This Vanishing Moment and Our Vanishing Future: John Hersey, Hiroshima, and the End of WorldRoundup
tags: neoliberalism, capitalism, inequality, political economy, 20th century
Jonathan Hopkin is a professor of comparative politics at the London School of Economics and Political Science. He is the author of Anti-System Politics: The Crisis of Market Liberalism in Rich Democracies (2020).
With the end of the Second World War, the economies of western Europe and North America began a period of spectacular growth. Between 1950 and 1973 GDP doubled or more. This prosperity was broadly shared, with consistent growth in living standards for rich and poor alike and the emergence of a broad middle class. The French call it les trente glorieuses – the 30 glorious years – while the Italians describe it as il miracolo economico. The story of how this golden age of shared economic growth came to be has almost been forgotten, despite it being less than a century ago. There has never been a more urgent time to remind ourselves.
How did western countries, in one quarter of the 20th century, manage to increase both equality and economic efficiency? Why did this virtuous combination ultimately fall apart by the end of the century? The answer lies in the awkward relationship between democracy and capitalism, the former founded on equal political rights, the latter tending to accentuate differences between citizens based on talent, luck or inherited advantage. Democracy has the potential to curb capitalism’s inherent tendency to generate inequality. This very inequality can undermine the ability of democratic institutions to ensure that the economy works for the majority.
The rise and fall of democratic capitalism in the postwar era is one of the most important events in modern history.
The Second World War cut capitalism down to size. Total war meant that nations couldn’t afford to allow normal patterns of private investment for profit to drive the economy. Instead, governments retooled capitalism to serve the purpose of military victory in ways that placed a greater burden on the haves, by taxing and even expropriating their wealth, while relieving the pressure on the have-nots. In the aftermath of the conflict, popular pressure and international threats established a more equitable distribution of resources. These changes ‘democratised’ capitalism: the market economy was regulated and attenuated in a variety of ways to meet the broader needs of society, rather than the narrow requirements of the investor class.
Not only did income gaps close, but wealth also became more widely held. In the United Kingdom, home ownership increased from just a third of the population in 1939 to more than half by 1971; in the United States, it grew from under half to more than two-thirds in same period. Luxuries such as private cars, televisions and regular holidays became widely available. For this to happen involved a major role for the government in shaping the productive system, reallocating capital and redistributing income.
The two world wars, with the Great Depression in between, fundamentally altered social power relations in the most advanced economies of North America and western Europe. The practical demands of war required an assertion of political control over the economy. The ‘invisible hand’ of the market was fine for peacetime, but the drastic and urgent reallocation of productive effort towards military uses could be achieved only through a command-and-control structure. Moreover, normal patterns of trade had broken down. This meant that markets couldn’t deliver key supplies of energy, food and raw materials: government would have to control prices and determine how to distribute basic goods. Government also reallocated a large share of the labour supply to military service through conscription. In some cases, mass consumption was restricted to essentials such as food and heating (often rationed) to free up resources for the war effort. The state took over a much larger share of spending in the economy, raising taxes and borrowing to pay for it.