“An Ungovernable Anarchy”: The United States’ Response to Depression and Default, 1837-1848
INTERECONOMICS, Vol 45, No. 4, July/August 2010
by Dorothea Schäfer
by Alasdair Roberts
American commentators have criticized European leaders for failing to deal firmly and swiftly with the eurozone’s sovereign debt crisis. These commentators forget the lessons of American history. The United States experienced a similar crisis following the financial panic of 1837. Eight states defaulted and political turmoil intensified, undermining stability in several states and the federal system itself. The restoration of economic and political order was a prolonged and painful process, as enraged voters confronted the costs of inaction and accepted new constraints on democratic processes. Will the European crisis play out similarly?
by Peter Bofinger, Stefan Ried
Current developments in Greece make clear that the rules of the European Stability and Growth Pact (SGP) were neither strict enough nor enforced strictly enough. To deal with the ongoing exit from the fi scal crisis and its related phenomena, we propose a new framework for fi scal policy consolidation in Europe. The centrepiece is a European Consolidation Pact to supplement the SGP which would supply loan guarantees in exchange for a fee and stricter budget consolidation measures. The new framework also spells out the details of an orderly government default.