business ( email )

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HOME PAGE: http://faculty.darden.edu/brunerb/

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