MARKETS The Great Depression of the early 1930s has cast a long shadow over subsequent decades. Then, the major economies suffered a collapse in output, profits and employment on a scale unprecedented either before or since. And, crucially, this world-wide economic meltdown accelerated the breakdown in international co-operation among the major powers, fostered aggressive nationalism and contributed mightily to the genesis of the Second World War.
Determined to avoid a repetition of the global economic disaster of the early 1930s, policy-makers have ever since striven to learn the right lessons. The parameters of the global trading and payments system were reconstructed on a growth-friendly basis at the very beginning of the post-WW2 period. And policy makers have done their utmost throughout to avoid the gross errors made by their predecessors. The very first G7 economic summit, convened in 1975, was designed primarily to head off the risk of renewed protectionism amid what was the worst ever economic downturn seen since the early 1930s. And the Fed’s supportive lender of last resort stance in the wake of the October 1987 stock market crash stood in stark contrast to its lack of response to the crash of October 1929.
