Global Economic Transformations: 1939-2010
ITEM 4.
1. War and Recovery, 1939-1951
The Second World War, a clash between democracy and fascism, was primarily determined by economic factors, specifically the capacity to produce war material and cripple the enemy’s economy. It was more destructive and costly than any previous conflict, with no consensus on the total costs, only estimates.
The war also brought significant economic changes:
- Permanent incorporation of women into the workforce
- Intensified research in nuclear energy, aviation, medicine, etc.
Despite the atomic bombings of Japan, Europe suffered greater devastation, emerging weakened and divided. Factors included subordination to the U.S. and the onset of decolonization. Economic recovery came through the Marshall Plan:
- Rapid recovery of GDP to pre-war levels
- Creation of People’s Republics in the East, centrally planned socialist regimes under USSR protection
A new monetary system emerged with international payments based on the dollar, the only currency convertible into gold.
2. The Golden Age of Capitalism, 1952-1973
The “Golden Age” represents the fastest economic growth period known, with GDP tripling in developed countries and high growth rates elsewhere. Industrialization spread to lagging countries and regions, particularly in the Mediterranean, Eastern Europe, and Asia.
The pillars of this economic growth were economic, social, and political, fostering a skilled and responsive social environment within a stable global economy led by the U.S. Two major factors drove this comprehensive growth:
The Momentum of Supply
- High Investment Rate, enabled by:
- Growth in profits due to wage moderation and market expansion
- Increased savings from higher household income and lower food prices
- Significant foreign investment, particularly from the USA
- Technical Progress, increasing and cheapening production (agricultural and industrial) through:
- Absorption of American technology
- Industrialization of new countries
- Moderate energy and raw material prices
- Strong Growth in Agricultural Yields, reducing food prices and freeing up rural populations
- The Service Economy: Labor concentration in the tertiary sector (distribution, private and public services)
- Globalization of the world economy: product, labor, and capital
The Surge in Demand
- Full Employment Policies leading to higher household income
- Overall Income Growth generated by increased productivity
- Increased Household Spending due to social welfare security and low savings
- Growth in Foreign Trade
3. The End of Expansion, 1973-1983
In contrast to the Golden Age, this period marked economic uncertainty, lower and unstable growth, and increased inequality.
By the 1970s, the factors driving post-war growth had lost much of their potential. This resulted in reduced productivity growth and declining profits, with profit rates in major capitalist countries falling since the 1960s. The U.S. economy lost its innovation advantage, facing competition from cheaper imports. This marked the end of Bretton Woods. Sudden oil price increases accelerated inflation.
Economic policy shifted to prioritize fighting inflation, leading to a new economic orthodoxy based on monetarism. This meant abandoning full employment goals and accepting lower real incomes for workers, eroding the welfare state, seen as a source of inflation. Another response was the globalization of securities, which came to dominate the economy.
4. Irregular Recovery and Growth, 1985-2010
Western countries experienced growth after 1973, but at much lower rates than before, with periods of growth followed by stagnation or recession. Eastern Europe returned to economic orthodoxy.
Persistent inequalities remained in the Third World, where economic growth was insufficient to overcome historical deprivations. Comparisons between countries often hide significant income disparities within them. Furthermore, there is an inverse correlation between income levels and inequality between countries and their inhabitants.