The Memory of Financial Crises: The Great Depression and the Global Financial Crisis of 2008

Youssef Cassis, Anna Knaps, Giuseppe Telesca

It is usually assumed that financial markets have a short memory: crises are quickly forgotten and excessive risk-taking replaces caution as new business and profit opportunities arise, with the conviction that ‘this time is different’, to use Reinhart’s and Rogoff’s formula. On the other hand, comparisons with the great depression of the 1930s feature prominently in commentaries on the depth and spread of the global financial crisis of 2008 and reveal the extent to which policy-makers seek to ‘learn’ from the past. But how relevant is the past as a guide to the present, or even the future, and how is it used when policymakers, bankers and the public are faced with difficult economic challenges?

Surprisingly, economists and economic historians have paid little attention to memory in their attempts to explain financial crises.  And despite the ‘memory boom’ that started some forty years ago with Pierre Nora’s Les lieux de mémoire, few business historians have made use of the concept of memory, however vaguely defined, for the analysis of financial crises and their aftermath. This paper, part of a larger project, is a first attempt to reflect on how and by whom financial crises have been remembered, why some have been remembered and others forgotten, and what use has been made of the memory of financial crises, whether for economic or political purposes.

The paper considers how the financial crises of the Great Depression (the Wall Street crash of 1929 and the various banking crises that broke out in Europe and the United States between 1931 and 1934) have been both remembered and discussed in terms of lesson-drawing since the end of the Second World War, especially at the time of significant anniversaries (twenty-fifth, fiftieth, seventy-fifth) and outbreaks of meaningful financial crises (1974, 1982, 1987, 1997, 2008). The collective memory of financial crises is analysed through the leading newspapers, the archives of the major banks (reports, memos, etc.) and the memoirs, when available, of some of the main actors, in Britain, France, Germany, and the United States. Particular attention is paid to the fading and changing of memory and its replacement by historical and economic analysis; to the ephemeral role of the Great Depression as a warning signal, and its different use by bankers and policymakers.