1873: The Rothschilds, the First Great Depression, and the Making of the Modern World, by Liaquat Ahamed

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1873: The Rothschilds, the First Great Depression, and the Making of the Modern World, by Liaquat Ahamed

The Great Depression that began with the 1929 Wall Street crash wasn’t the first worldwide economic catastrophe. The Financial Times’ Liaquat Ahamed examines an earlier global meltdown triggered by the 1872 crash of the Vienna Stock Exchange. Like the events of 1929, this Black Friday was a seismic shock whose full reverberations weren’t felt for months. By the end of 1873, stocks plummeted across Europe and American banks felt the impact.

Ahamed revisits familiar economic history with an eye toward the depression’s political impact. According to him, in the U.S., the Grant administration’s inept handling of the crisis led to the election of Rutherford B. Hayes, who promptly cancelled the faltering Reconstruction, opening the door to Jim Crow. When Egypt defaulted on its debt, Britain responded by occupying the country. Ahamed also tries to personalize his narrative by focusing on the Rothschild family, the world’s richest with banks in London, Paris, Vienna and Frankfurt.

The Rothschilds were the topic of conspiracy theories through their central role in the rise of the first truly global economy. They made a fortune helping the British evade Napoleon’s blockade, established a transnational network of contacts and informants and capitalized on the boom for borrowing. They raised capital for governments, railroads and industry around the world. Their lavish lifestyle set the model for the robber barons of the Gilded Age. The Rotschild’s agent in New York, August Belmont, became prominent on Wall Street.

The depression of 1873 was a symptom of a global economic system with few controls, a “collective madness” of high-risk gambles on speculative investments and a “contagion of fear” that spread once markets began to fall and pull each other down. Oddly, from today’s standpoint, Ahamed finds that the depression caused many years of deflation as prices continued to fall. The result was improved standards of living for many people through the end of the century.

Get 1873 on Amazon here.

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