From the Golden Age to Stagflation
During the dark years of the Second World War people were already beginning to discuss the bases on which the world economy could be rebuilt when the war was over. Between the First and Second World Wars, not only did Great Britain lose its position of economic leadership but the backwardness of the whole of Europe became evident, while technology, capital, and organizational methods began to be massively imported from the United States.
Thus the latter played a major role in determining the directions of reconstruction. There were three principal presuppositions on which the new period of prosperity was based: economic development as an instrument to solve distributive conflicts and to control Communism; European integration as an insurance against the outbreak of another world war; and international coordination as a condition for avoiding disruptive crises such as those of the interwar period.The Marshall Plan contributed decisively to the renewed industrial development of the European countries, pushing them towards economic collaboration, supplying the means for importing indispensable raw materials, resolving the ‘German question’ without creating problems of reparation payments and, finally, instilling in the Europeans the wish to imitate the American way of life. Also very important were the international monetary agreements concluded at Bretton Woods in 1944, with the foundation of the International Monetary Fund and the World Bank and the signing of GATT, mechanisms designed to co-ordinate monetary and commercial measures on the world scale.
The great boom that followed was generalized, involving the old industrialized countries and some of the new, born from the process of decolonization. Naturally, those that had a solid industrial base were able to narrow the gap with the USA, giving rise to a real ‘economic miracle’; however, most countries which were emerging at that time from their colonial past enjoyed rather limited improvement, mainly dependent on the sale of raw materials on international markets.
The push towards European integration turned out to be much more than a vague proposal: it led to the creation of the European Coal and Steel Community and later to the Common Market, and to all the other community initiatives which gave life to the new European economy. The decline of the European economies was soon arrested, with important consequences for relations not only with the USA but also with Eastern Europe, which had remained largely outside the development process.
These were the years of great exoduses of the labour force, from agriculture to industry and from the countryside to the cities; years of great social and cultural transformations, such as the growth of urban areas, changes in consumption patterns and cultural models, increased population mobility, the large expansion in the number of cars, and the achievement of a general rise in the standard of living. Trade union protests were limited, and this was partially due to the permanently high labour demand, which gave workers a strong opportunity to improve their economic position.
Such a sustained, rapid, and widespread growth had never before been experienced. The war and crises were rapidly forgotten; it seemed that there were no limits to economic expansion. When the first man landed on the moon in 1969, it seemed that any challenge could be met. Scientists and economists enjoyed enormous social prestige, and it seemed they could achieve anything that the human mind conceived.
The golden age of the 1950s and 1960s was in fact short-lived. The land of Cocaigne, with its abundance and harmony, was not just around the corner. It was trade union protests which first brought governments back to the harsh reality of the class struggle and made them understand that there was still a fundamental conflict, despite the rapid economic growth. Then serious disruptions in the international monetary system began to manifest themselves; and the dollar, weakened by the costs of Vietman War and by the strong growth in other industrialized countries, was no longer able to govern that system.
At the beginning of the 1970s, the Gold Exchange Standard, as established at Bretton Woods, was abandoned, first by the devaluation of the dollar and then by the declaration of inconvertibility.As far as raw materials were concerned, the situation was also reaching boiling point. Growing realization of the exhaustibility of resources and the gradual increase in the autonomy of the producing countries led to inevitable price rises which noticeably altered the terms of trade, especially in regard to oil. In this case, the existence of a small number of producer countries favoured the creation of a strong (but not omnipotent) international cartel which helped to raise the price of oil by 400 per cent in 1973, and managed to maintain it at a high and rising level in the following years.
Many countries suddenly found themselves with large balance- of-payments deficits, and had to resort to international loans and restrictive internal measures. Thus there was an increase in the foreign debt of many countries and, on the other hand, inflationary processes and restrictions in demand broke out. The growth rate of the world economy slowed down drastically. International co-ordination agencies showed to be incapable in dealing with the new problems.
Despite a worldwide network of lenders of last resort at work, some dramatic bank collapses could not be avoided. There were serious stock exchange crises which, however, did not cause the avalanche effects that had been seen on previous occasions; and this was largely due to the speed and wisdom of central-bank and government interventions. There were attempts at strengthening co-ordination and monitoring of the international economy, for example by means of the creation of the European Monetary System and by the conferences of the ‘Big Seven’ industrialized countries. On the other hand, many countries were experimenting with new forms of industrial relations.
In general, throughout the 1970s and 1980s the international scene was characterized by strong uncertainty and instability, and this made it difficult for governments to co-ordinate and programme long-term economic policies and for large companies to formulate coherent development plans. The latter were being forced to find new organizational modules so as to make their production flows more flexible and better adapted to the consumption patterns of their customers. This process led to the construction of a network of linked companies which function in a much more complicated way than has ever been seen in the past.
Finally, growing concerns about environmental issues, especially about pollution caused by the extension of mass industrial production, have added new demands for a rethink of the development model which dominated the 1950s and 1960s.
9.2.