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Lessons from History: Recovery through spending

Learning from economic recoveries of the past can help investors make good decisions
Lessons from History: Recovery through spending
  • Nationalism and panic – Covid recovery policies share many of the hallmarks of economic crashes gone by
  • Investors can learn from the triumphs and mistakes of the past and apply long-term thinking

The fallout from the Wall Street Crash in September 1929 reverberated around the world. It brought mass unemployment, bankruptcy and depression, and in response to the crisis, world leaders came up with a paradoxical solution: recovery through spending.

Politicians recognised the need to inject new cash into domestic businesses and many came up with policies specifically targeted at the unemployed. America’s Social Security Act of 1935 established a system of benefits. In Italy in 1931, Banca IMI was created and lent substantial sums to private companies to be reimbursed in a period of 10 years. And despite Hitler’s tyrannical shortcomings, his rearmament and the construction of autobahns created millions of jobs for German workers.  

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