ACTiON SOCiALiSt BY CLOSE of dealing on 19 October 1987 shares on the New York Stock Exchange had fallen 22.6 per and by 11.7 per cent the next day. repeats itself. The 1929 crash started a three-year slide which brought share prices down to just 15 per cent of their 1929 peak. No one can yet say how long has just happened. What brought it on, what course LIKE all recessions in the history of capitalism, Ine basic cause of 1929 was a single, simple fact: GeCsions to invest, to buy, to sel. and to produce in a prie me individ take and individuals privale companies No UlIC therefore decides what iS going on. It is outside the control of any human agency.
As JK Galbraith summed it up: 'On the evening of the 28th (of October 1929) no one any longer could feel secure mme knowledge that the SLOUU reade to pre panic ere rence" The valle market had reasserted itself impersonal force beyond the power of any person to control, and while this the way markets are supposed to be, it was horrible.
Market The market may be uncontrollable but it still has its laws. One is the cycle of which has recurred unfailingly the early ninteenth century cycle endemic capitalism.
This law was at work in 1929 and determined that, as night follows day, the slump 0l 1941, boom years of the roaring '20s, were to be followec the recession the 1930s.
But 1929 surpassed all previous slumps in intensi what has taken place so far in 1987. What explained it?
Like the crash we have just seen, 1929 came at the end of a prolonged 'bull' (rising) market share prices which, by 1929, was fuelled speculation Share prices depended not on dividends paid out, dividends, evel but on the fact that investors expected prices to keep on rising.
MadhouseR
They bought in order to sell. An economic madhouse in which share prices were expected to go on rising indefinitely had been crealed There is an element of speculation in every boom - which always tips it into a slump. However the expectations of were not just ill-founded. They were wild.
The months before the crash saw superlatives tripoff every tongue.
Led by those mighty knights of the automobile industry the steel austry 1cuU ausu.. UlIC respected authority with a classical bent, 'the market has gone forwara like ine phalanxes Cyrus, History never parasang upon parasang and again parasang upon parasang.' As Walter Baghot wrote 50 years earlier: 'No one is SO credulous when they are happy. No one who wants to understand the frenzy around proposals need look any further than 1928-29, Then as now, even as it became obvious the market was built on air, no one could come out and admit it even as the world collapsed around them On the Friday before the really big crash Wall Street, The Times told its breathless audience that the financial community stood 'secure in the knowledge that the most powerful banks in country prevent t walte recurrence of panic.' leagle • the oil baron, said his business had known no tundamen tal change to justify conColl The air resounded to 'fundamentals' rather like Nigel Lawson in fact Charles M Swab, , the steel baron fundamental said steel was making gress' towards stabilit the Baldwin Locomotive works explained that the fundamentals were sound' President Hoover spelled this OUL the hard of thinking: 'the fun damental business of the country, that producand distribution of HOS commodities, on prosperous SOUTC basis.' Broken "Fundamentally', the world was on the verge : of its biggest recession of the entire equilibrum of the world economy was broken up.
Though had won status as world economic fast ending hence And the USA of 1929 had IOL yet secured through the recession and the war that followed, its position capital's ruler The 1929 crash produced chaos, in large because no capitalist statt coulds act as stabiliser of the 1929 divided the capitalist world into protectionist trading blocs wilch eventually resolveu their differences on the battlefield.
United States emerged as undisputed leader of worlo capitalism. One hundred World Wars l and di so million died that the centre of gravity of world capitalism would shift from Western Europe to the United States La further ts taken 40 years for the United States to exhaust these reserves and become capable, again, of stabilising the world economy After 1929 the circle of decline was clear. Th stock market crash left in dividuals and firms unable ed money from the banks against the value of share which had now drastically devalued the stock market crash followed Dy. d. Dant. crash. Crash And as the banks col lapnemy dried up and th lapsed credit US economy was drags into slump. Then, to try t its domestic States, Like the United State every othet capitalist state the world, turned to protec tionism. And with protec tionism the ollapsedml ncontrollable slun It is pointless to try to speculate what will happen 1n History inere mechanical repeat of 1929.
But et 1929 tain As after world will never be same again
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cent in a single day. This surpassed the crash of 1929 when, on 28 October, shares fell by 12.9 per cent —
the present slide will last. But the crash of "29 is the only thing this century which compares with what
did it take, and what followed it? Answers to these questions can give some insight into what is taking place today. ALAN FREEMAN reports.
Leader Out of this chaos, the
to repay loans to banks because they had borrow.