The 1930s and the 1980s: Parallels and Differences 9789814377041

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THE 1930s AND THE 1980s Parallels and Differences

The Institute of Southeast Asian Studies was established as an autonomous organization in May 1968. It is a regional research centre for scholars and other specialists concerned with modern Southeast Asia, particularly the multi-faceted problems of stability and security, economic development, and political and social change. The Institute is governed by a twenty-two-member Board of Trustees comprising nominees from the Singapore Government, the National University of Singapore, the various Chambers of Commerce, and professional and civic organizations. A ten-man Executive Committee oversees day-to-day operations; it is chaired by the Director, the Institute's chief academic and administrative officer. The ASEAN Economic Research Unit is an integral part of the Institute, coming under the overall supervision of the Director who is also the Chairman of its Management Committee. The Unit was formed in 1979 in response to the need to deepen understanding of economic change and political developments in ASEAN. The day-to-day operations of the Unit are the responsibility of the Co-ordinator. A regional Advisory Committee, consisting of a senior economist from each of the ASEAN countries, guides the work of the Unit.

THE 1930s AND THE 1980s Parallels and Differences

Charles P. Kindleberger

ASEAN Economic Research Unit Institute of Southeast Asian Studies

This paper was delivered at a Public Lecture sponsored by the Institute of Southeast Asian Studies in Singapore on 27 April 1988.

Published by Institute of Southeast Asian Studies Heng Mui Keng Terrace Pasir Panjang Singapore 0511 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the Institute of Southeast Asian Studies. © 1989 Institute of Southeast Asian Studies

The responsibility for facts and opinions expressed in this publication rests exclusively with the author, and his interpretations do not necessarily reflect the views or the policy of the Institute or its supporters.

Cataloguing in Publication Data

Kindleberger, Charles Poor The 1930s and the 1980s: parallels and differences. 1. Economic history - 20th century. 2. Institute of Southeast Asian Studies (Singapore). ASEAN Economic Research Unit. II. Title. 1989 HC54 K52 ISBN 981-3035-24-2

Printed in Singapore by Kefford Press Pte Ltd

Contents

Introduction .............................................................................. vii KS. Sandhu

The 1930s and the 1980s: Parallels and Differences ............ 1 Charles P. Kindleberger

Question and Answer Session ................................................ 15

Closing Remarks ...................................................................... 25 K.S. Sandhu

Introduction K S. Sandhu Director Institute of Southeast Asian Studies

Excellencies, Ladies, and Gentlemen Good afternoon and welcome to another of the lectures which the Institute organizes now and then in order to keep in contact with the world at large, and more importantly with the concerned segments of Singapore society. Today we have Professor Charles Kindleberger with us. Professor Kindleberger has had a long and distinguished career spanning so many different incarnations: research economist, soldier, planner, government official, and university professor, to name but a few. In the process he has produced numerous books and a generation of economists. I am sure that we are going to have a very interesting afternoon, particularly as the subject, "The 1930s and the 1980s: Parallels and Differences" is going to be addressed by a person who has lived through all of the period he is going to be talking about. So, without further ado, I have the honour to present Professor Charles Poor Kindleberger.

The 1930s and the 1980s: Parallels and Differences

Professor Sandhu, Ladies, and Gentlemen It is a great pleasure for me to be here in Singapore for the first time. I have two weeks to study your country, enough to make me an expert. It's only after you have been here four or five weeks that you get confused. Unhappily, I won't have enough time left in the rest of the stay that has been allotted to me to use this information fully. It will come as no surprise to you, I hope, that I have thought about this subject before, and even talked on it, to the 50th Anniversary Celebration of the Icelandic Economic Association in Reykjavik, last month. The parallels and differences I have in mind are mostly those of the world economy as a whole and its fragility. For Singapore, the differences from the 1930s are enormous, except perhaps for the prices of tin and rubber. Singapore is no longer a colony. Its income has risen manifold. It is an industrial city-state, exporting manufactures and services rather than raw materials. My studies have been largely confined to Europe and the United States, with some slight exposure to Latin America, but one must be blind and deaf not to recognize the vast differences from the 1930s that has transpired in your remarkable city with its remarkable economy. My economic studies started more than fifty years ago. For a long time I was interested in the theories of international trade and international finance. Bit by bit, as these became more technical and even possibly esoteric, I have wandered, perhaps drifted, but in any event moved, into economic history, first studying The World in Depression, 1929-1939, then going further back in time to about 1720, in a book entitled, Manias, Panics and Crashes, A Study in Financial Crises, a series of booms and busts, with emphasis on the latter, that may help me to understand the present if not perhaps to predict the future. I may perhaps add that the book on financial crises touches only lightly on the world-wide crisis of 1873 and the British Empire crisis of 1890, generally called the Baring crisis. Since finishing that

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book, however, I have undertaken some study of 1873 and 1890, and am prepared, more or less, to draw comparisons with those periods and the present, if anyone here happens to be curious about them, as I somehow doubt. It is of great interest that while the details differ, the broad outlines of these financial crises have strong family resemblances. Let me summarize quickly how they come about. There is an autonomous shock to the economic system that changes profit motives. It can be almost anything: a good harvest, a bad harvest, the start of a war, the end of a war, a discovery, say, of gold in South Africa, a technological innovation such as canals or railroads, a commodity boom as in oil in 1973, perhaps a financial shock such as the overwhelming success of a security issue which makes people think that there is more there than they had thought before, or a debt conversion that lowers interest rates to an extent that makes people/investors look to see how they can sustain their incomes by new and more risky investments. Whatever it is, this change in profit opportunities calls for a reallocation of investment. And that reallocation of investment leads to boom, or may lead to boom. I don't say that it always does but that it may. The boom may be carried too far in a burst of euphoria. Investors have varying degrees of experience, intelligence, foresight, acumen. The first to take advantage of the new opportunities is likely to make substantial profits and that will induce some followers. I have had great success in public talks with a line of thought of the following sort: there is nothing that upsets a man or woman so much as to see a friend get rich. At about the time the last to wake up come in, the most astute, perhaps the first, may be taking their profits and getting out. Expectations of further rises moderate; markets are in a sort of distress not knowing what to think. A nice example of distress is the United States stock market in the last six months, not really knowing what will come out, although that may be changing now. The boom may wither away and subside quietly, or there may be a sudden realization that matters have gone too far and the rush to get into the asset or assets which previously had risen turns into a rush out which may lead to a panic or crash. Again, I say "may" and not "must". It is difficult to the point of impossibility to be dogmatic about matters that have a strong element of psychology bound up in them.

