Felix Somary, “The American and European Economic Depressions and Their Political Consequences” (1931)

This file is a published Chatham House address by Felix Somary, followed by a summarized discussion. Its scope is global: Somary treats the Depression as a systemic crisis linking monetary policy, commodity prices, capital flows, cartels, and European security. His central thesis is that the crisis is not a vindication of one economic ideology over another, but a breakdown of the international order whose political danger is war.

The present economic crisis is international and general. No country, no people, no branch of economic life has been spared from its onslaught; it has hit countries where private enterprise is predominant, those whose economic system has been syndicalised and those whose economic system has been completely socialised.

Somary structures the address as a diagnosis before offering remedies. He first attacks the complacency of economists, bankers, and institutions that had spoken of stabilization while ignoring gold scarcity, gold hoarding, and the coming turn in prices. The Bank for International Settlements appears in his account as emblematic of institutional inadequacy: created for international financial coordination, it is trivial beside the scale of the crash.

His main economic move is to locate the crisis in a widening disequilibrium between falling raw-material prices and rigid manufactured-goods prices. Agricultural and colonial producers lost purchasing power, export markets shrank, and organized industry temporarily protected itself through cartels, wages, and price maintenance. This makes the crisis at once monetary and structural: not simply “overproduction,” but a failure of prices, credit, and organization to adjust together.

The London money market is a market for bankers and trade bills; the New York market is a market for Stock Exchange credits.

That contrast supports Somary’s analysis of the Wall Street boom. New York call money drew funds from Europe, while American equities rose on yields far below money-market rates. The crash, in his account, was not accidental but the predictable end of a system in which speculative finance had overwhelmed industrial calculation. Europe then did not regain the capital it had lost; instead, postwar insecurity sent capital from weaker countries to stronger ones.

Never during the last two centuries has the difference between capital rates in civilised countries been so great as since 1928. With such variations in rates competition for capital became impossible.

Somary’s political argument turns on this fractured capital market. Germany, Italy, and Central Europe face capital flight, collapsing confidence, and ruined middle classes; yet he resists the fashionable fear that depression must produce Communism. His reasoning is geopolitical: Bolshevism requires a scale and centralization incompatible with divided Europe. The greater danger is that autocratic regimes, unable to win domestic prosperity, will seek legitimacy through expansion.

I would deny that a crisis increases the danger of Communism, but I cannot deny that it increases the danger of war.

His remedies follow from the diagnosis. First, prices of finished goods must fall toward raw-material prices, through wage reductions and the breaking of cartels and syndicates; exceptionally, states might buy cheap raw materials to revive those markets. Second, and more important, political confidence must be restored, especially between France and Germany, with Britain acting as mediator.

Europe has no lack of capital; what she needs is confidence.

The discussion tests these claims. Lloyd probes state buying of staples; Peel proposes international industrial coordination; Joseph asks about the Bank for International Settlements; Quigley challenges Somary’s hostility to cartels and presses British responsibility for debts and gold-standard policy. In reply Somary condenses the crisis into three linked movements—monetary disturbance, the raw-material/finished-goods price gap, and political fear—and insists that technical banking measures cannot substitute for restored confidence.

The address is most relevant as an early 1931 reading of the Depression as a crisis of international political economy, not merely trade-cycle contraction. Its force lies in the conceptual linkage between gold, credit, commodity prices, class fear, nationalism, and war. Somary’s final warning gives the essay its historical gravity.

If Great Britain has neither the will nor the strength to do so, then the present crisis will be but a prelude to a dark period to which the historian of the future will give the name “Between Two Wars.”