Barry Eichengreen, an economic historian at the University of California at Berkeley whose scholarly work showed how the international affection for the gold standard deepened the Great Depression, wondered: Why, given this is a global crisis and recession, have policy makers in other countries failed to move as aggressively as the U.S. to fight it?

Among his answers, in an essay “The Global Credit Crisis as History” on his Web site to be published in the January issue of Current History:

The crisis was slower to show up in other countries than in the U.S.

Some countries, notably indebted emerging market countries in eastern Europe and elsewhere , have resisted stimulative policies that might produce a falling exchange rate, just as central banks in the 1930s were restrained by the gold standard. “Their reluctance is not irrational: Sharp depreciation can mean bankruptcy for firms and banks with debts denominated in dollars and for household with mortgages and car loans in euros and Swiss francs,” Eichengreen writes. “But the result is that policy is hamstrung.”

American economic policy is informed by a “powerful historical narrative” in which the Depression was caused by inaction of governments and central banks. Europeans drew other lessons: “the importance of avoiding competitive currency depreciation and of keeping policies on a steady course.”

Jockeying between Japan and China – which he likes to relations between France and Germany between World War I and World War II — has limited the effectiveness of Asia’s response to the global crisis.

The good news, he writes, is that there has been substantial cooperation among central banks. The central banks were in constant communication during the late 1920s and 1930s (as documented in a new book titled “Lords of Finance,” by Liaquat Ahamed.) “But in contrast to the 30s, this time there has been a readiness to back words with deeds,” Eichengreen writes.

Eichengreen predicts that financial globalization – as opposed to trade in goods and services — will be restrained and perhaps reduced as a result of today’s crisis. “Not only will the countries that have been the source of capital flows be less able to provide them, but those on the receiving end will be less willing to accept them,” he says.

Charles Lee Geshekter - 1/26/2009

I buy "local" as much as possible.

Does that mean that one also should shop at local branches of national franchise businesses like Wal-Mart, Sears, Macy's, Shell Oil, Linens&Things, Great Harvest breads, and Ford Motors, etc. since the people who work there, earn money and then spend it are also our local neighbors?

Arnold Shcherban - 1/6/2009

that the crisis was exaserbated by burning desire of Big Business, in general, and Wall Street, inparticular, as a protest against Obama's presidential victory?
The ups and downs of Obama campaign followed the stock market's downs and ups, respectively, suspiciously close.

Randll Reese Besch - 12/31/2008

Buy local to help small farmers, lower the carbon footprint and save on cost are being promoted here and for good reason.