Around the World in One Long Depression: Liaquat Ahamed on 1873 & the Making of the Global Economy

00:00:31 Andrew Keen: Hello, everybody. It's Tuesday, 06/02/2026. Yesterday, we had the, British novelist, Alexander Starritt, on the show. He's the author of a very well reviewed new book, Drayton and Mackenzie, a novel about, the two thousand and eight crash. It got shortlisted for the Financial Times business book of the year last year, the first time they've shortlisted a novel for many years. It's a book about 2008. And as Alexander Starritt argued in another piece that he wrote for the London Times, the two thousand and eight crash ruined the lives of his generation, of the millennials. And when it comes to global crashes, there are a few people, more informed, knowledgeable, wise about global crashes than my guest, Liaquat Ahamed. He's the author of the Pulitzer Prize winning Lords of Finance, a book about the great crash of the nineteen thirties or the great depression of the thirties, which he actually wrote during the two thousand and eight crash. And he has a new book out. It's called 1873, the Rothschilds, the first great depression, and the making of the modern world. He's joining us from somebody else's home in Washington, DC. The book is out today, Liaquat. Congratulations on the new book.

00:02:04 Liaquat Ahamed: Thank you.

00:02:05 Andrew Keen: You seem a very cheerful fellow, Liaquat. What is it about global depressions that get you so excited? I mean, this book's taken you many years. The other book was massively acclaimed. As I said, it won the, not the Nobel Prize, but the closest thing to a Nobel Prize for writers, the, the Pulitzer Prize. What is it about Great Depressions that get your blood running?

00:02:31 Liaquat Ahamed: Well, most people assume that I must be some sort of misanthrope, who takes great pleasure in sort of mass suffering. And, actually, people who know me, real, know that I'm actually I have a very sunny disposition, with and a very positive outlook on life. So the reason that I find financial crises so fascinating is that when you're writing economic history, things happen quite slowly. Takes decades for things to move. But every so often, history speeds up, and you suddenly get what happened what typically takes a decade to happen, happens in a few months. And, you know, companies go under, people, people go bankrupt. So, I, I and it's it's, I suppose, the closest that a economic historian can come to the sort of action that a military historian writes about.

00:03:49 Andrew Keen: So that's what Yeah. And I think Lenin said something about history speeding up sometimes that a week sometimes is a decade or a century and sometimes, century, is a week and vice versa.

00:04:03 Liaquat Ahamed: Yep. So that that's the principle, and that's what that's what motivates me to focus on financial crises. Now I can't claim to be an expert because I've only written two books about them. So,

00:04:17 Andrew Keen: I guess certainly more of an expert than I am in most of our I'm being all our audience. As I said, the lords of finance won the Pulitzer Prize, partially for your economic wisdom, but also for your human your portrayal of the humans, the leading humans involved in this catastrophe. Alexander Starritt talked about 2008, the crash ruining their lives. There's the human dimension to all this too. I mean, it might be fun for an economic historian like you to write about it, Liaquat, but, it's a pretty miserable experience to live through one of these things.

00:04:58 Liaquat Ahamed: Yeah. Although, you know, both, lords of finance and, this new book, 1873, is less about the people affected and more about the decision makers. So, lords of finance was about four central bankers, and the craze and the sequence of errors they made, in the lead up to 1929. And the same thing is sort of true, less so in 1873, that it, it documents the buildup, the errors that the authorities allowed to happen. They were less they were much less hands on in those days. So, and then the, and then the aftermath. And, 1873, this new book, I focus very much on, on the after on sort of the next ten, fifteen years, aftermath, because it's it was so devastating both in The US, in Europe, and across the world.

00:06:20 Andrew Keen: Yeah. And, of course, at least according to Wikipedia, the long, quote, unquote, long depression that was triggered by the crash of eighteen seventy three may have lasted till March 1879, or other economists argue that it ended in 1899. So it's still highly debatable at its impact. The subtitle of the new book, Liaquat is, the Rothschilds, who we'll come to later. The first great depression and the making of the modern world, why was this the first great depression? What was the state of the global economy to create this Great Depression and, of course, the making of modernity?

00:07:08 Liaquat Ahamed: So, in 1870, we had three iconic projects that got, that were completed. We had the completion of the transcontinental railroads in The US. We had the completion, a few months later of the Suez Canal. And then a few months later, the, the Trans India railroad link linking, Bombay to Calcutta. And that was viewed as a truly significant, event because, a couple of peep a couple of, newspapers wrote that for the first time, you could go around the world in less than eighty days. And a French novelist happened to stumbled across this article, which actually even docu gave a itinerary for such a

00:08:21 Andrew Keen: Is it Jules Verne?

