Post-war consensus

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Post-war_consensus 

The post-war consensus, sometimes called the post-war compromise, was the economic order and social model of which the major political parties in post-war Britain shared a consensus supporting view, from the end of World War II in 1945 to the late-1970s. It ended during the governance of Conservative Party leader Margaret Thatcher. The consensus tolerated or encouraged nationalisation, strong trade unions, heavy regulation, high taxes, and an extensive welfare state.

The notion of a post-war consensus covered support for a coherent package of policies that were developed in the 1930s and promised during the Second World War, focused on a mixed economy, Keynesianism, and a broad welfare state. Historians have debated the timing of the weakening and collapse of the consensus, including whether it ended before Thatcherism arrived in 1979. They also suggest that the notion might not have been as widely supported as some claim, and that the word 'consensus' might be inaccurate to describe the period.

Origins of post-war consensus

The thesis of post-war consensus was most fully developed by Paul Addison. The basic argument is that in the 1930s Liberal intellectuals led by John Maynard Keynes and William Beveridge developed a series of plans that became especially attractive as the wartime government promised a much better post-war Britain and saw the need to engage every sector of society.

The foundations of the post-war consensus can be traced to the Beveridge Report. This was a report by William Beveridge, a Liberal economist who in 1942 formulated the concept of a more comprehensive welfare state in Great Britain. The report, in shortened terms, aimed to bring widespread reform to the United Kingdom and did so by identifying the "five giants on the road of reconstruction": "Want… Disease, Ignorance, Squalor and Idleness". In the report were labelled a number of recommendations: the appointment of a minister to control all the insurance schemes; a standard weekly payment by people in work as a contribution to the insurance fund; old age pensions, maternity grants, funeral grants, pensions for widows and for people injured at work; a new national health service to be established.

The post-war consensus included a belief in Keynesian economics, a mixed economy with the nationalisation of major industries, the establishment of the National Health Service and the creation of the modern welfare state in Britain. The policies were instituted by all governments (both Labour and Conservative) in the post-war period. The consensus has been held to characterise British politics until the economic crises of the 1970s (see Secondary banking crisis of 1973–1975) which led to the end of the post-war economic boom and the rise of monetarist economics as championed by Milton Friedman. The roots of Keynes's economics, however, stem from critique of the economics of the interwar period depression. Keynes's style of economics encouraged a more active role of the government in order to "manage overall demand so that there was a balance between demand and output". It was claimed that in the period between 1945-1970 (consensus years) that unemployment averaged less than 3%, although the legitimacy of whether this was solely down to Keynes remains unclear.

The first general election since 1935 was held in Britain in July 1945, giving a landslide victory for the Labour Party, whose leader was Clement Attlee. The policies undertaken and implemented by this Labour government laid the base of the consensus. The Conservative Party accepted many of these changes, and promised not to reverse them in its 1947 Industrial Charter. Attlee, using the Beveridge Report and Keynes economics, laid out his plans for what became known as "The Attlee Settlement".

The main areas he would tackle:

1. The mixed economy
2. Full employment
3. Conciliation of the trade unions
4. Welfare
5. Retreat from empire

Policy areas of consensus

The coalition government during the war, headed by Churchill and Attlee, signed off on a series of white papers that promised Britain a much improved welfare state after the war. The promises included the national health service, and expansion of education, housing, and a number of welfare programmes. It included the nationalisation of weak industries.

In education, the major legislation was the Education Act of 1944, written by Conservative Rab Butler, a moderate, with his deputy, Labour's James Chuter Ede, a former teacher who would become Home Secretary throughout the Attlee administration. It expanded and modernised the educational system and became part of the consensus. The Labour Party did not challenge the system of elite public schools – they became part of the consensus. It also called for building many new universities to dramatically broaden educational base of society. Conservatives did not challenge the socialised medicine of the National Health Service; indeed, they boasted they could do a better job of running it.

In terms of foreign policy, there is much evidence to suggest that there was a shared set of views that were rooted in role of the recent history. Dennis Kavanagh and Peter Morris emphasise the importance of the second world war, and war time cabinet, in yielding a set of values that were shared amongst the major parties rooted in the events leading up to the war: "Atlanticism, the development of an independent nuclear deterrent, the process of imperial disengagement and reluctant Europeanism: all originated in the 1945 Labour Government and were subsequently continued...by its successors". However, there were some disagreement on areas of foreign policy, such as the introduction of the Commonwealth where  "Labour opposed the conservative 'imperial rhetoric' with the idealism of multicultural Commonwealth" or, in the same vein, decolonization, which became "an important theme of partisan conflict" in which Conservatives showed a reluctance to give back colonial possessions as well as the gradual process of independence.