Monetarists insist that the boom could be avoided if the money supply were regulated so as to grow at some even pace -- Milton Friedman even advocates a constitutional amendment to limit monetary growth in the United States to 3 to 5 per cent a year. The problem is to define what is money. Traders and bankers are ingenious in innovating means of payment. When coin and bullion proved to be too restrictive, biiis of exchange were

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developed to serve as money, then bank notes, bank deposits, NOW accounts, certificates of deposits, credit cards, charge accounts, and the most remarkable experience of all, I think was that of Kuwait in 1982, when they created an enormous boom with postdated cheques -- for example, cheques dated today as of October 1988. Before we come to the two famous Octobers, 1929 and 1987, a word or two on the booms that preceded them. In the 1920s, there was first a boom in foreign lending which was suddenly cut off in the spring of 1928 when the stock market rise got under way and people turned away from lending to Germany, Argentina, Australia, and so on, to put their money in the stock market with the help of brokers' loans. The foreign lending in the 1920s started with the unexpected success of the 1924 Dawes loan -- the New York tranche of the Dawes loan -- undertaken to prime the pump of German reparations. The foreign lending boom of the 1970s was triggered by action of the Federal Reserve System in 1970 and 1971 in trying to lower interest rates in the United States while the Bundesbank in Germany was trying to raise them. Money poured out of the United States into the Eurocurrency market and thence into Germany. Banks with lower interest rates tried to find ways to use this large amount of money and started lending to the Third World on an ambitious scale well before the OPEC price hike of 1973. I used to call this action of the Federal Reserve System in trying to lower interest rates in the United States when Germany was seeking to raise them as "the crime of 1971", until I recalled the remark of, I think, Voltaire who said: "It was worse than a crime; it was a blunder". The stock market boom of 1928 and 1929 took place against an unstable political and financial background of reparations, war debts, and misaligned exchange rates, plus a real problem posed by European recovery in the production of many commodities, including wheat, without a corresponding decline of production outside Europe that had grown up during the war and immediate post-war shortages. In the 1980s, the major commodity problem was oil, but speculation was general in the United States, in stocks, in socalled junk bonds -- that is, bonds of less than investment grade promoted to help finance company take-overs, or in some cases to resist take-overs -- in shopping malls, office buildings, luxury apartments, and condominiums. In the earlier period, distress set in about June 1929 when business peaked. There had been rescues of a British bank in January 1929 (William Deacons Bank), and a collapse of a German insurance company in August 1929. Interest rates tightened from August 1929 as the Federal Reserve System tried to hold down the stock market rise. Then came Black Thursday, 24 October, and Black Tuesday, 29 October. 3

In 1987, the boom in the dollar caused by tight interest rates to restrain inflation peaked in February 1985; that in the stock market went on until August 1987 when the market was clearly in distress. One could discuss the proximate causes of the implosion or meltdown of Black Monday, 19 October -- computer trading, options, index futures, and the like, but I leave those technical subjects to groups like the Brady Commission, the governing body of the New York Stock Exchange and the Chicago market for futures and options, and to the new governmental group which is supposed to report this fall. I will state categorically, however, that I do not believe the stock market collapse had roots in a theory of rational expectations, responding to some unexpected event such as the monthly trade statistics, or Secretary James Baker's expression of irritation with the German monetary authorities. Nor can it be ascribed to a monetary theory, or a Keynesian one. It seems to me clearly to fall into the category of instability, as explained by Irving Fisher, Hyman Minsky, and if you will indulge me a certain amount of egoism, my own view of manias and panics. The theory is an old one, going back at least to Adam Smith, John Stuart Mill, and Lord Overstone, the great English banker in the mid-nineteenth century, who were concerned with what they call "over-trading", followed by revulsion and discredit. The words may be a little old fashioned, but I am sure you recognize the music. I assert that over-trading had gotten the stock market too high in its upward course from August 1982 to August 1987. The relevant question, however, is whether 1988 and 1989 are going to be like 1930 and 1931. First, a slight digression. It is a commonplace that the 1987 stock market crash started in New York but instantly spread all over the world, perhaps less to Japan than elsewhere, although Tokyo had price/earnings ratios in its equities three or four times those in the United States, that made many observers believe that if trouble should arise it would start there. In 1987 all markets imploded together, leading pundits to assert that this was the result of the integration of financial markets over the last decades. It is infrequently noticed, however, that co1nparable simultaneity occurred in 1929, with security markets all over the world following New York down within a matter of a day or two. Markets are connected not only through monetary movements, such as gold in those days and foreign exchange today, through income spillovers via the foreign trade multiplier and of course through arbitrage in identical commodities and assets; they are connected psychologically as well. There need be no transactions: demand and supply curves both shift, and with them prices, as traders in one market observe, without actual contact, what is happening elsewhere.

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But let me return to 1929. In 1929, as in 1987, the Federal Reserve responded immediately to the stock market crash by loosening credit. In 1987 under Alan Greenspan, there was complete agreement on the need for such action. In 1929, George Harrison at the New York Federal Reserve Bank acted on his own and was rebuked by the Board in Washington. In 1929, President Hoover called business leaders to the White House and outlined a programme of government action that in retrospect looked rather Keynesian. By contrast, President Reagan seems to have ignored the danger in the economy posed by the 19 October debacle, whether because of assurances that the Federal Reserve was taking the appropriate action, or through inattention, is not clear to this observer. Financial markets recovered rapidly after the 1929 crash. The discount rate at the New York Fed which had been raised to 6 per cent in August of that year was quickly lowered -- to 5 per cent on 1 November, 4.5 per cent on 15 November, 4 per cent on 7 February 1930, 3.5 per cent on 14 March, 3 per cent on 2 May, and 2.5 per cent on 20 June 1930. It was lowered once again in the banking crisis of November-December 1930 to 2 per cent on Christmas eve. The foreign bond market came back: from a low of $80 million in new issues in the third quarter of 1929, foreign issues rose to $430 million in the second quarter of 1930, including the barely successful New York tranche of the Young Plan loan to prime the pump of German reparations for the second time. The recovery was the result of taking up of loans that had been postponed under the high interest rates generated by the stock market boom that began in 1928, that cut off foreign lending abruptly. But the recovery of the bond market in the second quarter of 1930 was febrile, feverish. Echoing a remark of Lord Overstone on 1 November 1845, two years before the financial crisis of 1847, he said, "We have no crash at present, only a slight premonitory movement of the ground under our feet." Schumpeter described the position in the second quarter of 1930 in terms of "people felt the ground give way under their feet". These were not exact statements but they describe a psychological attitude that seemed general. In effect, Schumpeter said, "the money and capital markets had been more or less restored, but confidence had not been restored". The problem, in my judgement, lay pretty importantly in commodity prices. High interest rates from early summer of 1929 had set back automobile sales and house construction, so that the cyclical peak of business in the United States occurred, as indicated earlier, in June 1929. The causes of the downturn were financial, I assert, rather than the real factors seen by others. The economist Clarence Barber said the decline was due to the slowdown in

