State intervention after the 1987 crash averted a 1929-style depression

Evidence

Faced with a threatened meltdown of the world’s stockmarkets which could precipitate a collapse of the financial system, the state stepped in. Alan Greenspan, chairman of the US Federal Reserve Board, issued a celebrated one-sentence statement on 20 October: ‘The Federal Reserve, consistent with its responsiblities as the nation’s central bank, affirmed today its readiness to serve as a source of liquidity to support the economic and financial system.’ The Fed and the other major Western central banks cut interest rates and pumped money into the banking system in order to keep financial markets afloat. This large-scale intervention by the state averted the kind of chain reaction which led from the Wall Street crash of October 1929 to widespread bank failures and closures in the early 1930s and thence to the most profound recession in the history of capitalism. The resulting stimulation of demand helped to ensure that 1988 was a year, not of slump, but of unexpectedly rapid economic growth. — Alex Callinicos, Against Postmodernism, 515

Categorization

• XREF: Greenspan put’s one-sentence liquidity pledge; connects to crisis-stabilization literature and the contrast with 1929’s non-intervention. — connects to: A single bank executive’s last-minute decision averted a potential 1987 depression — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 26; Widespread crash fears created a self-fulfilling prophecy in October 1987 — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 859; The 1987 crash’s real effects persisted beneath an outwardly limited economic surface — Donald MacKenzie, An Engine, Not a Camera: How Financial…, 894
• SEED: Possible essay angle: the 1987 crash as the proof-case that interventionist state power is alive, contra globalization narratives.