It is argued that from 1945 until the arrival of Margaret Thatcher in 1979, there was a broad multi-partisan national consensus on social and economic policy, especially regarding the welfare state, nationalised health services, educational reform, a mixed economy, government regulation, Keynesian macroeconomic policies, and full employment. Apart from the question of nationalisation of some industries, these policies were broadly accepted by the three major parties, as well as by industry, the financial community and the labour movement. Until the 1980s, historians generally agreed on the existence and importance of the consensus. Some historians such as Ralph Miliband expressed disappointment that the consensus was a modest or even conservative package that blocked a fully socialised society. Historian Angus Calder complained bitterly that the post-war reforms were an inadequate reward for the wartime sacrifices, and a cynical betrayal of the people's hope for a more just post-war society.

However, it is still important to note that there was not total agreement between the two major parties and there were still policies which the Conservatives did not support, such as how the National Health Service would be implemented. Henry Willink, who was the Conservative minister of health from 1943-1945, opposed the nationalisation of hospitals. This could indicate that the post-war consensus may have been exaggerated, as many historians have argued.

Labour revisionism

The Future of Socialism by Anthony Crosland, published in 1956, was one of the most influential books in post-war British Labour Party thinking. It was the seminal work of the 'revisionist' school of Labour politics. A central argument in the book is Crosland's distinction between 'means' and 'ends'. Crosland demonstrates the variety of socialist thought over time, and argues that a definition of socialism founded on nationalisation and public ownership is mistaken, since these are simply one possible means to an end. For Crosland, the defining goal of the left should be more social equality. Crosland also argued that an attack on unjustified inequalities would give any left party a political project to make the definition of the end point of 'how much equality' a secondary and more academic question.

Crosland also developed his argument about the nature of capitalism (developing the argument in his contribution 'The Transition from Capitalism' in the 1952 New Fabian Essays volume). Asking, "is this still capitalism?", Crosland argued that post-war capitalism had fundamentally changed, meaning that the Marxist claim that it was not possible to pursue equality in a capitalist economy was no longer true. Crosland wrote that:

The most characteristic features of capitalism have disappeared – the absolute rule of private property, the subjection of all life to market influences, the domination of the profit motive, the neutrality of government, typical laissez-faire division of income and the ideology of individual rights.

Crosland argued that these features of a reformed managerial capitalism were irreversible. Others within the Labour Party argued that Margaret Thatcher and Ronald Reagan brought about its reversal.

A third important argument was Crosland's liberal vision of the 'good society'. Here his target was the dominance in Labour and Fabian thinking of Sidney Webb and Beatrice Webb, and a rather grey, top down bureaucratic vision of the socialist project.

Butskellism

Rab Butler

 

Hugh Gaitskell

"Butskellism" was a somewhat satirical term sometimes used in British politics to refer to this consensus, established in the 1950s and associated with the exercise of office as Chancellor of the Exchequer by Rab Butler of the Conservatives and Hugh Gaitskell of Labour. The term was inspired by a leading article in The Economist by Norman Macrae which dramatised the claimed convergence by referring to a fictitious "Mr. Butskell".

Debate about consensus

There is much discussion over the extent to which there was actually a consensus, and it has also been challenged as a myth. Many political thinkers and historians have argued both for and against the concept of consensus. Paul Addison, the historian most credited with developing the thesis, has engaged in discussions on the subject with figures such as Kevin Jeffreys, who disagrees. Jeffreys says that "Much of Labour's programme after 1945, it must be remembered, was fiercely contested at the time" using the example of the Conservatives to vote against the NHS. He attributes to the War the reason for the 'shock' result of the 1945 general election. Addison addresses many of Jeffreys' claims, such as the argument that if the Conservatives could have capitalised upon the Beveridge report they would have been the ones with a powerful mandate for pursuing policy, not the Labour party. Addison also changes his stance in this article, stating how he "exaggerated the extent to which 'middle opinion' already prevailed on the front benches" and determining that, in fact he "agree(s) with much of Dr Jeffreys' analysis".

There are also a number of other interpretations of the consensus which many historians have discussed such as Labour Historian Ben Pimlott. He says this idea is a "mirage, an illusion which rapidly fades the closer one gets to it." Pimlott sees much disputation and little harmony. He notes the term "Butskellism" meant harmony of economic policy between the parties, but it was in practice a term of abuse, not celebration. In 2002, Scott Kelly claimed that there was in fact a sustained argument over the use of physical controls, monetary policy and direct taxation. Political scientists Dennis Kavanagh and Peter Morris defend the concept, arguing that clear, major continuities existed regarding policies toward the economy, full employment, trade unions, and welfare programs. There was agreement as well on the major issues of foreign policy.

