1873: The First Great Depression and the Making of the Modern World

From the author of the Pulitzer Prize-winning Lords of Finance comes a brilliant account of the earliest truly global financial calamity.

On Friday, 9 May 1873 the Vienna stock market collapsed. Four months later Wall Street was in trouble. Elsewhere, as panic selling spread across financial markets, some countries defaulted on their debts, while the Bank of England was forced to raise its rates to their highest level in a century. It was the first global crash in history. And it was to have calamitous consequences.

In his powerful new book, the author of the Pulitzer Prize-winning Lords of Finance tells the epic story of that crash and explores its economic and human costs. He describes how the growth of the international bond market in the 1850s and 60s funded a frenzy of speculation in railways, construction and nation-building. He examines those who became swept up in the boom, from leading bankers like the Rothschild dynasty to national leaders both visionary and venal, to rogues and chancers like the shameless Jay Gould, to such sceptical onlookers as Mark Twain and Karl Marx. He then traces how, in the subsequent panic, investors were left with catastrophic losses, while governments on both sides of the Atlantic rushed misguidedly to reorder the world’s financial system.

As he shows, the blunders made as the crisis unfolded set the stage for twenty years of deflation, and a punitive legacy of aggrieved populism that infected every part of the globe. Amid the crash’s many aftershocks, the US abandoned Reconstruction, European powers staged an economic takeover of the heavily indebted Ottoman Empire, and the principle of international free trade came under pressure. Meanwhile there was a revival of antisemitic movements in Europe that blamed ‘Jewish finance’ for the disaster.

A brilliant evocation of a key turning point in world history, 1873 is also a masterly examination of the unforeseen political and social consequences of financial misjudgements.

Review

Liaquat Ahamed matches his earlier Lords of Finance with a page-turning saga of the world’s first international financial crisis. By pinpointing the essential characters, from the avaricious Jay Cooke in America to the Turkish sultan blowing his budget on a harem of two hundred women to the mysterious Rothschild banking clan, Ahamed makes 1873 seem as alive as today. And in his hands, it is. By confronting the question of what could topple economies across multiple time zones, this master writer comes again to the question of money, over a quarter-century in which prices spiralled out of control―not up, but down―sowing misery for the common man, especially in America. We read with fascination how Gilded Age bankers and statemen missed the yawning danger of deflation―and wonder if those in our time have yet to learn their lesson. A gripping read, Ahamed makes the crisis of 1873 both compelling and accessible. -- Roger Lowenstein, author of Ways and Means and Buffet

Liaquat Ahamed has a unique ability to bring financial and monetary history to life. In this superb book, he weaves together the people, forces, and events that led to the global financial crisis of 1873 and then shaped its dire long-term consequences. Not least, he shows how a huge boom-and-bust cycle combined with the decision to make gold the sole monetary anchor, to create a first global ‘great depression'. -- Martin Wolf, author of The Crisis of Democratic Capitalism

With his readable prose and agile analysis, Liaquat Ahamed has a talent for telescoping huge financial fiascoes into compact and exciting books. 1873 describes how speculative mania and misguided monetary policy produced debt and deflation that shadowed the final decades of the 19th century. With its cast of colorful villains, this saga contains a wealth of sobering insights that ought to sound a warning in our own hyper-speculative era. -- Ron Chernow

About the Author

Liaquat Ahamed graduated with degrees in economics from Cambridge and Harvard, worked at the World Bank in Washington, D.C., and had a twenty-five career as a professional investment manager based in London and New York before turning to writing. His first book, Lords of Finance: The Bankers Who Broke the World, about the lead up to the 1929 Great Depression, won the Pulitzer Prize for History, the Council on Foreign Relations Arthur Ross Gold Medal, and the Financial Times Best Business Book of the Year Award. He is a trustee of the Putnam Funds, an adviser to the Rock Creek Group, and the Chair of the Sun Valley Writers’ Conference. He lives in Los Angeles and Washington, D.C. with his wife Meena.