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the rate of population increase, which explains housing, and Rostow claimed that satisfaction of the first generation of automobile sales, and their related investments in tyres, gasoline, roads, suburbs brought the boom to an end. I don't believe those Keynesian explanations. The price changes were too sharp to be explained in that fashion. Stock market speculation had soaked up credit in brokers' loans, and when the crash came, the banks were totally engaged in unravelling the resultant complications. In consequence, they clamped down on credit for automobile sales, for example, leading to a precipitous plunge in production far greater than can be explained in monetarist, Keynesian, or real terms. More importantly they cut off credit to internationally traded commodities, which, in those days, were shipped to New York on consignment to be sold to commodity brokers financed with bank credit. With credit unavailable to buy these commodities as they arrived, commodity prices plunged. It is significant that export commodities financed at the point of production in the United States fell much less, as did import commodities produced on U.S. company plantations abroad, notably sugar, also financed in the United States. Such imported commodities as coffee, cocoa, copper, hides, rubber, silk, tin, and zinc fell 10 to 25 per cent in three months, and in the case of Japan, silk fell 25 per cent. You cannot explain that in monetary or Keynesian terms. These price decreases dealt a stunning blow to the exporting economies of the world, on the one hand, and to confidence in the United States on the other. There ensued what is now known as a "flight to quality", apparent in foreign bonds as early as March 1930, as low-grade issues fell in price while high-grade issues did not. A similar wedge between high grades and low grades occurred in domestic bonds in September 1930. This bears strongly against the contention of Milton Friedman that the crisis was an American or United States, not a world-wide, affair. It was communicated by the United States abroad but this wedge, showing a lack of confidence, showed up in foreign bonds first. September was a bad month for international confidence, too, as the Nazis made substantial gains in the German elections, and foreign capital withdrawals forced Germany to borrow through a new Lee Higginson market issue that failed. The flight to quality in the United States extended to municipal bonds and to mortgages. New and thrusting banks that had taken on the riskier loans because borrowers with high credit were already served by the older established institutions found themselves struggling for cash as their shaky loans tended to stop paying and their depositors sought safety by transferring funds to the respected older banks. In farming areas, banks had been failing by the score and hundreds since 1925 when farm prices world-wide started to slip after the comeback of European production, but the mountain of debt acquired during the war and post-war boom remained, squeezing farmers badly. In November 1930, despite easy credit conditions, 6

a banking crisis led to the collapse of Caldwell & Company in municipal securities, and the next month that of the Bank of the United States in mortgages. Collapse spread at home and abroad, as commodity and asset prices failed to come back, leading to debt default, capital flight, and a widening circle of financial disaster. In May 1931 another round of spreading failure started in Austria, and moved relentlessly to Germany, Britain, Japan, back to the United States, and finally in 1936 to the gold bloc led by France. We may usefully spend a paragraph on the Hawley-Smoot Tariff Act, especially as its memory is evoked by the rising tide of protectionist sentiment in the United States, abetted by the Democratic candidate for the presidency, There is also the now withdrawn, Congressman Richard Gephardt. interesting theory of Jude Wanniski that the crash in 1929 was caused by the rejection in a subcommittee of the Congress of an attempt to lower a tariff on a carbide product, which he, a believer in rational expectations, held was the force that led investors to revalue their securities on the expectation that a higher protectionist tariff would be passed, signed into law by President Hoover, as happened nine months later, and lead to widespread retaliation that was fateful for the world economy. I remember the story of a man coming up to the Duke of Wellington about 1825 and saying, "Mr Smith, I believe". The Duke's reply was "If you believe that you can believe anything". That is my reaction to the suggestion that the stock market crash of 1929 was caused by such a minor event. A strong prior belief in rational expectations requires price changes to be caused by some news, leading true believers to search high and low until they find something, even though it is only on page twenty-three of the newspaper. The same line of reasoning has led a few isolated observers to hypothesize that Representative Gephardt's protectionism is what precipitated the crash of 19 October 1987. Note that ordinary tariffs are regarded in the Keynesian model as expansionary, not deflationary, as they divert purchasing power from foreign goods to domestic goods; it is only when retaliation is widespread that the sign of the income change is reversed in the model that presumably rational expectors use. The Hawley-Smoot tariff, with retaliation by some forty-five countries, was a disaster in the spiralling deflation of 1930 and 1931, but to blame it as the trigger of the stock market crash and the subsequent and, as I think, consequent deflation, stretches belief. In October 1987, the stock market crash put only moderate pressure on commodity prices. These were financed in an entirely different way and the mechanism that operated fifty years earlier was not there. Prices had been falling in the United States during the appreciation of the dollar from 1982 to 1985, and they continued to slide gently when the dollar depreciated until 7

