What really caused the Great Recession? Rhyme and repetition in a theme from the 1930s

Diagnoses of the 2008 financial crisis have invoked arguments involving real sector developments that, though much debated in the 1930s, had largely disappeared from the literature in recent decades. Prompted by these revivals, the present study re-examines an inter-war conviction that the Depression had its origins in uneven technological progress and monopolistic competition. Effectively reversing the induced roundaboutness view of the Austrian thesis, these writings noted a conflict between the resulting need for monetary accommodation and its potentially destabilising distributional consequences. A common framework permits the extent of similarity in inter-war and contemporary American experience to be assessed, with the comparison drawing attention to the 1990s’ NASDAQ boom and the subsequent financial behaviour of the US corporate sector. Consistently with the earlier literature but contrary to recent conclusions, financial sector excess is seen as an aggravating factor, rather than an initiating cause of the recession.