Dean Blackburn offers a different argument about the accuracy of the consensus. He proffers that the so-called consensus did not stem from ideological agreement, rather, an epistemological one (if any). He makes clear the ideological differences between the Conservatives and the Labour Party; the latter openly wanting an equal and egalitarian society, while the former was more reluctant, for example. Rather, he suggests that an examination of parties' shared epistemological beliefs – "similar ideas about appropriate political conduct", a "shared a common suspicion of the notion that politics could serve fixed 'ends', and...believed that evolutionary change was preferable to radical change" – would offer a better insight into whether or not there was a consensus or not. Blackburn summarises this saying that instead of "being rooted in common ideological beliefs about the desirable 'ends' of political activity, the consensus may have stemmed from epistemological assumptions and the political propositions that followed from them".

Collapse of consensus

Market-orientated conservatives gathered strength in the 1970s in the face of economic paralysis. They rediscovered Friedrich Hayek's The Road to Serfdom (1944) and brought in Milton Friedman, the leader of the Chicago school of economics as Monetarism began to discredit Keynesianism. Keith Joseph played a major role as an advisor to Thatcher.

Keynesianism itself seemed no longer to be the magic bullet for economic crises of the 1970s. Mark Kesselman et al. argue:

Britain was suffering economically without growth and with growing political discontent ... the "winter of discontent" destroyed Britain's collectivist consensus and discredited the Keynesian welfare state.

In 1972, Chancellor of the Exchequer Anthony Barber introduced a tax-cutting budget. A brief "Barber Boom" followed but ended in stagflation and (effectively) devaluation of sterling. Global events such as the 1973 oil crisis put pressure on the post-war consensus; this pressure was intensified by domestic problems such as high inflation, the three-day week and industrial unrest (particularly in the declining coal-mining industry). In early 1976, expectations that inflation and the double deficit would get worse precipitated a sterling crisis. By October, the pound had fallen by almost 25% against the dollar. At this point the Bank of England had exhausted its foreign reserves trying to prop up the currency, and as a result the Callaghan government felt forced to ask the International Monetary Fund for a £2.3 billion loan, then the largest that the IMF had ever made. In return the IMF demanded massive spending cuts and a tightening of the money supply. That marked a suspension of Keynesian economics in Britain. Callaghan reinforced this message in his speech to the Labour Party Conference at the height of the crisis, saying:

We used to think that you could spend your way out of a recession and increase employment by cutting taxes and boosting government spending. I tell you in all candour that that option no longer exists, and in so far as it ever did exist, it only worked on each occasion since the war by injecting a bigger dose of inflation into the economy, followed by a higher level of unemployment as the next step.

A cause of the supposed collapse of the post war consensus is the idea of the state overload thesis, chiefly examined in the UK by political scientist Anthony King. He summarises the chain of events as saying "Once upon a time, then, man looked to God to order the World. Then he looked to the market. Now he looks to government". It is suggested that due to the increased demand on the government during the consensus years, that an imbalance grew between what was possible to deliver and the demands that had been created. The process is defined as being cyclical: "more demands means more government intervention, which generates yet more expectations". It is believed that these qualms with the consensus are what led, in part, to the emergence of the New Right and Margaret Thatcher.

Thatcher reversed other elements of the post-war consensus, as when her Housing Act 1980 allowed the residents to buy their flats. Thatcher did keep key elements of the post-war consensus, such as nationalised health care. She promised Britons in 1982 that the National Health Service is "safe in our hands."

Economists Stephen Broadberry and Nicholas Crafts have argued that anticompetitive practices, enshrined in the post-war consensus, appear to have hindered the efficient working of the economy and, by implication, the reallocation of resources to their most profitable uses. David Higgins says the statistical data support Broadberry and Crafts.

The consensus was increasingly seen by those on the right as being the cause of Britain's relative economic decline. Believers in New Right political beliefs saw their ideology as the solution to Britain's economic dilemmas in the 1970s. When the Conservative Party won the 1979 general election in the wake of the 1978–79 Winter of Discontent, they implemented New Right ideas and brought the post-war consensus to an end.

New Zealand

Outside Britain, the term "post-war consensus" is used for an era of New Zealand political history, from the first New Zealand Labour Party government of the 1930s until the election of a fundamentally changed Labour party in 1984, following years of mostly New Zealand National Party rule. As in the UK, it was built around a 'historic compromise' between the different classes in society: the rights, health and security of employment for all workers would be promised by government, in return for co-operation between unions and employers. The key ideological tenets of governments of the period were Keynesian economic policy, heavy interventionism, economic regulation and an extensive welfare state.

