‘Depression’, wrote Thorstein Veblen shortly after the end of the Great Depression of 1873–96, ‘is primarily a malady of the affections of the business men. That is the seat of the difficulty. The stagnation of industry and the hardship suffered by the workmen and other classes are of the nature of symptoms and secondary effects’. To be efficacious remedies must, therefore, be such ‘as to reach this emotional seat of the trouble and . . . restore profits to a “reasonable” rate’.footnote1 Between 1873 and 1896 prices had fallen unevenly but inexorably, in what David Landes has called ‘the most drastic deflation in the memory of man’. Along with prices, the rate of interest had dropped ‘to the point where economic theorists began to conjure with the possibility of capital so abundant as to be a free good. And profits shrank, while what was now recognized as periodic depressions seemed to drag on interminably. The economic system appeared to be running down’.footnote2

In reality, the economic system was not ‘running down’. Production and investment continued to grow not just in the newly industrializing countries of the time (most notably, Germany and the US) but in Britain as well—so much so that, writing at the same time as Landes, another historian could declare the Great Depression of 1873–96 nothing but a ‘myth’.footnote3 Nevertheless, as Veblen suggests, there is no contradiction in saying that there was a ‘great depression’ at a time of continuing expansion in production and investment. On the contrary: the great depression was not a myth precisely because production and trade, in Britain and in the world economy at large, had continued to expand too rapidly for profits to be maintained at what was considered a ‘reasonable’ rate.

More specifically, the great expansion of world trade from the middle of the nineteenth century had led to a system-wide intensification of competitive pressures on the agencies of capital accumulation. An increasing number of business enterprises, from an increasing number of locations across the UK-centred world economy, were getting in one another’s way in the procurement of inputs and disposal of outputs, thereby destroying one another’s previous ‘monopolies’—that is, their more-or-less exclusive control over particular market niches.

But then, all of a sudden, as if by magic,

As we shall see, there was nothing magical about the sudden restoration of profits to a more ‘reasonable’ level, and the consequent recovery of the British and Western bourgeoisies from the malady provoked by ‘excessive’ competition. For now, let us simply note that not everyone benefited from the ‘beautiful times’ of 1896–1914. Internationally, the main beneficiary of the recovery was Britain. As its industrial supremacy waned, its finance triumphed and its services as shipper, trader, insurance broker and intermediary in the world’s system of payments became more indispensable than ever.footnote6 But even within Britain not everybody prospered. Particularly noteworthy was the overall decline of British real wages after the mid-1890s, which reversed the rapidly rising trend of the previous half-century.footnote7 For the working class of the then hegemonic power, the belle époque was thus a time of containment after the preceding half-century of improvement in its economic condition. This no doubt gave an additional boost to the renewed euphoria of the British bourgeoisie. Soon, however, the ‘rattling of arms’ got out of hand, precipitating a crisis from which the British-centred world-capitalist system would never recover.