the spring of 1987 when they picked up again. Farm prices and the price of farm land were especially depressed after a run-up earlier, in the course of which farm mortgages had increased sharply. But by the summer of 1987 farm prices were coming back. The weak points in the system lay elsewhere, in corporate debt, especially "junk bonds"; in Third World debt that had swelled in the binge of lending from 1971 to 1982; in mortgages issued to finance the speculative construction of office buildings and luxury apartments; in the oil industry; in savings institutions in the southwestern United States; and in consumer debt. And that's enough weak spots. On the other hand, they are not all desperately weak yet. Nor do I mean to imply that they will be. Part of the rise in the long bull market from August 1982 to August 1987 lay in the shrinkage of company equities, bought up by large increases in corporate debt issued at high interest rates. Banks did not hold junk bonds directly but made loans to help industrial companies and their investment houses in take-over operations. Consumer debt and a great deal of construction loans were held by the banks, but some of them have been "securitized", that is bundled into packages that are then sold off to retail investors. Whether securitization had been applied to the better loans, to facilitate their sale, or to the poorer ones to keep the good loans for the banks is not known to me. It also makes a difference whether the bank has an explicit or implicit obligation to stand behind the packaged loans and mortgages, a condition that will differ from institution to institution. Regional differences are also important, and the southwest of the United States is considered to be in an especially weak state of bank health because of the decline in oil prices since their peak in the year or two after 1979, but not significantly since 19 October 1987, and the overbuilt condition of such cities as Houston, Dallas, and Austin, in Texas. The real estate boom of the 1970s in that area led to a rapid pile-up of loans and mortgages at low rates of interest that were still on the books when disintermediation set in in 1982, and banks had to replace their dwindling deposits by borrowing from the market at high rates of interest. In the money-centre banks, as distinct from the regionals, the principal problem would appear to lie in Third World debt, where muddling through has been going forward since August 1982 when the New York banks and the Bank of America in San Francisco belatedly discovered that they had overdone syndicated bank loans to sovereign states. Such is the position at the end of the first quarter of 1988, fifty-eight years after the end of the first quarter of 1930. It is not one of great financial strength, although business conditions seem to be holding up well, as I observed in the newspapers this morning, with weak if recovering farm loans and mortgages; strenuous disintermediation in thrift institutions in Texas, 8

Oklahoma, and Louisiana; a slow, uneven, and painful recovery in Third World debt; and weakness in junk bonds, speculative mortgages, and consumer debt. It is hard to compare the situation in 1930 in terms of strengths and weaknesses in the domestic U.S. position. In addition, the international picture is different. There is a drastic change from a net creditor position in 1929 to a debtor one on the part of the United States today, a floating dollar instead of the gold-exchange standard, and low interest rates in the United States dependent upon Japan, Taiwan, and Germany funding the balance-of-payments deficit of the United States by investing their surpluses of dollars in U.S. Treasury obligations. Thirty-three economists from thirteen countries sig.ned a report of the Institute of International Economics in Washington, D.C., last December signalling their alarm that 19 October 1987, might produce a loss of confidence in the dollar, a revulsion against further lending at relatively low interest rates, and the necessity for the Federal Reserve to raise interest rates drastically to attract foreign capital and prevent a free fall of the dollar. These high interest rates, it was felt, would produce a depression by dealing a blow to house construction, consumer borrowing, and the level of bond prices. In 1930, low interest rates could not revive spending in the face of damaged confidence. In 1988 the fear is rather that high interest rates may be needed to overcome the loss of confidence, not in the U.S. but of the rest of the world in the dollar. In 1988 as in 1930, the weakness of the position lies in the possibility of financial flight -- in domestic quarters out of various types of securities and bank deposits into money, in the international field out of the dollar into strong currencies such as the Deutschmark, the Swiss franc, and the yen, and perhaps the precious metals. But there is one important difference between 1988 and 1930 and that is in the increase in our understanding of how financial crises have to be handled to prevent them turning into a depression. They need a lender of last resort to halt the rush out of real assets and less liquid securities into money -- a lender which provides assurances that there is sufficient liquidity for all. In the United States we have, in addition, deposit insurance for banks, savings and loan institutions, farm banks, and the like, which prevent liquidation in one sector of the banking system from spreading through contagion to other sectors. The lender-of-last-resort function is not without problems of its own. There is in insurance something called moral hazard, that is, when a man is insured against a particular risk, he may be less than prudent in trying to avoid it. By the same token confidence of major banks that they will be saved in case matters go wrong may have encouraged them to take more chances than they prudently should. This moral hazard is thought by some observers 9

to have contributed to the rather carefree manner in which the moneymarket banks, stuffed with money in 1971 and 1972 began lending to the Third World. In addition to moral hazard, last-resort lending faces the problem that when the institutions that provide the safety net under thrift institutions, farm banks, and mortgage lenders become stretched, they must be replenished -- a political process which renders last-resort lending possibly problematic. The Federal Savings and Loan Insurance Corporation ran out of funds in 1987 and had to go to the Congress for more. There was a debate as to how much was needed, and a political compromise was reached that may fall short of the total need, especially to rescue thrift institutions in the Southwest and West. This puts the issue back again into politics where there may be hitches. It must be acknowledged, of course, that all rescue operations are inherently political. Choices must be made as to what institutions and people are saved, and who is allowed to fail. In addition to the slight cloud over the domestic lender-of-last resort function in the United States, there are threats of rising protectionism there, if nothing like the legislative free-for-all that led to the passage of the Hawley-Smoot Tariff Act in June 1930 and its signature by President Hoover over the protests of 1,028 economists, and ensuing widespread retaliation. It seems clear that if something on the order of the Gephardt bill should pass the Congress, which is probable, it would be vetoed by President Reagan who is ideologically opposed to tariffs. I really shouldn't discuss this because this matter is going on from day to day, it changes every day. If you read the Straits Times, you'll find out. I have not been following the action during the last few days. While understanding of the lender-of-last-resort function abounds at the national level, and institutions to carry it out exist, especially central banks, the matter is not so clear internationally. In 1931 when exchange markets seized up and spread inconvertibility through capital flight throughout Europe, Japan, and the United States, there was no international lender of last resort. The Bank for International Settlements (BIS) had just been founded, and was too small as well as too new, though it tried to mobilize rescue loans for Austria. Britain was too weak, the Bank of England said, to lend more to Central Europe, and the United States and France had not awakened to their international, as opposed to their national, responsibilities. In 1988, the United States after forty or more years of international leadership is faltering in economic strength. The International Monetary Fund is not set up for crisis management. Its decision-making process is time-consuming, and a last-resort lender may have to move in hours rather than weeks or months. The swap-network which sprang into

