#72 Economic Recovery in Europe 1945-1971: The European Union and the Welfare States
Children in the East End of London. Source: https://www.flickr.com/photos/pingnews/1858202903 CC BY-SA 2.0.
My last blog risks being charged with being a bit simplistic – in attempting to provide an overview of the post-1945 scenario, I largely removed the key element of human agency. I ignored the rise of an educated middle class – lawyers, medics, bankers, and professional businessmen and women – which was a key ingredient for a growing and changing economy. What I wanted to show was the overriding norm, the growth of world inequality over 250 years. This pattern of inequality is more clearly illustrated in the states of the South, who have been unable to industrialise, and have inadequate resources to even create the middle social strata, found so predominantly in Western states. Other states that were also unable to industrialise included Central America, much of the Middle East, including even Afghanistan. These societies had started the process of industrialisation, through their own mechanisms, but were then invaded and laid to waste.
In the stable wealthy parts of Europe & North America, a small portion of the increase in wealth created after 1945 has moved and spread itself further down the line to the new middle classes. The issue I was concerned to express was the overall direction of wealth distribution across the world after 1945; powerful literature has grown up to challenge the status quo.
1945-1971/1972 in Outline
The 25 years between 1945 and 1971/72 were turbulent globally and domestically. Some of the key events and issues I’ve summarized below:
The Korean and then Vietnam wars drained the gold reserves from the USA. By 1972 the US came off the Gold Standard.
The USA provided sufficient resources so that Western Europe and Japan recovered from the devastation of the war.
Keynesian economic principles were used in these 25 years, to guide all politicians across the spectrum. Keynesian economic methodology of running a state was significantly different from 1815 through to 1945,[i] to allow states to intervene in their economies where previously it had been taboo.
The Europeans all set up health facilities that were inclusive of their entire populations, these facilities outlasted the Keynesian economic policies.
The state expanded education at every level and more peoples were able to access higher education than ever before. This created social mobility between classes, which had never been achieved before or since.
The state created housing for the poorer sections of the population.
The institution that had allowed the ruling classes of Europe to maintain their privileges, democracy, was maintained but not strengthened.
Democracy
Before continuing, I need to expand on point number 7 above. Democracy in the 21st century is widely considered the true mark of a ‘civilized’ society. By ‘democracy’ we often mean the regular 4 or 5 yearly events when politicians vie with the adult public for votes. Democratic systems remain only in the political sphere and not in the economic. In the economic sphere, democratic principles would come up against private property in companies, and the latter would always be given precedence.
Political democracy, where all adults were given the vote, is relatively a recent event. Women for instance were only allowed to vote in the 20th century, and then they had to struggle for the privilege. So why were whole populations given the vote, why were the relatively under-educated working classes given the vote? It was the privileged upper classes that allowed universal suffrage.
Initially, the answer was simple. As the working classes were squeezed, their answer was revolution. Revolution was the order of the day across Europe after the end of the 1914-1918 war. Universal suffrage was the way out. And revolution was equally the order of the day after 1945. In both cases, revolution was avoided partially by offering the suffering peoples some say under a political party that was said to represent their interests. After 1945, this was done by offering the population a part of the economic pie.
Democracy as I have defined it has become the sine qua non of the 21st-century world. The so-called ‘democratic world’ is supposed to be the ideal of all decent people. Certainly, the recent struggle in Hong Kong and Myanmar of a sizable proportion of the populations of these societies would indicate that many peoples think that democracy will give them control of their futures. The so-called Arab Spring was another example where sizeable numbers of people were willing to put their own lives on the line in their struggle for “democracy”.
Today the first thing countries do after military conflict is to hold elections. Syria, Iraq and others are offered elections almost before the fighting was finished. Elections are supposed to confer legitimacy on populations after suffering the traumas of civil war. Democracy is supposed to offer populations ‘civilized’ political options. Always the threat of revolution is sufficient to justify democracy in situations of potential chaos and where private property is threatened.
Political democracy for whole populations arose initially in the late 19th century. The varied political systems had a long period of birth. They arose away from the previous European Feudal systems of kingship. The first small but significant move came after the beheading of the English king, Charles the 1st, in 1649. The Houses of Parliament was at first relatively small but a nonetheless hugely significant move. Significant, as the powers of the monarch, were reduced for the first time.
During the first 250 years when the struggle for power across Europe was undertaken largely by war, kings were guillotined and absolute political system headed by Napoleon vied against monarchy allied with nobles. Out of that long political struggle came the realization that ruling elites could incorporate new wealthy peoples into their existing systems of power, and at the same time they could afford to give voting rights to a large number of people. They could maintain their elite wealth at the same time.
Nothing much happened until after the French Revolution and the French wars at the end of the 18th century. By then a whole new wealthier class had developed out of the slave trade. This new middle class were given political powers after the 1830s. In Britain's case, the House of Lords represented the ancient Lords of feudal times, while the Commons represented new wealthy social classes.
