#61 Global Structural Change 1945 -2020
In my last blog, I argued that our job when looking at events of the past is to assess what altered and what has stayed more or less the same. In this blog and the next three, I show what altered on a global scale. Here I illustrate the broad outlines of the political framework determined by US policy, followed by the economic framework determined by global events. Some of these events were somewhat outside of the US control. Events like the attack on the Twin Towers in New York, or the collapse of the USSR, were of course outside direct US control. But once they happened, the US policy that followed had global consequences. Over these 70 plus years, the USA has been by far the most dominant power on the planet, hence global structural change has been directed by Washington.
Please don’t gasp with fury at what might at first appear to be a gross overstatement. As time elapsed after 1945, other powers, like China began to play an ever-greater role in world affairs. My job here is to illustrate the big picture on a global scale and you will see how powerful the USA was in 1945, slowly declining as time moved on. Still, by 2021, the USA remains the world’s dominant world power, determining the direction of many states around the world.
The period 1945 to 2020 can be divided into political and economic control on the world stage. Although they overlap, they have some distinctions.
Political Control on the Global Stage
1945 to 1989. Known often as the ‘Cold War’, during these years, the USA alongside their European allies sought to roll back socialism in all its forms across the world. The USA attempted to deny socialism to any state and created worldwide propaganda to glorify the American way of life.
This period finishes in 1989, due to the collapse of the Soviet Union collapsed.
1989 to the present is the second period; after the attack on the Twin Towers in New York in 2001 the USA took up a new global position which they named the ‘War on Terror’. This policy has led to multiple invasions from Afghanistan across the Middles East, into Northern and Eastern Africa. The multiple attacks on individual politicians and states that had the temerity to attempt to create socialist societies fell away. In its place arose Islamic armed forces which have grown year on year since 2001. Islamic armies have taken the place of socialism as enemy number one in the world of the American order. Invasions in Iraq, Syria and Libya, in particular, have all failed and led to ‘forever wars’. Nations and peoples have been ‘laid waste’ by American or American proxy armed forces. At the time of writing, waste and loss of life on a gigantic scale have weakened a once all-powerful USA and its Western Allies.
Both the Cold War and the War on Terror had similar consequences. They both provided the ideological frame which legitimised the USA’s intervention against any government they considered a threat. In both cases, the USA has used its massive surplus financial resources to fight enemies she herself has named.
Economic Control on the Global Stage
The economic timeline overlaps with the political but has been distinctly different, as the dynamics of the global economy are to a major extent determined independently of political determination:
1945 to 1971: These years were unique to industrial capitalism. These were years of relatively high growth and investment. Governments aimed to improve the standard of living, especially of the poor and infrastructure improved. Inequality was reduced for the first time, social mobility allowed people to improve their life's changes. It was a period of prosperity across much of the Western world.
Up to 1971, the global economy was ruled by the dictates of the Gold Standard, the exchange rate was fixed against the US dollar; this global model was similar to the British pound sterling fixed to gold before 1914; both provided stable fixed exchange rates.
From 1971 to the present: Whatever name you give these 50 years; a neoliberal era or The Washington Consensus. The results were similar to the 19th century. The surpluses rolled into the hands of the already wealthy and the majority of people ceased to benefit from growth. This is slightly exaggerated statement. But the benefits from growth on the whole benefited those who were already wealthy. There is now a wealth of evidence to support this assertion.
Low investment, and growth; tax cuts for the rich, attacks on the living standards of 90% of the population. Wealth moved upwards to the richest percentage of the world's people. Wealth for 90% of the population remained relatively static. World trade continued to use the US dollar as the arbiter of value. The US dollar remained as the currency for world trade.
These two periods of time coincide exactly with economic domestic national policies. From 1945 to 1971, welfare states were created across the European and western world (excluding the USA). This was a period when the fear of Soviet socialism led western Europe to the economic policies of Maynard Keynes. Western capitalism spread the benefits of growth to a large proportion of their populations, perhaps for the first and last time.
After 1971, national capitalist governments became more confident that they had beaten off the threat of Soviet-type equalitarianism. Governments moved into 'neoliberalism' where policies mirrored the key elements of the nineteenth century: free trade and free movement of capital. Throughout the 19th century and the 50 years after 1971, the increases in value in the economy were directed into the hands of the already wealthy. The vast majority of the people did receive little benefit from the wider economy. The movement toward concentration of capital led to monster companies and new billionaires. Future blogs will explain how neoliberalism has successfully achieved these objectives over the last 50 years.
There were exceptions China, Vietnam (after the end of the Vietnam war in 1964), Japan 1947-1972, South Korea 1960-80, and Taiwan 1965-85. The latter three were able to use a different system of financial management until the USA brought them to heel (the Shimomura-Wernerian Macroeconomics).
Fear of Communism and the New Political Order
The 1945 war did not end for everyone. Like the 1914 to 1918 war, many smaller but equally violent wars, which had their roots in the Colonial past, continued after the European and Asian peace was declared. The global war finished in 1945, but wars in Korea, Vietnam, Algeria, Kenya and Malaya flared up before the final global peace. These wars were the dying embers of the colonial past.
For many people, the world after 1945 appeared new. The Colonial regimes appeared things of the past; opportunities to benefit from capitalism appeared as if for the first time; the world of pre-capitalist empires had come to an end. Politically and economically these 30 years of extreme violence seemed to have swept away the evils of the past. People widely believed they were at last free to engineer their own future’s.
I can remember personally believing that a new freer world was possible. The Americans would lead us to realise that there were severe limitations on the freedoms we assumed at the time. Leaders like Walter Rodney and many others were assassinated, regimes were changed, and small countries were invaded; the American world order was imposed in Latin America, Africa and Asia. It would take a few more decades to realise that although the world had changed substantially, severe new limitations on action were possible.
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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.