00:08:23 Liaquat Ahamed: Yes. So Jules Verne, you know, was trolling around for ideas about a book. He reads this and says, this would make a great, novel. And so that that, it was a sort of keep, a key event in the evolution of the global economy. And it really signified how integrated the global economy had become. And that is, I think, why you've had the first global depression or the first global, crisis.

00:09:12 Andrew Keen: So, Liaquat, of course, the events that led up to the crash of twenty nine and the Great Depression of the thirties was the massive boom of the twenties, the crazed boom, the irrational exuberance of the nineteen twenties. Did you have a similar, irrational experience in the eighteen sixties?

00:09:36 Liaquat Ahamed: We had a rational boom in the eighteen fifties and sixties, and it was actually quite a steady boom. What happened was in 1870, just as these three iconic projects were being completed, war broke out in Europe between France and Germany.

00:10:02 Andrew Keen: In '18, 1870?

00:10:04 Liaquat Ahamed: Yes. And unification, which, of course,

00:10:07 Andrew Keen: result Franco unification of Germany.

00:10:10 Liaquat Ahamed: Yeah. The Franco Prussian war. But, so the assumption was this is gonna lead to a this is gonna lead to massive disruptions in capital markets, in trade flow flows, and is gonna bring this twenty year boom, which was a perfectly rational and not irrational, bubble, to a halt. What instead happened, and no one quite understands why, the disruption in the capital markets that occurred from 1870 to 1873 fueled a sequence of bubbles. One was, the in The US, US railroad construction was was, was proceeding, at a very strong pace. But suddenly, all this capital that was fleeing Europe flowed into the, flowed into The US and gave the, railroad boom an extra fill up up. On top of which, France was required, under the peace treaty, to pay Germany a billion dollars. And by the way, a billion dollars in those days would be the equivalent of $1,200,000,000,000 today. And through the help of the Rothschilds, they raised the trillion you know, the equivalent the $1,200,000,000,000 equivalent in the space of, in the space of six months. And all of this money was injected into Germany, which caused a massive bubble. Injecting that much money in the that shorter space of time caused a massive equity bubble. The, the equity market in both, Berlin and the ancillary equity market in Vienna, went up $203,100 percent.

00:12:27 Andrew Keen: So that's the Rothschilds element. We'll come to that in, in Right. Specifically in a few minutes. I know you've

00:12:33 Liaquat Ahamed: And then there was a third bubble, which is that there was an explosion in foreign borrowing on the, on The UK stock market. And all sorts of countries came, to borrow, on the on the capital markets. And, you know, many of those countries should never have been provided credit. But there was so much money, that was sort of set loose by the Franco Prussian war that was looking for a home. So it's three bubbles.

00:13:07 Andrew Keen: Like, I know, one of the other things you've done in your life is as a senior figure within the IMF, and you wrote a book back in 2014 called Money and Tough Love Inside the IMF about when you should and shouldn't lend money. So you're not just an academic, Liaquat. You're also a man who's practiced the business or the lack of business of lending to companies. It's interesting. You begin your wonderful book, Lords of Finance, with, a section on the first World War, which you see as being intimately bound up with the crash of the thirties. How central do you think war is when it comes to these great crashes? Is there always some sort of military event triggering economic crashes from the beginning of time?

00:13:56 Liaquat Ahamed: You know, I'm not sure. I mean, the, first of all, we haven't had that many crashes. I mean, the if you look at history, the truly global crashes were 1873, 1929, arguably 1973.

00:14:19 Andrew Keen: Arab Israeli war, of course.

00:14:21 Liaquat Ahamed: Yes. And, 2008.

00:14:23 Andrew Keen: Yeah. Where there was I mean, I there was I guess, the Americans were in Iraq and Afghanistan, but that's slightly different.

00:14:30 Liaquat Ahamed: Yeah. So, but I don't think that was not what ended up triggering, 2008. So, you know, though, so I don't know. Two out of three or three out of four, there was a massive military operation that probably had some repercussions.

00:14:54 Andrew Keen: Liaquat, what did the global economy look like at this time? You were educated in The UK. My rather amateurish understanding is that the British Empire was at its pomp, in the middle of the nineteenth century in the Victorian age, and that their share control of the this global economy, which was increasingly an anglocentric economy was pretty astonishing. Is that fair?

