1873: The First Great Depression and the Making of the Modern World

Over the course of the 1850s and 1860s, during the first era of globalization, the world experienced an unprecedented economic boom. Fueling this expansion was an explosion in borrowing through the global bond market, which provided financing for the century's most costly and transformative innovation: the railroad. At the hub of the bond market stood one family—the Rothschilds. With offices in London, Paris, Vienna, and Frankfurt, and through their agent August Belmont in New York, the Rothschilds were arguably the wealthiest and most powerful family in world history, possessing an unmatched ability to mobilize capital on a massive scale and wielding unparalleled political influence.

The boom predictably swelled into a series of bubbles that burst simultaneously in the early 1870s, cascading from one country to the next across Europe and the world. Governments of the major economic powers responded by blundering amid the tumult into a precipitous remaking of the global currency system—a move that not only exacerbated the ensuing economic collapse but set the stage for a prolonged twenty-year period of punitive deflation. This deflation sparked waves of populism and anti-globalization sentiment.

As Liaquat Ahamed shows us in this enthralling history, the crisis of 1873 was, among other things, a death blow to Reconstruction in the United States and the proximate cause of the Ottoman Empire's slow death spiral and Britain's takeover of Egypt. Ironically, as markets grew irrationally frenzied, the Rothschilds had presciently managed to protect themselves from the worst financial effects. Nevertheless, when the deluge came, they were viciously scapegoated everywhere as part of a wider spasm of hatred directed at "Jewish finance," a strain of antisemitism that would come to full evil flower in Austria and Germany during the 20th century.

1873 is a marvelous birds-eye reckoning with the full dimension of the crisis, from its build-up to its long aftermath. Through the Rothschilds and a cast of other eyewitnesses, including Karl Marx and Mark Twain making cameos at crucial moments, we have witnesses on the ground to give us the human perspective. And we have a great and brilliant financial historian’s firm grasp of the larger forces at play to create a truly cohesive global narrative with thrilling explanatory power.