Lecture Rehearsals: 4.3. Thirty Glorious Years in þe Post-WWII Global North
From the Fall 2021 version of my 20th Century Economic History course
4.3.1. A Startling Reversal-of-Fortune: Thirty Glorious Years
A striking reversal of fortune after World War II: almost all of the difficulties blocking the road to utopia vanished in the global north, and it experienced once again, as it had over 1870-1914, but at a much higher level and at a much faster pace, rapid progress towards economic El Dorado.
4.3.2. Milton Friedman & Semi-Classical Semi-Liberalism Post-WWII
Even the conservatives and the austerians among economists sung a very different tune after World War II. Look closely, and you see someone like Milton Friedman as, in essentials, very, very close to John Maynard Keynes—although desperate not to admit it.
4.3.3. Social Democracy in America
America’s path to post-WWII social democracy and the mixd economy, to the shotgun marriage of von Hayek and Polanyi blessed by John Maynard Keynes, was relatively smooth.
4.3.4. Social Democracy in Western Europe
The coming of mixed-economy social-democracy—of the shotgun marriage of Polanyi to von Hayek, blessed by John Maynard Keynes—to the western European wing of the post-World War II global north was considerably more contingent, and fraught. Yet it was accomplished. And it powered the Trente Glorieuses in western Europe as well.
4.3.5. Social Justice & Social Democracy
Social democracy treats equals equally, and assumes everyone is equal. But society does not think all are equal, and wants those it sees as unequals treated unequally—wants reciprocity, not redistribution.
4.3.6. The Spectre of Inflation
The inflation of the 1970s was annoying, but it was not a reduction in global or national wealth: some people’s incomes went up faster and some people’s slower than the rate of inflation. But it all evened out. Yet the inflation of the 1970s was the thing that did the most to undermine confidence in and the stability of the social democratic order.
4.3.7. Oil Shocks
The inflation of the 1970s would have been in all likelihood a manageable problem, both from a technocratic and from a system-stability and -legitimacy point of view, if not for the oil shocks of the 1970s. But in both 1973 and 1979 the world spot price of oil tripled. And those triplings gave a powerful upward push to inflation. The result was that, to nearly all observers, it was clear that the social democratic governments had lost their mojo: were not competently conducted, and that a policy change was necessary
4.3.8. Toward the Neoliberal Turn
History rhymed. Just as the end of the economic El Dorado of 1870-1914 had called forth a desire for a political-economic turn, so the end of the Thirty Glorious Years in the 1970s issued a similar call. And yet, and yet, this time the discontents were vastly disproportionate to the real economic problems of the 1970s
4.3.9. Economic Progress & Its Discontents
The very fact of extremely rapid and equitable growth in the Thirty Glorious Years had massively raised the bar for what a successful political-economic system was. And, in the (minor) troubles of the 1970s, the consensus conclusion was that social democracy did not surpass that bar.
4.3.10 The Return of Semi-Classical Semi-Liberalism from Exile
In the end, the survival of older ideas that “the market giveth, the market taketh away: blessed be the name of the market”, plus a lot of money, prepared the ground for the neoliberal turn that the world made so sharply at the end of the 1970s.