00:15:25 Liaquat Ahamed: You know, I think that's an exaggeration. Just to give you rough numbers, The UK economy was $6,000,000,000. The US was catching up fast. It was $5,000,000,000. France was $4,000,000,000, and Germany was, let's say, $4,000,000,000. So they were it was actually one of the few times when the four major economic powers were roughly equal in size. And, you know, today, The US economy is, whatever, $30,000,000,000,000. The next largest is China at 10 to $12,000,000,000,000. So, you know, there's a massive discrepancy here.

00:16:16 Andrew Keen: So it was a multi an economically multipolar world as it was politically and military in the middle

00:16:22 Liaquat Ahamed: of Very much so.

00:16:23 Andrew Keen: The nineteenth century. In your, in your book about, the great crash, John Maynard Keynes, his great niece was on the show recently. She has a new book out about trade wars. She works for the Financial Times. He's presented as one of the few wise men who got it. Were there people in the eighteen seventies, Liaquat, who were the equivalent to Keynes, who understood what was happening?

00:16:51 Liaquat Ahamed: You know, I'm, I'm not sure that anyone got their heads around, totally got their heads around what was going on because, you both had a you had a crash, which had massive repercussions. But then on top of it, you had this crazy decision by the Germans to double down on their attack in on France by trying to, impoverish France by selling all their silver. And France was the largest holder of silver in the world, and it was sort of the it was a, it was a self inflicted wound, for the Germans to do this because everyone silver prices fell everywhere, including in Germany, and it caused a spiral downwards in, silver prices, which then caused a massive contraction in the volume of international reserves. And to do this in the middle of a financial crisis was to was to compound what was an unfortunate sequence of accidents with a crazy economic buzz.

00:18:20 Andrew Keen: I mean, maybe in the long term, we can see then French behavior at Versailles as being a kind of revenge. Bismarck's always been treated kindly by his story or many historians in history as being a wise realist, the man who united Germany in your, in your book, Lord of Finance, you present him as someone who understood that Germany shouldn't be a fighting war on two fronts. Does Bismarck have some responsibility for the this in economics, at least this disastrous peace with the French?

00:18:54 Liaquat Ahamed: Yes. He had he did not understand economics and by his own admission. And, when they imposed this billion dollar, today, the equivalent of a trillion dollars, this fine on France, He didn't understand that just imposing a giant fine on a country, actually does you no good because they try and give you they pour in gold and silver into your country, which then causes massive inflation, a stock market bubble, and it doesn't actually help the it didn't actually help the German, economy, and in fact, left a residue that would last for a decade.

00:19:49 Andrew Keen: Marx comes up in your book, not just, the Rothschilds. Marx, who, of course, fancied himself as an economist, although many people think he was a better philosopher and political theorist, did Marx understand what was happening?

00:20:06 Liaquat Ahamed: No. Marx had been predicting a financial crisis since the eighteen fifties.

00:20:17 Andrew Keen: In a biblical sense, of course, Marx was perhaps most mostly influenced by a kind of a biblical theology in his narrative of history.

00:20:27 Liaquat Ahamed: Exactly. And so every few years, he would predict, okay. The crisis is now coming. And his, I mean, people it was so ridiculous. He was so ridiculously long wrong for so long that even his pals started making fun of him.

00:20:47 Andrew Keen: Well, even a clock is right twice a day. Exactly. I joke with, Alex Starritt when he was on the show that, in fifty years' time, people are still gonna be talking about a late a crisis of late stage capitalism. This thing's been going on for a couple of hundred years, hasn't it?

00:21:05 Liaquat Ahamed: Right.

00:21:06 Andrew Keen: What about Mark Twain? He also again, not a not a character one would expect, the great American writer and humorist, a man who understood nineteenth century America as well as anyone and its booms and bust culture. Twain comes up in this book. He's not the kind of figure who would you would expect to see in a in an economic history. What did Twain make of the 1875?

00:21:29 Liaquat Ahamed: You know, he, I think, understood that the, the bubble in railroad construction was having very damaging effects in The US. And in fact, he and a friend, collaborated to write a novel, which came out in 1873 in early eighteen seventy three. The title of which was the gilded age. The novel was terrible. It, you know, it the plot didn't hang together. It was full of minor characters that, you know, very forgettable minor characters. But what did remain was the title of the book. And it struck a chord, and it was, it it, it was converted. He actually rewrote it as a play, and it ran as a play in New York and did somewhat better as a play. But it was, it was an attempt to capture, the decline in morality, because of the boom in railroad construction.

