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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.
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