Review: 1929 by Andrew Ross Sorkin

Is it worth reading?

I could tell that there was something going on with Andrew Sorkin’s new book on the 1929 stock market crash when I put a reserve on it on my local library soon after its release, and found myself number 47 in the queue!

Finally getting my hands on it recently, I was excited to see what all the buzz was about.

In a time when we are constantly being told that people are reading less and attention spans are being worn down to nothing, it is kind of exciting to be part of a community of readers all fixated on one topic. So I thought I would put down a few thoughts on the book.

Sorkin is a long-time journalist at the New York Times and previously wrote a book on the GFC. According to his author’s bio, he also co-created the TV show Billions (which I haven’t seen – is it good?).

The book’s full title is 1929: The Inside Story of the Greatest Crash in Wall Street History.

I think if you appreciate that the word ‘Inside’ does a lot of heavy lifting in that subtitle, you will really enjoy what is, in effect, a journalistic account of the lives and actions of the bankers and politicians who shaped the 1929 crash and its aftermath.

To be clear though, it is an inside story – not a history. But I will come back to that.

The book is split into two parts.

The first part spans from February to October 1929. Sorkin provides a super readable journalistic account of the lives and decisions of the men (yes, all men) at the heart of financial decision-making in the fateful lead up to the October crash.

This includes Charles Mitchell, who at the beginning of the book takes the heroic (?) action of taking personal loans to purchase stock in his own National City Bank to quiet the markets (the future destination of this stock and its ownership would lead to Micthell’s downfall).

But such seemingly heroic actions are undercut by the operating model of Wall Street banks that Sorkin clearly outlines: the constant search for new ways to expand speculation, wilful opposition to any orchestrated efforts to rein speculative borrowing in, new credit and debt-based borrowing arrangements for stock purchases, as well as an array of special vehicles and other technically not illegal but clearly dodgy practices that would all come crashing down in 1929.

There is a great section in the book where Sorkin walks through Micthell’s rationalisation of the rapid expansion of speculative investment, accompanied by its own faux-egalitarianism:

To Mitchell, there was nothing wrong with American consumers using credit [to buy stocks] – they were already using credit to buy cars, refrigerators, and radios. So why not stock? Mitchell and National City Bank were making it possible for ordinary Americans to invest in the future. Who could say with any authority what the proper price of a stock should be? It was up to the market to decide. (43).

Part Two was, I thought, less effective as it spans over several years following the cataclysm of 1929 to try and understand the ramifications of the crash. There are some useful character portraits and vignettes in this part. But overall, I found it suffered from lacking Part One’s compressed timeframe, which aided the sense of momentum and drama as one decision compounded upon another in a hectic rush to the collapse.

The best aspect of Part Two (for me) was Sorkin’s breakdown of the contest and compromises that led to the famous Glass-Steagall Act that is most famous for separating commercial and investment banking (repealed in the 1990s to not great results).

Carter Glass is profiled throughout the book – a vituperative racist pro-segregation Democrat with a populist bent. Sorkin charts how Glass himself was pushed to accept stricter elements in the Bill in its separation of commercial and investment banking than he wanted, not the least because of his own close association with JP Morgan’s Russell Cornwell Leffingwell.

Overall the book is a super readable and interesting journalistic investigation of this extremely important historical moment. As an historian, I just love it when people en masse are reading about and thinking about history – and what it can tell us about our own times. So giant big ticks from me.

But with caution.

The book is not a history – in that it is not the work of an historian based on the methodologies of the discipline. That’s not a criticism, just something that it is important readers are aware of.

The book has some of the American journalistic tradition’s greatest strengths, but also its weakness. Its strengths are a strong narrative, an ability to put the reader in the room where decisions were made and demystify them. The bankers deciding the fate of millions come across less as ‘masters of the universe’ and more as what they were: deeply flawed and self-interested people doing their best to understand and affect rapidly moving events (that they had caused!).

But this tradition is weaker when it comes to deep analysis, especially over causation.

Ben Bernanke once said “To understand the Great Depression is the Holy Grail of macroeconomics”.

We could add it is the holy grail of economic history as well.

Bernanke was a macroeconomist (not an historian) but his point is well made. The causes of 1929 and why the ongoing depression was so severe remain deeply contested. It would be completely unfair to expect Sorkin or anyone else trying to write for a mass audience to delve into a dense academic economic and historical literature that is at best complicated and nuanced and difficult to grasp and at worse downright unreadable.

But there are weaknesses from disregarding the insights scholars have developed over many decades of research and debate. Absolutely central factors to creating the conditions in which the depression occurred are missing – for instance, the gold standard which did so much damage over the 1920s to national economies (and in the 1930s contributed greatly to the political as well as economic project of deflating economies that made the depression ‘great’ by compounding and stretching out the misery of the market crash) is not mentioned until page 270.

That is not a criticism of what the book is – it is a note of caution to not treat it as something it is not.

The ultimate conclusion that 1929 draws is that rampant debt-funded speculation with minimal regulation is not a great idea. Having a financial system built around the whims of a few powerful men and where their individual decisions will shape the life outcomes of many millions is less than ideal.

It’s hard to dispute this perspective, or to doubt why he would want to push such a project today. Ultimately, the book is a super readable account of a vital moment of our history, with obvious contemporary relevance. But anyone wanting to grapple with the how and why of the Depression will need to keep reading on.

Well there you are whoever was number 48 in my library’s queue, it’s all yours now!