00:22:53 Andrew Keen: Marx, of course, famously wrote about, '18 the Paris Commune of eighteen seventy that, history repeats itself first as tragedy, then as farce. When we think about our current boom and inequality and our current gilded age two point o, are there equivalents? Was the boom of the eighteen fifties and sixties, did it create an enormously wealthy class of capitalists and investors, Liaquat?

00:23:21 Liaquat Ahamed: Yes. In a in a word. Yes. I mean, there were, it not only did it create a, sort of change the change the distribution of income, particularly in The US, but, also somewhat in Europe. It it, it fueled a explosion in borrowing. And part of the story that I tell in the book is that behind that explosion in borrowing was the Rothschilds, who essentially, were the inventors of the bond market. But that left the world in 1873 with this overhang of debt. And when things started going south, this overhang of debt provoked not only bankruptcies, but this massive deflation in prices as debtors found themselves increasingly overburdened by the rising, the rising cost of their debts.

00:24:41 Andrew Keen: So let's see. We've got to the r word, the Rothschilds. We did a show couple of years ago with the writer, Mike Rothschild, who has nothing to do with the Rothschilds, called Jewish Space Lasers, the Rothschilds and two hundred years of conspiracy theories. They were very much involved or people who wrote who read and wrote the protocols of Zion, thought that the Rothschilds were the antichrist. How, introduce us to this Rothschild family, a wealthy Ashkenazi Jewish noble banking family based originally in Frankfurt. Tell us about them.

00:25:21 Liaquat Ahamed: Well, they were they were more than just wealthy. They were the richest family in the world.

00:25:27 Andrew Keen: They were the Musks and the, the Bezos's of the late nineteenth century.

00:25:32 Liaquat Ahamed: Yes. I mean, in '18, in the early eighteen seventies, it's estimated that they were worth a 150 to $200,000,000 then, which, you know, if you multiply by a thousand, is a 150 to $200,000,000,000, today. And until very recently, that would have made them the richest family in history. The last few years have upended that. We're about to see Elon Musk exceed a trillion. But it you know, you cannot underestimate how important they were to the financial the financial situation, particularly in Europe, which was the main which was the main center of capital, in the eighteen seventies.

00:26:34 Andrew Keen: And, of course, they're a Jewish family, although they certainly weren't, traditional Orthodox Jews from the ghettos of Eastern Europe. How overt was their Jewishness?

00:26:47 Liaquat Ahamed: Very overt. They, they only married, they would only marry within the faith. The founder there's the founder and then his, five sons, and then there were, I don't know, 11 grandsons who ran the business. Of those 11 grandsons, because they would only marry within the Jewish faith, 10 of them married their first cousins. So, it was it was a very insular family. And, you know, I should add that, in the nineteenth century, marrying your first cousin was not, was not quite as exceptional as it is today. I don't know. Queen Victoria and prince Albert were first cousins.

00:27:53 Andrew Keen: Albert Einstein Although it's quite surprising given how smart the Rothschilds were in amassing money, I'm not sure it generates very smart kids, especially in the British royal family.

00:28:03 Liaquat Ahamed: Albert Einstein married his first cousin. Charles Darwin married his first cousin. So, so it was a it was a common phenomenon. So how

00:28:15 Andrew Keen: I mean, the Jews, of course, historically in Central And Eastern Europe lived quite separate lives. They became more integrated in nineteenth century Germany. There were Marx, of course, famously wrote about the Jewish question, and some people see him even if he was the son or grandson of rabbis from Trier as himself an antisemite. How did the Rothschild involvement with this crash, how did it trigger or change antisemitism in Central And Eastern Europe?

00:28:50 Liaquat Ahamed: Well, the first of all, you know, I should say the Rothschilds were in a class of their own. You know? They were truly viewed on this on a par with, the royal families of Europe. They had a 150 homes spread across Europe. They, you know, socialized with kings and, and even, they were they were elevated to the nobility in the eighteen thirties. They, in places like Austria, they weren't received at in court at court, but they were, you know, they were otherwise, you know, they had they had a noble status. In Britain, they Lionel de Rothschild became a member of parliament. The next generation, there were you know, his son was, was elevated to the House of Lords. So they were they were not in any sense in a ghetto.

00:30:07 Andrew Keen: Yeah. They I guess the closest thing to them these days is George Soros. He made a fortune taking the Bank of England on. As you know, I'm sure you're familiar with do you know Soros?

00:30:20 Liaquat Ahamed: I don't know. Well, I've met him.

00:30:23 Andrew Keen: Well, you know you I mean, you know the story as well as anyone. Did the Rothschilds make Soros style money out of lending the German, the their involvement in this, in the piece of 1870?

