The New Alchemy: Veblen’s Theory of Crisis and the 1974 British Property and Secondary Banking Crisis
Historically, the British banking system has been characterized by a much lower level of financial crises and bank failures than most other developed countries. The most severe crisis experienced by the system during this century occurred in 1974, when heavy lending to the property sector led to the failure of a number of secondary banks and threatened the liquidity of the entire banking system. There have been a number of accounts of this crisis, written from the perspective of the Marxist theory of crisis [Massey and Catalano 1978; Smyth 19851 and focussing on declining profit rates in the British economy. This article reassesses the causes of the property crash in the light of the theory of crisis presented in Veblen's The Theory of Business Enterprise [1904], arguing that Veblen's discussion of the causes of business crises provides a more convincing explanation of the underlying factors precipitating the crisis.