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being in 1961 at a time of the British crisis is ideal, but must be led into action by the central banks with strong currencies, and can be undermined, as has happened from time to time, when it seems clear than one or more of the leading central banks are holding back. For a long time until September 1985, the Reagan administration adopted an attitude of benign neglect of the dollar exchange rate, which encouraged private speculators and discouraged public institutions in trying to provide the public good of exchange stability. The Plaza and Louvre Agreements under the leadership of James Baker turned matters around for a time, but more recently other countries appear to have been hanging back. The swap arrangement, moreover, is not appropriate for meeting a crisis in Third World debt because the central banks of the Group of 10 (leading financial centres, plus Switzerland) cannot count on being repaid in their own currency if they make their currencies available to Third World debtors against pesos, escudos, cruzeiros, and the like. In August 1982, the Federal Reserve System made a bridging loan of $1 billion available to Mexico while the IMF tried to work out new loans from the commercial banks (and the U.S. Government bought $1 billion worth of oil for storage in its underground facilities as protection against an Arab embargo). The more substantial BIS today, as compared with 1930, further made a bridging loan for Hungary, to tide it over until an IMF solution could be reached. These operations and the less automatic and more contrived operation of the swap system give an impression of ad hoccery and improvisation that is less than reassuring. The possibility of crisis in the years ahead, as in the years that followed the first half of 1930, lies in private revulsion against the dollar -- say, by Japanese insurance companies with their vast savings and limited investment opportunities at home, unmatched by public governmental efforts in support of the dollar as lenders of last resort. It is sometimes argued that Japanese savers have no other place to invest. The World Institute of Development Economic Research (WIDER) in Helsinki suggested in 1986 that Japan lend directly to the developing world rather than to the United States (memorandum by Saburo Okita, Lal Jaywardeena, and Arjun Sengupta) but that produced little response. At the November 1985 Kemp-Bradley Summit on exchange rates in Washington, one observer found it obscene that savings in Japan, a country of limited and cramped housing, should be invested in office buildings and luxury apartments in the United States with high incomes and high vacancy rates. But most investors like intermediaries between them and weak debtors, at least until they determine at some point that the intermediaries themselves are poor credit risks, and perhaps stop lending, suddenly and convulsively to produce a financial crisis. 11

If the leadership of the United States in providing economic stability is waning, as appears possible, what follows? Is there a successor in the wings ready to take over, as there was not in 1931 when Britain abdicated, and the United States hung back? In 1929, the British Treasury economist, Ralph C. Hawtrey, wrote -- I have given away the book but I quote from my review of the second (1952) edition: Any balance of power is inherently unstable. Changes in relative power occur and are dangerous .... Rivalry between large powers renders situations of power vacuum dangerous.

Milton Friedman and Anna Schwartz, thinking of the shift of power from the New York Fed to the Board in Washington, and possibly of the transfer of authority from Hoover to Roosevelt in 1932 and 1933, also observed that transitions are dangerous. But the position now as in the early 1930s is not one of a leader challenged by ambitious rivals so much as a faltering leader with no heir apparent ready and willing to take the job. The Federal Republic of Germany and Japan have been faithful followers of United States leadership for most of the four decades since the end of World War II, but show little inclination to take over the leadership. Lately, to be sure, there has been some decline in followership, along with the decline in leadership. Co-ordination of fiscal policy has been weak since the failed attempt in the Carter administration to get the three locomotives pulling together. Co-ordination of monetary policy has been somewhat better, but the semi-annual summit meetings of the Group of Seven seem to produce little more than photographic opportunities. Co-ordination of fiscal policy and most of that in monetary policy deal with periods of relative tranquility, when the critical issue in the several years ahead may lie in crisis management. Can the political will to assign roles of leader and followers and make them stick be found? It is awkward that in 1988, as in 1932, the United States finds itself mired in one of its quadrennial presidential campaigns. Less than a year remains of the government of a president who is well liked but whose mind set lacks flexibility in economic matters and often a deep understanding of the issues. An election diverts public attention from international economic responsibilities to more parochial issues. Apart from the Republican Congressman Jack Kemp, whose campaign has ended and whose views about returning to the gold standard are idiosyncratic, only Senator Bill Bradley, who is not a candidate for the Democratic Party nomination, has spoken forcefully on world issues of free trade, the Third World debt problem, foreign aid, and exchange rates. Most candidates agree on the necessity to produce a substantial reduction over the next years in the government

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deficit, and thereby in the deficit in the United States balance of payments, but there is virtually no unanimity as to how that should be done. Business, politics, and most economists unite in willing the ends, but every distributional coalition, to use the term of Mancur Olson in his book Rise and Decline of Nations, is resolved to ensure that the means impose the burden on others not themselves. It is not enough, therefore, to diagnose what needs to be done to enhance world economic stability. There must be the political will to apply the appropriate therapy. This calls for agreement among groups under strong political leadership at the national level, and among countries. One of the sad lessons of the 1930s, and especially of the months ahead of the convening of the World Economic Conference of June and July 1933 is how little value good ideas have without the political clout and will to put them into effect. It is a lesson discouraging for individual academic economists on the one hand, people like Okita, Jaywardeena, and Sengupta, and for small countries such as Singapore on the other. Proposals from individuals, from institutions such as the International Labour Office, and from a long list of countries -Poland, Belgium, Japan, and even Great Britain, fell on deaf United States ears so long as they were others' suggestions that the United States should spend its money. It is a well-known principle of political science that the leader has to bear a disproportionate share of the burdens of joint expenses because of the presence of free riders, that is beneficiaries of public goods who believe they will get the benefit of the good whether they pay or not. It is possible that the habits of co-operation built up during the period of United States leadership will endure, forming what political scientists call a "regime". Such is the hope. My prediction, however, is that the path ahead stretches out uncertainly, with twists and turns, surprises, some of them perhaps unpleasant. I suspect we are subject to what I am told is a Chinese curse: "May you live in interesting times". I thank you very much.

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Question and Answer Session Question The United States needs to borrow from abroad as long as its budget deficit persists. But then it doesn't like having current account deficits, particularly trade deficits which are the counterpart of the surpluses that Japan, the NICs, and Germany are enjoying because these are the real counterpart of the borrowing. So, at the same time the United States is pressurizing these countries which have surpluses with it to cut down their surpluses. At the same time it wants to borrow money from them. Can you tell us how to achieve this impossible trick? Professor Kindleberger No, I can't square the circle either. But I quite agree that the pressure of the United States to try to force countries to accept more U.S. exports should be based on microeconomics, not macroeconomics. I have always objected to mixing the two up. In the world of second best, you may have to use microeconomic devices to shape macroeconomics and I completely agree that in an absorption model of the balance of payments, it is the lack of savings in the United States which is producing the deficit. Some blame it exclusively on the federal budget but the decline in savings on the part of households is also to blame. We have had a spending mania for some years, personal savings have gone down from something like 7 per cent national income to 2.5 of disposal income. This is not just an odd happenstance but goes deeper. People in the United States want to get rid of the budget deficit and the trade deficit, but they are not willing to do it by willing the means. Look what happened to Mondale in the election of 1984 when he proposed a tax increase. And notice how every candidate this year is staying away from talking about taxes. My tax accountant tells me that there certainly is going to be a tax increase by July, one he thinks it is inevitable. But I would think that in an election year it is inevitable that you won't. Question During the last two hundred years or so, the world's major economic powers have usually been also the major military powers -- the United Kingdom, Germany, and I think the United States accord with that feeling. However, 15