00:30:42 Liaquat Ahamed: They, they made a ton of money, raising capital for France to pay off Germany. So and, you know, it took everyone by total surprise when they raised a billion dollars in 1870 to pay off the French indemnity.

00:31:04 Andrew Keen: So where did they get the money from?

00:31:06 Liaquat Ahamed: Well, they had contacts all around the world.

00:31:10 Andrew Keen: Right. So it was a kind of global so when it comes to this idea of a global, the Great Depression, the money itself was also global in a way. We see the emergence of a global economic system all coming together in '18 in the early eighteen seventies.

00:31:27 Liaquat Ahamed: Very much so. There was, there were probably 200,000, 300,000 bondholders, of, of pretty, you know, of sort of high net worth individuals who were the clients of people like the Rothschilds who financed this whole boom.

00:31:50 Andrew Keen: Were there Rothschilds, some of the members of the family who were a little concerned about their more and more visible role in this and the fact that I mean, I know no one expected this great crash, but they must have understood that they were involved in a massive gamble, and it could backfire not just in a financial sense, but in a cultural and a political sense?

00:32:16 Liaquat Ahamed: You know, they were actually not participants in the bubble. I mean, they, you know, they raised capital, and they were you know, they created this, you know, this giant machinery for raising capital, which is the bond market. But they were very they had a tradition of avoiding anything that smacked of sort of a mania. So anything that looked as if it was everyone was piling in, they immediately became skeptical of that. So they did not lose money in 1873.

00:32:58 Andrew Keen: Well, that's always the smart money. I'm sure the Dutch some of the Dutch investors in the tulip mania, they didn't lose money. It's always the smart guys who come out, didn't sell all his stock before 1929.

00:33:13 Liaquat Ahamed: Yeah. I I've forgotten that story. Yes.

00:33:17 Andrew Keen: So what exactly happened? There was this panic of eighteen seventy three. I know you focus as you do in your other wonderful book, Lord of Finance, with the inadequacies, the shortsightedness, the human deficiencies of the leading, not just economists, but the people in control. We've talked about Bismarck. How inadequate was the response of policy economic policymakers to this panic when the boom busted?

00:33:50 Liaquat Ahamed: Totally inadequate. I mean, I don't know how what one could say that the, the actual economic impact of the downturn was relatively modest. In, in The US, industrial production went down 6%, which, you know, is not great, but is is, you know, a very modest recession.

00:34:18 Andrew Keen: But, you The US was historically a boom and bust economy and culture, wasn't it?

00:34:24 Liaquat Ahamed: Right. But it so the fact that it only went down 6%, and that Germany neither Germany nor, Great Britain had a major depression, was actually quite significant. What was significant was all of this monetary mismanagement on with silver led to a twenty year period of falling prices. Eventually, prices in the eighteen nineties had fallen by between 30 to 40% compared to where they were in

00:35:10 Andrew Keen: a deflationary crisis has happened recently in Japan.

00:35:15 Liaquat Ahamed: Exactly. And it was it was just, it was so pervasive, and it had such damaging consequences for you know I mean, the irony was that in a deflation, creditors, I. E. Bankers and people who own bonds, do pretty well, and debtors do terribly. So you had a situation where bankers were viewed as having brought on the crisis, and then in the twenty years thereafter were blamed for having provoked, you know, for having benefited from the aftermath.

00:36:03 Andrew Keen: When it comes to blaming bankers, I've talked about the protocols of Zion earlier. I'm not sure when they were written at about this point.

00:36:11 Liaquat Ahamed: I think later, eighteen nineties.

00:36:14 Andrew Keen: So do you see this crisis as triggering, shall we say, just as it triggered the modern economic age, also modern antisemitism? I mean, we can't Oh,

00:36:25 Liaquat Ahamed: very, very much.

00:36:26 Andrew Keen: In the cry you know, we don't necessarily see a straight line between this crisis and the holocaust, but, certainly, it reinvented antisemitism. Is that fair?

00:36:39 Liaquat Ahamed: That is totally fair. It's not a coincidence that the word antisemitism was first coined in the late eighteen, seventies in Germany by someone who view used it as a as a term, a positive term. And

00:37:02 Andrew Keen: Who was that?

00:37:04 Liaquat Ahamed: William I'm blanking on his name. Sorry. Mhmm. But he so, yes, it antisemitism. Jews were in the eighteen sixties and eighteen seventies were becoming totally emancipated in Germany. And then the crash and the bubble caused a, a retrogression and, the, so a revival of anti a new form of anti semitism. A Muslim. Yeah. Economic anti semitism. Even France, which until then had been relatively immune from anti semitism, then gets infected, which then leads to the Dreyfus crisis. Right.