Political democracy had arisen early in the USA, although their indigenous and slave populations were consciously excluded. American democracy was consciously designed for the white immigrant population.
By the end of the 19th century, a new class of working people were agitating for better conditions in Western Europe. The first social reforms were just coming in. By the end of the first great war, the Russian Revolution of 1917 sent shivers down the backs of the new wealthy class. It was widely feared that the revolution would spread. Votes for men came to pass significantly in 1918, one year after the Russian Revolution.
It is not at all surprising that MI5 (the British domestic secret service) should arrive at the same moment in time. The service was directed to protect British parliamentary democracy and economic interests. Its role was originally quite restricted; existing purely to ensure national security through counter-espionage. With It became a much more political role, involving the surveillance not merely of foreign agents, but also of pacifist and anti-conscription organisations, and organised labour. This was justified through the stated belief that foreign influence was at the root of these organisations.
For the last 250 years or so, political democracy has stood beside the maintenance of wealth and power of the past. The USA, the Netherlands and Britain are prime examples where this is the case. The old colonizing societies have maintained power, privilege and huge wealth. And at the same time, they developed democratic institutions. Our modern democracy was never designed to change the world, its primary function has been to maintain existing power structures and the status quo.
Our democracies are strong so long as wealth and power are not threatened. Socialism that attacks private prosperity is understood as a threat. Democratic institutions in the capitalist Western world are not about changing societies so much as they are about maintaining the inequities.
1945-1971/1972 Europe and Japan
After 1945, the situation was so insecure, the call to socialism from the USSR so great, that for 25 years ruling elites in Western countries allowed redistribution of financial resources.
This section applies only to Europe and Japan. The rest of the world focused on moving from colonialism to independence or revolution; that is another story for another blog.
During these 25 years, there was no area of economic activity that the state did not get involved. The trades unions were freer than ever before or since.
The period between 1945 and 1971/2 saw unprecedented political activity across the nations of western Europe and Japan. At the time no one accused these States of introducing socialism. At the time, many people considered that the new caring State was there for the long term. They were wrong, I was one among many myself.
These new developments of a caring society were short-lived; none affected the USA. The government of the USA dealt with the issue of socialism repressively through McCarthyism; in Europe the situation was different. The entire geographical area of Europe had been devastated by the war and needed measures to recover their economies and to avoid the beckoning finger of Communism. They also needed measures to avoid socialism, or so the thinking was in Washington.
In every case, health systems were devised that were inclusive of whole populations. In any other era, these might have been considered to be 'socialistic' but proved so popular that no government since has attempted to replace them with a privatised system like that practised in the USA. Free education was expanded at every level, over these 25 years, so that for the first time people from poor social backgrounds were able to climb out of badly paid jobs and move into the new middle classes: again, a move of great popularity.
Since 1971, over the last 50 years, attempts at privatisation have attempted to eat into the edge of both health, educational, and social provision. The period after 1945 was successful from the point of view of the people at the centre of the Empire, mainly in the USA, but also the old guard, the people in Europe who had been at the centre of the class system. Socialism as a long term political project in western Europe was stopped in its tracts. Yet, despite the overall success, institutions were created of such popularity that they remain with us to this day.
The political ups and downs across Europe since 1971 have led to a variety of governments that chip away at social provision. The basic institutions in health, social welfare and education remain, but in a weakened form.
During the post-1945 years, many of the key components of industrial society were nationalised across Europe: rail travel, the coal and steel industries and much more. In Europe, coal and steel were privatised, but rail remained in the ownership of the state, except for Britain. Nationalisation in the fields of production did not last; industry was privatised in the period after the 1970s. The state ceased to play a significant part in the production of goods. As capital became free to move across borders, so new owners of car production, iron and steel and coal appeared from across the world.
Up to 1971, states had played a significant role in the control of the movement of capital. Before the wars, 1914-45, Amsterdam, Frankfurt, Paris, New York and London had been the major centres of capital in the 19th century. Each had long traditions of banking: central banking, merchant banking, provision of cash for governments, international banking and domestic banks. After 1945 these traditions were revived, and each centre grew again in importance through an entirely new banking global dimension.
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The peoples of Western Europe had risen from one world of relative poverty and had learnt how to take the wealth from the Americas and transfer it to their own countries. This was slavery and latterly until 1920, indentureship. A whole set up of banks, shipping companies, and insurance companies had arisen to make these transfers possible. From the 1750s the European invaders turned their attention to Asia and systematically began the colonisation process anew. At the same time, as they attempted to colonise and extract the wealth of Asia, the colonising countries began the process we now recognise as industrialisation alongside the rapid growth of cities. The surplus resources extracted through colonisation were used to finance the growth of new industries.