we appear to be entering a new era where possibly the largest economic power, the Japanese -- as you say, the United States is faltering -- is not by any means a major military power. In the past, this situation has allowed the United States or the United Kingdom to back up its economic policies with military force, it has allowed it to extend sometimes its economic and territorial ambitions. But the situation, if you agree with this theory, could well be different for the Japanese. I wonder therefore if you would like to comment on the possible effects on the world economic situation if you agree with this possible scenario. Professor Kindleberger I think that is very difficult to do. Spain was a political power, but not very big economically, apart from its silver. Venice was both. Amsterdam had a big navy and enormous trade. Britain had a big navy and economic power. I am interested in the parallel between the international public goods of peace-keeping on the one hand and economic stability on the other. I regard both of them as international public goods which leadership is needed to provide. Typically stability in economics and in military matters have been provided by the same country at the same time. It is of great interest that the United States seems to be hanging on longer in the Middle East, trying to stabilize that complex area than it is in trying to work out economic programmes for the world, as opposed to its own U.S. problems. The Japanese find themselves very happily protected by a constitutional amendment which General MacArthur proposed to them. They have been living in paradise now for some years, spending very little, if you like, on defence and reaping the benefits of the protection of the nuclear umbrella. I am not enough of the political scientist to judge how stable that is in the long run. But I think you raise a profound question. The position may be unstable. Small countries have no responsibility for solving world problems. But how about a country like France which is big enough to destabilize but not big enough to stabilize? It can rock the boat seriously, and does so from time to time -- seeming perversely to enjoy it. It is of great interest by the way that the countries of Europe and Japan have held back so strongly in helping stabilize the Middle East when their benefit from the steady flow of oil is also clear. And now we are beginning to approach a crisis, perhaps, in this issue in NATO where the pressure to bring troops home is building slowly. And the question is, if that happens what will that do to the stability and peacekeeping of that area? If the Soviet Union's threat weakens enough, then it is okay, I guess. Question I would like to follow up from what you just said. I've learnt from your talk that you can't really predict the next crash, at least not as an economist,

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because you have to be a psychologist to do that since the theory of rational expectations is a theory that you discard. At the same time there is not much point in making prescriptions as an economist because the political leaders don't listen to you. So, my question to you is, have you and I, as economists, chosen the wrong profession? Professor Kindleberger There is a dictum of Paul Samuelson which is objected to strongly by people like Kenneth Boulding that the economist works for the applause of other economists. There is something to it. If you go back and read Moral Sentiments, Smith says there that the real motive of people is emulation. In other words, emulation is more important than greed. If greed were the main motive, Iaccoca would be satisfied with a mere $20 million last year. He has $36 million because he tried to win the applause of others. I have always thought as a member of the Admissions Committee to a graduate school that I would prefer the student for admission who is curious about how the economy works rather than the student who wants to do good. You may disapprove of that, but that's what the science is about, I think. Curiosity, that's the big thing. There is a new book that I find amusing, called The Right Pond, by a man named Robert Frank. What he is saying is that everybody wants to be a big frog in the right pond, but you've got to choose your pond. You and I happen to choose an academic life, not because income is what we are after, but because that is the pond with the frogs we choose to emulate. Question One of the factors which apparently exacerbated the Great Depression was comparative devaluation. Don't you think that we are experiencing some of it today with the U.S. dollar, yen, and other exchange rates being bones of contention among the major powers and even the exchange rates of small countries like Singapore, Korea, Hong Kong, and Taiwan being questioned by the United States? Professor Kindleberger: Well, I happen to be an authority on compet1t1ve exchange depreciation between Denmark and New Zealand in 1933. I am the only person who has ever studied it. But I don't think the position is like that. I am a little bit worried about my colleague, Rudiger Dornbusch, who says the dollar ought to go down 30 per cent more because I think that would put enormous pressure on domestic inflation. I am worried about the pressure the French put on the British in the 1920s. By going back to a par after World War I the British made a mistake. But the French undervalued the franc that led to a piling up of claims on London which was part of the instability of the French position. I don't see that kind of thing happening much now although I think 17

benign neglect is worse. Benign neglect is the attitude that you don't care what happens to your exchange rate. That was based upon a theory that was promoted very strongly by the Chicago School that markets always clear, that markets always do the right thing, and that if you leave the exchange rate alone everything will be for the best in this best of all possible worlds. That isn't true. I must say that I was surprised with the amount of capital movements that followed floating in the face of exchange risks. I think the Japanese insurance companies which bought a lot of U.S. Treasury bonds have made a mistake. But if on the other hand the dollar keeps going up and down, up and down, and if they live long enough, it'll come back. But I don't think this is a stable period; it is, I think, a period of volatility, instability. There are three lines of balance of payments adjustment: one is the monetary school which says that if you produce too much money people spend it abroad. One is the absorption school which says that it is spending that counts, and the other is the elasticity school which says the exchange rate. I am an absorption man but at the same time I think anybody who has one model and clings to it for all times is wrong because sometimes the other applies. I think that the problem with the dollar right now is an absorption problem, not an exchange rate problem. Question In your talk today and in most of your writing, I believe you identified three major roles within an international system: the leader, the free rider, and the spoiler. I feel that it is only because you have identified these three roles within the system that leads you to predict interesting times for the future. But if you expand these three roles and include another category of actors, that of a supporter, then the future might become less interesting than otherwise might be if you restrict yourself only to three major roles. The question I want to ask you is whether you can look at Japan as a future supporter of the international system, maintaining it or helping to maintain it in the sense that Japan, for example, whilst one of the prime pushers behind the exchange rate devaluation of 1985, helped end the auto dispute in 1980, and by opening up its market in 1985 and in the period after that, took off some of the pressures on the United States in terms of managing the global supply and demand imbalances. I was wondering if you could respond very briefly on whether you could envisage a future system where stability in the system is provided by a combination of a leader and a supporter of the system. Professor Kindleberger I thought I said that I didn't see any spoiler now and suggest that Japan and Germany have been faithful followers. Japan has been a faithful supporter, as I think I said. At the same time, I don't think it is enough to get by with

