Taking Different Paths

As you probably know, from last decades of eighteen hundreds to the first quarter of the twentieth century world economies were led by free trade and gold standard, in which social and economic progress settled. Meanwhile, imperialism and rivalries didn´t stop. As a result, the world was doomed to world war (thirty years of warfare, actually) and countries started to adapt their resources to the new context. Certainly, was the aftermath of the first world war what explains the end of the victorian boom, an era characterized by the economic interdependence all over the planet, and also by the idea that goods were manufactured in order to consume them wherever you live and work. One example of those was fordism, that spread the assembly line and mass production everywhere.

Why, finally, main economies left the previous model of economic globalization? Maybe, at this point we must study the post-war conditions. In this way, we can read the following in Worlds Together, Worlds Apart: 'Its causes went back to the Great War, which had left European nations in deep debt as they struggled to rebuild their economies and pay off war debts. To restore stability, Europeans borrowed heavily from the United States. When wobbly governments and small investors defaulted on their loans, the U.S. Federal Reserve reacted by raising interest rates. Starting in central Europe, financial institutions began to collapse. As banks fell, other lenders scrambled to call in their loans. Companies, governments, and private borrowers were soon floating in a sea of debt. The panic then spread to the world’s stock markets, which led to the Wall Street crash of 1929, which spurred more bank closures' (p. 719).

The situation was untenable and the United States enforced penalties to import and export assets, signing the Smoot-Hawley Tariff Act, and also taking the first step towards protectionism. In response, trading partners cut links and international relations started to break down. We can also read some words in the textbook concerning that worry: 'After the United States enacted protective tariffs, other governments abandoned free trade in favor of protectionism. Manufacturers cut back production, laid off millions of workers, and often went out of business' (p.720). In Europe, actually, the crisis started when an austrian bank, the Kredit-Anstalt Bank, collapsed. In consequence, diplomacy tried to arrange the issue. It failed, anyway. One example to solve it was the Paris Conference of 1931.

Patterns of Recovery

Liberal economies were, hence, put in question, claiming that the market place hadn't a self-equilibrating structure. Here, we must quote figures like John Maynard Keynes, who despite believing in the free market, also argued that it should be controlled by the state. Therefore, following these ideas, countries like the United States applied its policies to stimulate the economy. In this particular case, it was called New Deal. However, there were other kind of responses. Sometimes diametrically opposite. These replications relied on popular support to carry out its strategies, which it could be divided in hard-core command economies and medium-core command economies. In this way, the state became the representative of the common will. Let me analyze them briefly.

Collectivized Agriculture - Soviet Propaganda: 'Let's Achieve a Victorious Harvest'

On the one hand, the most relavant example of hard-core command economy was the Soviet Union, country in which the collective way gained immense importance. What did collective way mean? Roughly, collectivist policies tried to accumulate resources in the hands of the state. That's to say, everything you produce must be property of those who run the country's destiny. Private property and other individual rights were largely beaten in the name of the state. This sort of planned economy was very effective to mobilize people and technology, especially in war time. Nonetheless, it demanded much sacrificies (of all types) and the need of produce new tools caused the population, in the end, remain exhausted. In reality, things were not so easy: 'The realities behind the images (like in the poster above) of smiling farmers were low productivity, enormous waste and often broken-down machinery' (p. 724).

On the other hand, medium-core command economies like Japan and Germany did not take over the organization of production. The state was above everything, that's true, but it left some freedom for the commercial activity (always for the general interest), which was supervised but the state officials. The aim was to create loyalty and capacity to consume, but needing reliance on peripheries to satisfy their needs (great resources), so they kept the persistance in the way of empire because of primary staples for industrial recovery. Although Japan broke down, Germany, the Third Reich, was the best example of this kind of policy. Both of them were great militarized and led societies.

In conclusion, this financial crisis took countries to make decisions like to leave the gold standard and retreat into protectionism. Liberal democracies relied on the state as a key agent to stimulate economy. However, others, like the Soviet Union and Germany pushed for policies in which peoples support, expansionism and popular will played crucial roles, not only in the recovery but also in the nationalist and popular machinery.

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