- Alan Beattie is world trade editor at the Financial Times, and author of the recent book “False Economy: A Surprising Economic History of the World”. He studied history at Oxford and economics at Cambridge, and worked as a Bank of England economist before joining the FT. The opinions expressed are his own. -
Those who forget history are condemned to listen to historians going on and on about it, a fate almost as bad as listening to economists doing the same. (And I write as a double agent with a foot in both camps attempting the delicate task of bringing the two together in my new book)
As we are perpetually being told, the current global financial crisis and recession is the kind of event that comes along only once or twice in a century. So now the immediacy of the panic has subsided, perhaps this is a good time to ask if we been applying the correct lessons from the past, and particularly from the 1930s, in dealing with this one.
On monetary policy, the answer is largely yes. On fiscal policy, it’s partly yes, but not where it matters most. And on trade, the response hasn’t been perfect but it’s not been disastrous. Yet.
First, monetary policy. Subtle differences in the way that the major central banks have gone about pumping cash into the financial system – with some, like the Bank of England, slower off the mark than others – should not conceal the basic fact that they have largely learned from the mistakes of the Great Depression. They have acted fast, used extraordinary tools when necessary and all costs headed off the hreat of deflation. No-one has made serious headway arguing that the world’s central banks should have been following markedly tighter monetary policy – though Angela Merkel has (wrongly) been criticising the ECB.