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just supporters and no leadership. You have to have a crisis management. I remember the early stage in the formation of the IMF, I talked to Frank Southard who was the American Executive Director and I said, "How is it going?" He said, "Not well." He said, "Unless the United States says something, nothing happens." They were sitting around waiting for some direction. We are beginning to get the Japanese talking more; that's good. There's a further danger which we haven't discussed which is the danger of a declining leader going in for bashing, insisting that the followers are not supportive enough. In due course I think it is quite clear that the interests of Germany and Japan will be asserted more and that their assertions will disturb the United States. We may get a vacuum. I think I would quote again They are tricky, Friedman and Schwartz: "transitions are dangerous". awkward. I do think we benefit by not having a spoiler. Certainly, we are better off if the Soviet Union goes in more for detente, glasnost, and perestroika and there is no Hitler around, no De Gaulle, or Bismarck. Those people were so ambitious; they are not spoilers except in the sense that they very aggressively pushed their national interests. You don't have that anymore. I don't know if you know the literature of some interest in political science about corporatism in small states. Small states, they say, have to be careful to have good policies. They can't indulge in long fights between employers and unions for example, or between political parties, because they are so open. The work is by Peter Katzenstein from Cornell. And there is a third category of states that try to shine by example which the Swedes were for a long time under Palme -- a classic example -- and to a certain extent, Canada. Goody, goody examples are very irritating. On the other hand, they are important. It shocks me to have the U.S. contribution to foreign aid keep going down, down, down and have the Swedes' and the Canadians' hold up. They are trying to tell us something that is important. The three categories you mentioned -- leader, the free rider, and spoiler -- are more complex than that. But then I would offer you a law propounded by my colleague, Robley Evans, a physicist. Evans' law says that everything is more complicated than most people think. Question You have described confidence as one of the major problems in a panic. Are there any common threads that you see between 1929 and 1987? The latter is viewed with alarm as a possible repeat of 1929, the dramatic, the serious depression. There have been other panics as you have mentioned and some others more recent that you haven't alluded to in the financial markets that haven't resulted in a depression, in certain cases not even a recession. Is there some determinant? What restores confidence? What is the difference between a panic or crash that results in a depression and one that doesn't?

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Professor Kindleberger I think it is the lender-of-last-resort function. A panic is a rush to get money, dump assets to get money. If the monetary authority says there is plenty of money, that calms things down. There is a debate about that. I say it is true of 1929, particularly about the collapse of Austria, Germany, England, and Japan. I think that could have been prevented by an international lender of last resort. There's a man named Moggridge who says that's not true. What you really needed was a Marshall Plan, a structural adjustment, something much more deep-seated. I believe that if you prevented the market from imploding, it would have corrected. I think the 1873 panic led to a deep depression because of no lender of last resort. I think 1890 was the same sort, the lender of last resort turning up in a very funny way, which was the gold produced in South Africa which was discovered in 1888. These long depressions come when you have nobody who stops the deflationary process going on. A deflationary process doesn't seem to be going on now. I am not a stock market expert, but as I see it, institutional investors in the United States are pretty confident; it is the public that is scared. The United States public is staying away from the market and putting its money into money funds. The institutional investors have got so much money from pension funds to play with, thus they remain fairly blase. And that's good. But confidence is one of those intangibles that is very hard to pin down. Let me say this: the issue is the difference between a typhoon and a thunderstorm. If lender-of-last-resort money comes out fast enough it is a thunderstorm, whereas if it doesn't, deflation can spread and result in a depression. In the literature on these things, the meteorological analogies keep popping up all the time. Question I am not an economist or a psychologist. I am an engineer. I believe in basic things. I think the Japanese, the Koreans and the Taiwanese, and Hong Kongese, they work hard by producing more and they have mastered their production skill, their marketing skill. So with their skill, they work hard and keep on producing while the Americans or the Western world keep on spending without producing. I don't see any formula that can balance the payments or improve the economy in the world. Don't you agree with me? Professor Kindleberger I do agree to a very considerable extent that the lack of savings shows that, the hours of work show that. I have worked on a Saturday here in Singapore for the first time in years. But we do have a certain amount of productivity in some lines. It is easy to exaggerate. I worry also about the shift from productive sources to finance. People make money -- they work hard by the way, in those boiler rooms, trading desks, buy-sell, buy-sell -- but that's not

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very productive in the sense you're talking about. What you are suggesting is that the real economy is more significant than the financial economy. And I recognize that there is a lot to that. There's a lot of literature about the decline in the United States now. A man named Paul Kennedy has written a book called The Decline of Great Powers, emphasizing too much military expenditure. Mancur Olson, whose book I referred to, writes about groups -vested interests, trade unions, employees, and civil servants, and so on -- who fight for a larger share of a given income rather than work. Carlo Cipolla some years ago wrote on The Decline of Empires and emphasized excessive consumption -- your line exactly. And he would say Spain went in for consumption. One of the quotations of Spain in the 1650s, when the silver came from Peru and Mexico was "they stopped working, laid down tools on the bench, put on airs, and rode horses". If you want to put it in terms of ageing, an economy, to a certain extent like a person, doesn't produce much in the early stages. In adulthood it becomes productive, and when it gets old and feeble, arteriosclerosis sets in. I agree. But on the other hand, some of us with arteriosclerosis manage to turn out a few books.

