The Golden Age of Capitalism

(11. The post-cold-war expansion of capitalism)

The post–World War II economic expansion, also known as the postwar economic boom, the long boom, and the Golden Age of Capitalism, was a period of economic prosperity in the mid-20th century which occurred, following the end of World War II in 1945, and lasted until the early 1970s. It ended with the collapse of the Bretton Woods monetary system in 1971, the 1973 oil crisis, and the 1973–1974 stock market crash, which led to the 1970s recession. Narrowly defined, the period spanned from 1945 to 1952, with overall growth lasting well until 1971, though there are some debates on dating the period. Booms in individual countries differed, some starting as early as 1945, and overlapping the rise of the East Asian economies into the 1980s or 1990s.

During this time, there was high worldwide economic growth; Western European and East Asian countries in particular experienced unusually high and sustained growth, together with full employment. Contrary to early predictions, this high growth also included many countries that had been devastated by the war, such as Japan (Japanese post-war economic miracle), West Germany (Wirtschaftswunder), France (Trente Glorieuses), Italy (Italian economic miracle), and Greece (Greek economic miracle).

Terminology[edit]

In academic literature, the period is frequently and narrowly referred to as the post–World War II economic boom, though this term can refer to much shorter booms in particular markets. It is also known as the Long Boom, though this term is generic and can refer to other periods. The golden age of Capitalism is a common name for this period in both academic and popular economics books. The term is also used in other contexts. In older sources and occasionally in contemporary ones, Golden age of Capitalism can refer to the period of the Second Industrial Revolution from approximately 1870 to 1914, which also saw rapid economic expansion. Yet another name for the quarter century following the end of World War II is the Age of Marx, though the Soviet Union's economic statistics were not reliable during this period.

Dating the period[edit]

Political economist Roger Middleton states that economic historians generally agree on 1950 as the start date for the golden age,[3] while Robert Skidelsky states 1951 is the most recognized start date.[4] Both Skidelsky and Middleton have 1973 as the generally recognized end date, though sometimes the golden age is considered to have ended as early as 1970.

The boom ended with a number of events in the early 1970s:

· the collapse of the Bretton Woods monetary system in 1971

· the growing international trade in manufactured goods, such as automobiles and electronics

· the 1973 oil crisis,

· the 1973–1974 stock market crash,

· the ensuing 1973–75 recession, and

· the ensuing displacement of Keynesian economics by monetarist economics.

While this is the global period, specific countries experienced booms for different periods; in Taiwan, the Taiwan Miracle lasted into the late 1990s, for instance, while in France the period is referred to as Trente Glorieuses (30 glorious [years]) and is considered to extend for the 30-year period from 1945 to 1975.

Causes[edit]

Productivity[edit]

See also: Agricultural productivity

High productivity growth from before the war continued after the war and until the early 1970s. Manufacturing was aided by automation technologies such as feedback controllers, which appeared in the late 1930s were a fast-growing area of investment following the war. Wholesale and retail trade benefited from new highway systems, distribution warehouses, and material handling equipment such as forklifts and intermodal containers.[7][8] Oil displaced coal in many applications, particularly in locomotives and ships.[9]

In agriculture, the post WW II period saw the widespread introduction of the following:

Chemical fertilizers

Tractors

Combine harvesters

High yield crop varieties of the Green revolution

Pesticides

New products and services[edit]

Industries that were created or greatly expanded during the post war period included television and commercial aviation.

Economic aftermath of war[edit]

Economists employing Marxian economic analysis and Crisis theory argue that the period of prosperity was a temporary phase in capitalist development fueled by a revival of capital stock, large pools of labor and raw materials, and technological innovation emerging from the end of the Second World War and the scale of defeats of the international working class.[10] This era of prosperity helped prop up the perspective that the crises and business cycles inherent to capitalism could be solved through macroeconomic Keynesian policies, when in actuality the fundamental instabilities of capitalism had not been resolved.[11]

International cooperation[edit]

Propaganda poster for the Marshall Plan.

See also: Aftermath of World War II

Among the causes can be mentioned the rapid normalization of political relations between former Axis powers and the western Allies. After the war, the major powers were determined not to repeat the mistakes of the Great Depression, some of which were ascribed to post–World War I policy errors. The Marshall Plan for the rebuilding of Europe is most credited for reconciliation, though the immediate post-war situation was more complicated.

In 1948 the Marshall Plan pumped over $12 billion to rebuild and modernize Western Europe. The European Coal and Steel Community formed the foundation of what was to become the European Union in later years.

Institutional arrangements[edit]

Institutional economists point to the international institutions established in the post-war period. Structurally, the victorious Allies established the United Nations and the Bretton Woods monetary system, international institutions designed to promote stability. This was achieved through a number of policies, including promoting free trade, instituting the Marshall Plan, and the use of Keynesian economics.

US Council of Economic Advisers[edit]

In the United States, the Employment Act of 1946 set the goals of achieving full employment, full production, and stable prices. It also created the Council of Economic Advisers to provide objective economic analysis and advice on the development and implementation of a wide range of domestic and international economic policy issues. In its first 7 years the CEA made five technical advances in policy making:[16]

The replacement of a "cyclical model" of the economy by a "growth model,"

The setting of quantitative targets for the economy,

Use of the theories of fiscal drag and full-employment budget,

Recognition of the need for greater flexibility in taxation, and

Replacement of the notion of unemployment as a structural problem by a realization of low aggregate demand.

Military spending[edit]

Another explanation for this period is the theory of the permanent war economy, which suggests that the large spending on the military helped stabilize the global economy; this has also been referred to as "Military Keynesianism".

Date: 2016-04-22; view: 2743