00:38:04 Andrew Keen: What year was the Dreyfus case?

00:38:07 Liaquat Ahamed: In the eighteen nineties, early eighteen nineties.

00:38:10 Andrew Keen: So from an economic point of view, Liaquat, why do economists differ on whether the long depression as a consequence of this panic of eighteen seventy three? Why does some say it ended in 1879, which is a six year crisis, which don't seem too bad, and some say 1899, which is a quarter of a century.

00:38:34 Liaquat Ahamed: Because depends whether you're looking at production or price.

00:38:38 Andrew Keen: Well, how do you see it?

00:38:39 Liaquat Ahamed: I see it as a long peer I focus on prices. That that's what made, that's what gave, the global economy, its malaise. That with constantly declining prices, it was hard to generate any sort of optimism. And as a consequence, the economy it was, in my in the book, I describe it as, an a global economy which was, trying to get, going, but with one foot on the accelerator and one foot on the brake.

00:39:19 Andrew Keen: That's one way of breaking the gearbox, which, of course, they use those days. And the political consequence is, Ulysses Grant was The US president at the time. I know you talk about its impact on reconstruction, on the failure of reconstruction after the civil war in The US. What were the political consequences in The United States of this great, not this great depression of the long depression?

00:39:44 Liaquat Ahamed: You know, actually, it was, it would they were almost immediate. In 1873, you get a financial crisis. Going into the financial crisis, the Republican Party was in the Catbird seat. It had just won a it had won the presidency. It was controlled both houses of congress. And most people, in 1872, the democrats didn't even field a candidate. The two candidates were a Republican and a Liberal Republican. So everyone thought the Republican Party would dominate American politics for a generation. The effect of 1873 and in particular of Ulysses Grant sticking to hard his hard money policies as it was at as the country was going into a depression and as and most importantly, as prices were falling dramatically, was to, the democrats rewon the house in 1874 and came close to winning the presidency in 1876 and were only able to win the presidency with one electoral college vote, and that seems to have been the product of a backrooms deal, between the Democrats and the Republicans in congress.

00:41:28 Andrew Keen: The first or the last, I mean, of that term.

00:41:30 Liaquat Ahamed: Yeah. And the terms of the deal were very simple. The democrats said to the republicans, we'll give you the presidency, but you have to withdraw all true all federal troops from the South. And that was the end of reconstruction, and it was only another it took a barely a decade for Jim Crow laws to get

00:41:57 Andrew Keen: In other words, Liaquat, we can blame Jim Crow on the Rothschilds. Is that fair?

00:42:03 Liaquat Ahamed: No. When that that's a

00:42:05 Andrew Keen: little bit if I get accused of, all sorts of things. That was a joke.

00:42:09 Liaquat Ahamed: Yeah. That was no. But Oh, it

00:42:13 Andrew Keen: had a profound, it had a profound impact on The US on the history. It's a very interesting, counterintuitive interpretation of American second late nineteenth century history, which often isn't given. But,

00:42:28 Liaquat Ahamed: I mean, second half

00:42:29 Andrew Keen: interpretations are always probably the most truthful, full, as Mark's reminded. What about in The U what about in The UK, Liaquat? What was the impact of this long depression, on the on the British economic miracle, on the industrial revolution there?

00:42:48 Liaquat Ahamed: The impact was essentially, that, as prices were going down everywhere in the world, The UK was slow to adjust. And

00:43:01 Andrew Keen: Not for the first or the last time,

00:43:03 Liaquat Ahamed: I see. Yeah. And so The US and Germany, so you got a revival in the in the '70 in the eighteen eighties in the global economy, though not in prices. But the, but the driving the drivers of that were The US and Germany and not The U UK.

00:43:30 Andrew Keen: And what about Germany? We mentioned that Bismarck may have been, in some senses, responsible even if he didn't fancy himself as an economist for this rather unwise punitive, peace treaty with the French in 1870. Can we see the long depression as forming the background, the foundation of Bismarck's social reforms? Of course, he's a conservative, but he also pioneered a social welfare system in Germany that, is enormously influential. What was the impact in Germany in political and, cultural terms of the long depression?

00:44:07 Liaquat Ahamed: I think the, the falling prices, damaged the German aristocrats and set the basis for a sort of, for an anti democratic. Until then, you could actually argue that Germany was becoming more democratic. Once the, once prices started falling, and, you and agro the big agricultural estates started facing trouble. You had protectionism being introduced, and Bismarck retreated from his alliance with the Liberals and from a sort of a movement towards free trade. And you got a movement right across Europe of protectionism, which was, yeah, which had damaging effects.

