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  • Per H. Hansen (a1)


This issue of Business History Review is devoted to financial crisis, business failure, and scandal. As readers of this journal know, white-collar fraud is not a new phenomenon. Public and private authorities have confronted the problem for a long time, looking for ways to deal with it that will not stifle economic growth.

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1 Schwartz, Anna, “The Weekend Interview: Bernanke Is Fighting the Last War,” Wall Street Journal, 18 Oct. 2008. See also Schwartz, Anna, “Real and Pseudo-Financial Crises,” in Capie, Forrest and Wood, Geoffrey, eds., Financial Crises and the World Banking System, (London, 1986), 1131.

2 See, for instance, Kindleberger, Charles P. and Aliber, Robert, Manias, Panics, and Crashes: A History of Financial Crises, 5th ed. (New York, 2005). For theory, see Fisher, Irving, “The Debt-Deflation Theory of Great Depressions,” Econometrica 1 (1933):337–57; and Minsky, Hyman, “A Theory of Systemíc Fragility,” in Altman, Edward I. and Sametz, Arnold W., eds., Financial Crises: Institutions and Markets in a Fragile Environment (New York, 1977), 138–52.

3 Regarding self-regulation, see Mullineux, A. W., Business Cycles and Financial Crises (Hemel Hempstead, U.K., 1990). See also Hansen, Per H., “Bank Regulation in Denmark from 1880 to World War II: Public Interests or Private Interests?” in Business History 43 (Jan. 2001): 4368, for the relation between crises and regulation. For the relation of the Kreuger crash to SEC regulation in 1934, see Flesher, D. and Flesher, T., “Ivar Kreuger's Contribution to U.S. Financial Reporting,” Accounting Review 61, no. 3 (July 1986), 421–34.

4 For two classic articles, see Stigler, G. J., “The Theory of Economic Regulation,” in Bell Journal of Economics and Management Science.2 (1971): 321; and Posner, R. A., “Theories of Economic Regulation,” in Bell Journal of Economics and Management Science 5, no. 2, (1974): 335–58.

5 Kindleberger and Aliber, in Manias, Panics and Crashes, 115–16, maintain that it was a bubble, while Garber, Peter, in Famous First Bubbles: The Fundamentals of Early Manias (Cambridge, U.K., 2000), and Thompson, Earl A., “The Tulipmania: Fact or Artifact,” Public Choice 130, nos. 1–2 (2006): 99114, argue that there was no bubble. In his article, Thompson claimed that regulatory changes led to the dramatic decline in the price of tulip bulbs, which constituted a rational response to the changes. A different, microhistorical, perspective, is taken by Goldgar, Anne, in Tulipmania: Money, Honor and Knowledge in the Dutch Golden Age (Chicago, 2007), 18.

6 See, for instance, Cohen, Patricia, “Ivory Tower Unswayed by Crashing Economy,” New York Times, 5 Mar. 2009; and, more generally, Galbraith, John Kenneth, Economics in Perspective: A Critical History (Boston, 1987).

7 The point could be made that the instability that followed was a direct cause of the managed economies, but, to my knowledge, such causality has not been demonstrated. Rather, it could be argued that the high and stable growth of this period was the result of a unique combination of a number of factors. See, for instance, Reich, Robert, Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (New York, 2007), 1549; and Eichengreen, Barry, The European Economy since 1945: Coordinated Capitalism and Beyond, (Princeton, 2007).

8 Vernon, R., “International Investment and International Trade in the Product Cycle,” Quarterly Journal of Economics 2 (1966): 190207; and Schumpeter, Joseph A., “The Process of Creative Destruction,” in Schumpeter, , Capitalism, Socialism and Democracy (New York, 1942), 8186.

9 For popular delusions, see the classic by MacKay, Charles, Extraordinary Popular Delusions and the Madness of Crowds (New York, 1980; originally published in 1841). For the Charles Ponzi scheme, see Zuckoff, Mitchell, Ponzi's Scheme: The True Story of a Financial Legend (New York, 2005).

10 See, for instance, Smith, Roy C. and Walter, Ingo, “Four Years after Enron: Assessing the Financial-Market Regulatory Cleanup,” Independent Review 11 (Summer 2006): 5366.

11 The disciplines of behavioral economics and behavioral finance are gaining ground. See, for instance, Ariely, Dan, Predictably Irrational: The Hidden Forces that Shape Our Decisions (New York, 2008); and Akerlof, George A. and Shiller, Robert J., Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism (Princeton, 2009).

12 See Kindleberger and Aliber, Manias, Panics and Crashes, esp. ch. 9; and Hamilton, Stewart and Micklethwait, Alicia, Greed and Corporate Failure: The Lessons from Recent Disasters (New York, 2006).