Question The crash in the 1930s led to a decline in faith in the market as an allocative mechanism and the rising recognition that the role of the government as an economic stabilizer is quite crucial in the economy that led to the Keynesian revolution and the others. Covering the last two decades we witnessed the rising world-wide faith in the market. One can see that in the United States, in the United Kingdom, and even in Russia and China. So, my question is, do you think the crash in 1987, which has claimed the rational expectation school and the capital asset market pricing models as its intellectual victims, will lead to a world-wide decline in faith in the market again and possibly a recognition of the increasing role of the government in the economy? Professor Kindleberger That's a deadly question. Good! You get an A for the question and see if I can get a C for the answer. I am inclined to think that there are many things in the world where antipathy sets in under any system and you swing back. I used to work in the State Department. There are two ways to organize work in the State Department: one is functionally and one is by region. And the best way to do it is to keep changing because you organize it functionally and after a while it gets corrupted, and so you move to regional and after a while that gets corrupted, so you move back. It can easily be that there is no system that commands an economy which is perfect. You want to move back and forth. I think that the classic example is Mitterrand in 1981 when the French came in as a socialist economy, nationalized a great many companies, and the market turned against them and they had to move back. No system is perfect. 21

I happen to believe in markets on trend and interference in cns1s management. It so happens that a lot of true believers in the market think that markets never go wrong. I think they do. And a lot of true believers in socialism say markets never go right. That's a wrong view. My judgement would be, based upon inadequate knowledge, that you want to rely on the market as much as possible on trend, but don't be ideologically committed to it when there is a crisis. Try that line. Question Your response to an earlier question troubles me. I refer to the question about Japan and the NICs and how people in these countries work very hard. I did part of my academic training in the United States. I came back about eight years ago and one of the things that always impressed me about America was that the people really worked very hard. I've never seen more hardworking people. Maybe since I came back, perhaps they have become less hardworking. I'm not sure about that. But to me it is not the number of hours that you work. I think your productivity is more important. What's going for America today that is not going for many others is maybe temporary. We are producing the Sony sets and computers, IBM compatibles, but IBM is still in America. In terms of research and development we have a long, long way to go to catch up with Europe and America. When it comes to space technology, your Boeing planes, when it comes to your new generation of computers and so forth, I think it will take a long time before the others catch up. So, what I am getting at is that it is not important how many hours you work but what is your productivity. I don't know whether productivity in America is high but from what I see for the future, I mean all the Nobel prizes and future research, R & D and so forth, there is a lot going in America. This will decide for the future who will be economically active and really contributing. If I can produce more and relax, why not? I think it is good to work two hours a week and relax and still be more productive. Let Japan work. Professor Kindleberger You have a good point. I am a little worried about Nobel prizes which may be more showy than productive in some cases, but not in the case of the three MIT economists. The Germans have some wonderful words like Tuchtigkeit and Fleissigkeit. Tuchtigkeit is when you organize and get it done. Fleissigkeit is when you really push. And they have another word, Sitzfleisch; sitz is related to sitting, and fleisch is flesh -- putting the tail on the chair and leaving it there for a while. The Germans are much better at these words than anybody else, but in some cases I quite agree it is the purpose as well as the attitude, the effectiveness.

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Question I may be wrong but I don't think I have heard you make reference much to another possible explanation which has been bandied around about the parallels between the 1930s and the 1980s. I am referring to the idea that in the 1920s there was an increasing difference in incomes and so on in the United States between the rich and the poor and the suggestion is that this happened again in the 1980s. And, that when this sort of thing occurs, banks and other wealthy individuals are forced to get involved in investments where the risk of defaulting or the possibility of failure is rather high, and that this creates the situations where crashes occur. The other suggestion linked with this is that crashes and depressions actually redistribute income more evenly in a society by wiping out the rich element. I would like to know what you think of this. Professor Kindleberger I really haven't thought of underconsumption as a cause of the depression. It seems to me that if you have credit facilities, underconsumption is not a problem. I worry about the U.S. economy now. When I first learned Keynesian economics we learned that investment was the autonomous variable in producing change. Now it is perfectly clear that it is consumption. If people like the new models you get a boom; if people don't like the new models you don't get a boom. It is consumption which is autonomously changing all the time. I don't think underconsumption is a serious issue today. I don't deny it; I just don't see it that way. Question I am going to tell you an anecdote before I ask you a question, which is a very down-to-earth question. The other day I was talking to a Japanese banker

who was summoned by a Japanese visitor whom he didn't know to his hotel to bring him to meet the Japanese banker in the Japanese banker's office. My Japanese banker friend thought it was very rude but since culture is thicker than blood, or as thick as blood, he obliged. This Japanese visitor doesn't speak anything except Japanese, was sixty-eight years old, CEO of a mediumsized Japanese support manufacturing business, first time in Singapore. And the message was that in the last twenty years the Japanese have been exporting product because of growth. Today they are exporting capital in the form of plant because, in the words of this sixty-eight-year-old CEO, they have to survive. That is obviously because of the push on the yen. This man is not alone and whilst we all believe that the Japanese economy is a powerhouse, I am curious and have been curious since I heard this anecdote. I venture to ask your views on how long the Japanese economy can last 125 yen.

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Professor Kindleberger

I am afraid I am not tuned in on the exact rate of the yen. I can see they have problems, the problems that I see are the financial ones. A good many insurance companies have bought dollars at 300 yen and now they are down; if they hit the bottom in the market they would be broke. That's the problem. They are hanging on. I am not sure how much they are hanging on in the productive field. I have this colleague who thinks it is not enough yet. Lower, lower, and lower, that's what all these people are saying. I don't know what the answer might be. I am sorry.

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Closing Remarks K S. Sandhu Director Institute of Southeast Asian Studies

Ladies and Gentlemen The interest in terms of listening to a person of the calibre and experience of Professor Kindleberger is that, I suppose the brain expands as you get older because his interest has widened rather than narrowed as is well known. And the guiding principle has been curiosity -- curiosity to try and learn, curiosity to try and explain and explore new avenues. What he has been expounding and passing to people who have come into contact with him is that you never stop learning and you always question. So, it is refreshing to listen to him, who is a trade union economist but ranges over the wide fields of political science, psychology, sociology, and so on. I am sure you would like to join me in thanking Professor Kindleberger in giving us the opportunity of ranging through this age from the 1920s to the 1980s, but even more fundamentally in ranging through the whole range of explanatory variables of any particular phenomenon. And if you have learned anything this afternoon, it is that no one solution or one explanation is going to work. For those of us who live here in Singapore, I thought, the rule of the game is how to keep one step ahead of disaster. Professor Kindleberger, thank you very much.

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THE AUTHOR

Dr Kindleberger is Ford International Professor of Economics Emeritus at the Massachusetts Institute of Technology. He studied at the University of Pennsylvania and Columbia University where he obtained his doctorate in 1937. He has also received honorary degrees from the University of Paris, the University of Ghent, and the University of Pennsylvania. In 1980 he became a Distinguished Fellow of the American Economic Association, and Dr Kindleberger has researched extensively on in 1985 its president. international trade and finance and lectured widely on the subject. Among his numerous publications are American Business Abroad (1%9), Pmvrr and Money (1970), The World in Depression, 1929-39 (1973), Manias. Panics and Crashes (1978), and International Capital Movements (10~7).