00:45:31 Andrew Keen: The MAGA movement in the nineteenth century. And was it also behind Bismarck's war, so to speak, with the Catholics, his culture camp?

00:45:41 Liaquat Ahamed: You know, I don't know enough about German

00:45:44 Andrew Keen: So he didn't blame the Jews. He blamed the Catholics for this. And then what about the two tottering empires, the two sick men of Europe? Officially, of course, the Ottoman Empire was the sick man of Europe, but the Habsburgs weren't perhaps quite as sick as the Ottomans, but they weren't in a great state. What was the impact on these two great empires of, national nationalism?

00:46:05 Liaquat Ahamed: The giant the giant impact was on the Ottomans. They were, in 1874, when people started adding up all of the international sovereign debts. It turned out the biggest borrower was the Ottoman sultan, Abdulaziz, who had accumulated a debt of a billion dollars then, which, you know, the idea that bankers were willing to or bondholders were willing to lend a billion dollars to the Ottoman Empire and only, you know, $2,000,000,000 to US railroads, just sort of puts that into perspective that, it was ridiculous. The Ottoman,

00:47:02 Andrew Keen: were the Rothschilds also lending money to the Ottomans?

00:47:07 Liaquat Ahamed: No. They you know, that was the astounding thing about the Rothschilds. They managed to avoid They had very strict standards about whom they would lend to, or it wasn't their money. They were underwriting, they were underwriting bonds, which they then sold to their clients. But they had very strict standards, and they would not lend, they the Ottomans approached them many times to be able to borrow, and, and the Rothschilds said no. In 1873, when the whole thing went south, the Ottoman state was paying 70¢ of every dollar of public revenue to servicing its debt. So as the equivalent of

00:48:04 Andrew Keen: The United States today, perhaps.

00:48:07 Liaquat Ahamed: Well, no.

00:48:08 Andrew Keen: In The

00:48:08 Liaquat Ahamed: United States in The United States today, it's 15¢.

00:48:11 Andrew Keen: Right.

00:48:12 Liaquat Ahamed: So we're a long way from 70¢.

00:48:16 Andrew Keen: So could we argue I mean, the Ottoman Empire, of course, was in massive decline, and it was involved in all

00:48:21 Liaquat Ahamed: sorts of

00:48:22 Andrew Keen: wars, especially the Balkan Wars before the first World War. Could you argue, Liaquat, that, that the great crash of eighteen seventy three, the panic, was the death now of the Ottoman Empire?

00:48:36 Liaquat Ahamed: Well, it certainly led to the, the Russians, the Russia Turkey Turkish war, which then, In Crimea. Yeah. No. Post Crimea. Crimea was eighteen fifties. This was '18, seventies, and it essentially hived off all the Ottomans lost all of their European possessions. So everything in the Balkans that belong to the, to the, The Habsburgs acquired

00:49:10 Andrew Keen: a buzzer at Herzegovina, and Serbia became

00:49:14 Liaquat Ahamed: Exactly. Yes. So,

00:49:16 Andrew Keen: the Russians, Liaquat. What was the impact on a primarily agricultural economy?

00:49:23 Liaquat Ahamed: You know, I don't quite know. It, the Russians certainly gained from, the decline of, of the, you know, of the of the Ottoman Empire losing half its, half its empire in Europe. Because some of it went to Russia. Some of it went to, went to, the Habsburgs. I don't actually know what the impact on Russian economic prospects was. It because it, you know, it didn't seem to Russia was still viewed as this bear trying to move into, to Europe, to Egypt and the Mediterranean. So it reinforced the idea that the British essentially forgave the Turks three quarters of their debts in order to bolster up the what remained of the Ottoman Empire.

00:50:39 Andrew Keen: And to as a challenge to the Russians, of course, and then the, the English and the Russians ended up on the same side in the first world. Well, you begin lords of finance with the outbreak of the first world war. To what extent is that the final chapter in a sense in your 1873? To what extent did the crisis of eighteen seventy three create the conditions for the first World War?

00:51:09 Liaquat Ahamed: Yeah. No. I think that's a that's a reasonable, position to take. I mean, it it's certainly, it's certainly we actually we got a depression. We then had the last boom from about 1900 to 1913. And that was a universally, was a true global boo another true global boom before the whole thing ended, in tears. Was it inevitable that it was going to end in war? No. I mean, I don't think the first the fir I've always taken the view the first World War was a series of massive misjudgments and that, you know, it was not there was nothing foreshadowed in the global boom that was gonna cause, the first World War to break out. And then secondly, I don't think there was anything, the crazy economic commitment to of four years of fighting, of essentially pointless fighting in Europe was what caused the Great Depression.