13 This topic is discussed by Coffee, J. C. Jr. in “A Theory of Corporate Scandals: Why the USA and Europe Differ,” Oxford Review of Economic Policy 21, no.2 (2005): 198211. Coffee argues that the issue of different corporate governance systems is important. For business systems, see Whitley, Richard, “Dominant Forms of Economic Organization in Market Economies,” in Organization Studies 15, no. 2 (1994): 153–82.

14 One such study, prepared from a behavioral finance perspective, is by Lai, L., “The Norwegian Banking Crisis: Managerial Escalation of Decline and Crisis,” Scandinavian Journal of Management 10, no. 4 (1994): 397408. For an instructive discussion of behavioral finance, see Bondt, Verner de, “Bubble Psychology,” in Hunter, William C., Kaufman, George G., and Pomerleano, Michael, eds., Asset Price Bubbles: The Implications for Monetary, Regulatory, and International Policies (Cambridge, Mass., 2003), 205–16. There is also an enormous literature on individual firm failures, such as, for instance, on Enron: Eichenwald, Kurt, Conspiracy of Fools: A True Story (New York, 2005); and on Long Term Capital Management: Lowenstein, R., When Genius Failed: The Rise and Fall of Long Term Capital Management (New York, 2001). Although many books on failure are of high quality, they have not been written by business historians. In the interwar period, the Kreuger scandal in 1932 was the most important, and the literature on that scandal is abundant and growing. See, for instance, Shaplen, R., Ivar Kreuger: Genius and Swindler (1960); and the excellent Harvard Business School case by Geoffrey Jones and Ingrid Vargas, “Ivar Kreuger and the Swedish Match Empire,” Harvard Business School case 804–078.

15 For the institutional framework, see North, Douglass C., “Institutions and the Performance of Economies Over Time,” in Menard, Claude and Shirley, Mary M., Handbook of New Institutional Economics (Dordrecht, 2005), 2130. For some important recent work on the incentive structure and how it may lead to excessive risk taking, see Smith, Roy C. and Ingo, Walter, “Four Years After Enron: Assessing the Financial-Market Regulatory Cleanup,” Independent Review 11 (Summer 2006): 5366; Smith, Roy, and Ingo, Walter, Governing the Modern Corporation: Capital Markets, Corporate Control, and Economic Performance (Oxford, 2006), ch. 11, 270–92; and McKenna, Chris, The World's Newest Profession: Management Consulting in the Twentieth Century (Cambridge, U.K., 2006), ch. 9, 216–44. For social and cultural perspectives on failure, see, for instance, Sandage, Scott A., Born Losers: A History of Failure in America (Cambridge, Mass., 2005); and Mihm, Stephen, A Nation of Counterfeiters: Capitalists, Con Men and the Making of the United States (Cambridge, Mass., 2007).

16 Punch, Maurice, Dirty Business: Exploring Corporate Misconduct. Analysis and Cases (London, 1996); and Gobert, James and Punch, Maurice, “Because They Can: Motivations and Intent of White-Collars Criminals,” in Pontell, Henry N. and Geis, Gilbert, eds., International Handbook of White Collar and Corporate Crime (New York, 2007), 99122. For other studies on the Barings failure, see Hamilton and Micklethwait, Greed and Corporate Failure; and Drummond, Helga, The Dynamics of Organizational Collapse: The Case of Barings Bank (New York, 2008).

17 Granovetter, Mark, “Economic Action and Social Structure: The Problem of Embeddedness,” American Journal of Sociology 91 (Nov. 1985): 481510.

18 This question is addressed directly by Naomi Lamoreaux in this issue.

19 See, for instance, Dore, R., “Financialization of the Global Economy,” in Industrial and Corporate Change 17, no. 6, (2008): 1097–112. See also, Wade, R., “Financial Regime Change?New Left Review 53 (Sept.-Oct. 2008): 521.

20 Regarding this point, it is worth noting that organizational failure is a multidimensional concept. Failure is a social construction, and its meaning depends on one's perspective. See Anheier, Helmut K. and Moulton, Lynne, “Studying Organizational Failures,” in Anheier, Helmuth K., ed., When Things Go Wrong: Organizational Failures and Breakdowns (London, 1999), 273–90.

21 See the presidential address by Patrick Fridenson to the 2004 annual meeting of the Business History Conference: Fridenson, Patrick, “Business Failure and the Agenda of Business History,” Enterprise & Society 5, no. 4 (2004): 562–82.


  • Per H. Hansen (a1)


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