Archive · 12 Sep 2026
How the Crisis of 1873 Still Shapes Financial Thinking
Liaquat Ahamed’s book tells the story of a huge financial crisis that began in 1873.
Many people had borrowed money to build railways, buy property and fund ambitious projects.
When markets fell in Vienna, fear quickly spread to other countries.
Banks and companies failed, and many people lost money and jobs.
Countries such as Egypt and the Ottoman Empire also became more dependent on foreign powers because of their debts.
A shift toward gold reduced the supply of money and made debts harder to repay.
The crisis also caused anger, political conflict and hatred directed at groups such as Jewish financiers.
The review says the same dangers can appear today when investors chase exciting technologies such as artificial intelligence.
Its main lesson is that strong finances and careful borrowing matter even when people believe a boom will last forever.
Liaquat Ahamed’s book examines how the 1873 financial crisis spread across interconnected global markets and economies.
The Vienna Stock Exchange collapse in May 1873 triggered panic in Berlin and New York, including the failure of Jay Cooke & Co.
Debt-fueled projects and sovereign borrowing left Egypt and the Ottoman Empire vulnerable to expanding European influence.
The shift from silver toward gold tightened money, deepened deflation and intensified conflict between debtors and creditors.
The review connects the crisis’s lessons about leverage, speculation and human folly to India’s financial system and today’s artificial-intelligence boom.
- Who
- Liaquat Ahamed, whose book is reviewed by Srinath Sridharan, along with the bankers, politicians, monarchs and speculators described in the book.
- What
- A review of 1873: The First Great Depression and the Making of the Modern World and its lessons about financial crises, debt and speculation.
- When
- The central crisis began in May 1873; the review also relates its lessons to present-day finance and artificial intelligence.
- Where
- The crisis spread from Vienna to Berlin and New York and affected places including Egypt, the Ottoman Empire, India and the American South.
- Why
- Speculation, leverage, heavy borrowing and changing monetary arrangements caused financial distress that expanded into political conflict, social resentment and shifts in power.
- Book
- 1873: The First Great Depression and the Making of the Modern World
- Author
- Liaquat Ahamed
- Publisher
- Penguin Random House
- Length and price
- 368 pages; Rs 1,499
- Crisis trigger
- The Vienna Stock Exchange collapsed in May 1873, losing nearly half its value in a single day.
- Major banking failure
- The failure of Jay Cooke & Co helped turn international anxiety into a banking panic in New York.
- Review author
- Srinath Sridharan