00:52:41 Andrew Keen: Liaquat, what about the impact on the left on not just Marx, but on Lenin, and the social democrats in Germany. Was this enormously influential, this long crisis?

00:53:01 Liaquat Ahamed: You know, I I'm not I'm I don't quite know the answer to that. It was it clearly, the because the deflation from 1873 to the eighteen nineties. Created massive social problems both in Europe and across, and across The US. But there were less to do with workers versus capitalists and much more to do with farmers, struggling under the burden of debts, with protectionism. So it was it was much less a sort of, a war, a war of capital versus labor.

00:54:01 Andrew Keen: Yeah. So, they, of course, always expecting this final crisis. Two more quick questions, Liaquat. You've been very generous with your time. We're always fighting the last war, whether it's a military or economic war. What did economists learn from this crisis that may have indeed been misapplied to the crisis of the late twenties and nineteen thirties?

00:54:26 Liaquat Ahamed: I think they, they assumed that, the world was able to deal that it reinforced their view that the gold standard was the right thing even though it was the wrong thing. But the fact that

00:54:48 Andrew Keen: the world you do month people like Montague Norman, who was head of the Bank of England

00:54:52 Liaquat Ahamed: at the

00:54:53 Andrew Keen: time was a gold standard guy.

00:54:56 Liaquat Ahamed: Right. So, so I you know, it the odd thing I mean, if you read that the review of my book in The Wall Street Journal

00:55:06 Andrew Keen: Yeah.

00:55:06 Liaquat Ahamed: Which just came out a

00:55:07 Andrew Keen: few days ago.

00:55:09 Liaquat Ahamed: Right. It the same thing, appears, which is, you know, it was it was fine. The fact that prices went down was actually okay. And I think it reinforced this sort of belief in the gold standard, which was we which would become a major problem in the twenties and thirties. And final question,

00:55:36 Andrew Keen: and everyone's gonna be asking you this, Liaquat, because you're such a wise man. We live in a time of economic exuberance. Some people might think it rational. Some others, others will say it's irrational. James Surowiecki just recently had a piece in The Atlantic about why stocks keep going up and suggesting that maybe it's not quite as unrealistic as we think. What does your you've spent a long time on this book on law lords of finance. So you're an expert on economic crashes. On this latest book, 1873, the Rothschilds, the first great depression and the making of the modern world. What does this book and this crisis teach us about the twenty twenties and what we might think of as the postmodern world? What are the lessons?

00:56:27 Liaquat Ahamed: So, you know, I suppose the closest equivalent might have been the boom of the nineteen twenties. And the interesting thing about the boom of the nineteen twenties was until 1927, the boom the rise in the stock market was matched by a rise in earnings. So it was perfectly rational. It was from 1927 to 1929, the last two years, where the whole thing became untethered. So, you know, you've gotta be careful about characterizing a whole a whole bull market as a bubble. What instead hap seems to happen is the bull market is, is driven by real fundamentals and real economic growth and, real earnings. But then people become so enamored with what they're experiencing that they start projecting this into the future forever. So the nineteen twenty seven to twenty nine was the bubble, not nineteen twenty to twenty seven. So the question and that happened again in the, in the late nineteen nineties. We had, you know, a big, increase in productivity. We it was perfectly rational. The stock market going up was perfectly rational until about '97 '9 1997 and 1998. And then it became it went crazy. The dilemma is, if you're an investor, is the last two years, you know, it may go crazy, but you'll miss out on 40% rises in returns on stocks.

00:58:43 Andrew Keen: So in other words, and final question, Liaquat, should we buy Anthropic and OpenAI, when they come public later this year? Should we be optimistic or pessimistic about the current AI global boom?

00:58:59 Liaquat Ahamed: We should be optimistic about the boom, but don't buy the stock.

00:59:03 Andrew Keen: Well, wise words from a very wise man. One of the most important economic books of the year is out today, 1873, the Rothschilds, the first great depression, and the making of the modern world. Not just smart economic analysis, but enormously readable with a an excellently colorful human dimension. Congratulations, Liaquat, on the book. I know it took you many years, and expect you to get to work again on the next economic catastrophe. Thank you so much.

00:59:34 Liaquat Ahamed: Well, thank you for having me, Andrew.