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Alasdair Roberts’ forthcoming book America’s First Great Depression: Economic Crisis and Political Disorder After the Panic of 1837 reminds us that the Great Depression of the 1930s, examined in our Winter 2012 cluster, was not the country’s first experience with financial catastrophe. Roberts, a professor at Suffolk University Law School and former Woodrow Wilson Center fellow, who recently wrote about Wikileaks for the WQ, explains why the First Depression is worth remembering.
You’ve written widely on a distinctly contemporary set of topics: governance in the 21st century, government secrecy, and financial administration in a globalized economy. What prompted your interest in the Panic of 1837?
Since the financial crisis of 2007-2008, there’s been a lot of talk about the decline of American economic power. Some have said that the United States will be charting unfamiliar waters, in which it’s more vulnerable to external pressures. But that isn’t right: in fact, for most of its history, the United States hasn’t been a hegemon. It’s been subject to the ebbs and flows of the international economy. So I thought I would tell a story about what politics is like in such circumstances. The book is about the past, but it might also tell us something about the future.
As you say, Americans forget that outside of a unique period after World War II, the United States has not been an economic hegemon. What changes when we’re not on top?
When you’re not the hegemon, domestic politics is more difficult. Often, it’s the politics of constraint—that is, explaining to voters what can’t be done, because of the demands of the global marketplace. This is a difficult, unpleasant kind of politics. Indeed, it might not even be right to call it “domestic” politics at all. In a very open economy, the line between domestic and foreign policy breaks down. As I show in the book, many local issues suddenly acquire international significance. When there were riots in Philadelphia in 1844, for example, there was real concern in London—because holders of Pennsylvania bonds wondered whether the government had enough control of the population to collect the taxes needed to make its loan payments. About one third of American states were already in default to foreign lenders.
You’ve spent a lot of time reading about American economic and governmental crises, both then and now. What keeps you up at night?
Two things. The first is the strong temptation to indulge in unjustified optimism. No one likes facing the prospect of severe losses in wellbeing. So it is tempting to deny the severity of an economic crisis—to hope that the worst is over, or that we will grow our way out of the problem, or that some modest policy initiative will make everything right. These are all excuses for inaction, and sometimes delay just makes things worse.
The other problem is limited peripheral vision. When you’re a largely self-contained economy, you get used to the notion that domestic problems have domestic causes. And if you see no immediate threats to your well-being close to home, you tend to assume that all is well. But in an open economy, what happens far away still matters. For example: what happens to the U.S. economy if Greece defaults, and the European economy and financial system are badly rattled? And what other dominos like Greece are out there, and starting to wobble?