The Spectre of the Past Hovering over the Crisis

When the financial crisis broke out a few months ago and began to affect the real economy, many people were reminded of the mother of all crises: the great crash of 1929. This stock market crash, other similar crises and the differences between them and today's difficulties will be discussed Thursday 21 May during "Recession: The Spectre of 1929." This year marks the third edition of the Economy and the Open Society, the international forum organized by Bocconi and Corriere della Sera. The speakers at this presentation will be Gianni Toniolo, Professor of Economic History at Duke University and LUISS in Rome, and Alberto Alesina, Professor of Economics at Harvard and Political Economics at Bocconi. The meeting, with an introduction by Severino Salvemini, Professor of Organization Theory at Bocconi, will be moderated by journalist Salvatore Carrubba.

There are basically two reasons why the '29-'30 crisis is still the reference point when discussing recessionary phenomena: the enormity of the loss of revenue, employment and wealth in countries all over the world and the fact that it represented a real watershed for the twentieth century, with long-term consequences that lasted almost 40 years, as Gianni Toniolo explains: "The crisis of '29 represented by far the largest crash of the markets (forecasts, readjustment mechanisms), government (due to incorrect policy decisions) and international cooperation (protectionism and lack of coordinated reflation)."

Then, in a climate of high international tension and emerging totalitarian regimes , counterproductive policies were adopted to face the crisis. "At the beginning," continues Toniolo, "the United States applied restrictive monetary policy, a balanced budget and import barriers. In Europe, the response to the reduction of American capital flows were increased interest rates and decreased public spending, in an attempt to maintain fixed exchange rates. Starting in 1931, Great Britain did the right thing with monetary devaluation and expansion, like today, but withdrew into the Commonwealth, and in '32 the protectionism that was rejected in 1847 was introduced." Today the international framework is more aware of the dangers of protectionism and more in favor of cooperation. The question is, if paired with a more aggressive fiscal and monetary policy, will this be enough to quickly reverse the downward trends in production and employment ?