Post–World War II economic expansion

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Post%E2%80%93World_War_II_economic_expansion 

 

In the United States and several other countries, the boom was manifested in suburban development and urban sprawl, aided by increasing automobile ownership and cheap oil

 

GDP per capita in various industrialized countries 1920 to 1976

The post–World War II economic expansion, also known as the postwar economic boom or the Golden Age of Capitalism, was a broad period of worldwide economic expansion beginning after World War II and ending with the 1973–1975 recession. The United States, the Soviet Union and Western European and East Asian countries in particular experienced unusually high and sustained growth, together with full employment.

Contrary to early predictions, this high growth also included many countries that had been devastated by the war, such as Japan (Japanese economic miracle), West Germany and Austria (Wirtschaftswunder), South Korea (Miracle on the Han River), Belgium (Belgian economic miracle), France (Trente Glorieuses), Italy (Italian economic miracle) and Greece (Greek economic miracle). Even countries that were relatively unaffected by the war such as Sweden (Record years) experienced considerable economic growth.

The boom established the conditions for a larger series of global changes at the height of the Cold War, including postmodernism, decolonisation, a marked increase in consumerism, the welfare state, the space race, the Non-Aligned Movement, import substitution, counterculture of the 1960s, the beginning of second-wave feminism, and a nuclear arms race.

In academic literature, the period is typically referred to as the post–World War II economic boom or simply the postwar economic boom.

Another name for the era is the Golden Age of Capitalism, a term coined by heterodox economist Stephen Marglin. This is not to be confused with the Gilded Age, which refers to the era of rapid economic growth from approximately 1870 to 1900 in the United States.

Timeline

Economist Roger Middleton states that economic historians generally agree on 1950 as the start date for the golden age, while Robert Skidelsky states 1951 is the most recognized start date. Both Skidelsky and Middleton have 1973 as the generally recognized end date, though sometimes the golden age is considered to have ended as early as 1970.

This long term business cycle ended with a number of events in the early 1970s:

• the collapse of the Bretton Woods monetary system in 1971
• the closing of the gold window by President Richard Nixon as a response to the Bretton Woods collapse
• the growing international trade in manufactured goods, such as automobiles and electronics
• the 1973 oil crisis,
• the 1973–74 stock market crash, and
• the ensuing 1973–75 recession

While this is the global period, specific countries experienced business expansions for different periods; in Taiwan, the Taiwan Miracle lasted into the late 1990s, for instance, while in France the period is referred to as Trente Glorieuses (Glorious 30 [years]) and is considered to extend for the 30-year period from 1945 to 1975.

Global economic climate

In the United States, unemployment fluctuated during the 1950s, but dropped steadily during the 1960s.

OECD members enjoyed real GDP growth averaging over 4% per year in the 1950s, and nearly 5% per year in the 1960s, compared with 3% in the 1970s and 2% in the 1980s.

Skidelsky devotes ten pages of his 2009 book Keynes: The Return of the Master to a comparison of the golden age to what he calls the Washington Consensus period, which he dates as spanning 1980–2009 (1973–1980 being a transitional period):

Metric	Golden Age	Washington Consensus
Average global growth	4.8%	3.2%
Unemployment (US)	4.8%	6.1%
Unemployment (France)	1.2%	9.5%
Unemployment (Germany)	3.1%	7.5%
Unemployment (Great Britain)	1.6%	7.4%

Skidelsky suggests the high global growth during the golden age was especially impressive as during that period Japan was the only major Asian economy enjoying high growth (Taiwan and South Korea at the time being small economies). It was not until later that the world had the exceptional growth of China raising the global average. Skidelsky also reports that inequality was generally decreasing during the golden age, whereas since the Washington Consensus was formed it has been increasing.

Globally, the golden age was a time of unusual financial stability, with crises far less frequent and intense than before or after. Martin Wolf reports that between 1945–71 (27 years) the world saw only 38 financial crises, whereas from 1973–97 (24 years) there were 139.

Causes

Allied war bonds matured during these years, transferring cash from governments to private households.

Productivity

See also: Agricultural productivity

High productivity growth from before the war continued after the war and until the early 1970s. Manufacturing was aided by automation technologies such as feedback controllers, which appeared in the late 1930s were a fast-growing area of investment following the war. Wholesale and retail trade benefited from new highway systems, distribution warehouses, and material handling equipment such as forklifts and intermodal containers. Oil displaced coal in many applications, particularly in locomotives and ships. In agriculture, the post WWII period saw the widespread introduction of the following:

• Chemical fertilizers
• Tractors
• Combine harvesters
• High-yielding variety
• Pesticides

Keynesian economics

Many Western governments funded large infrastructure projects during this period. Here the redevelopment of Norrmalm and the Stockholm Metro, Sweden.

Keynesian economists argue that the post war expansion was caused by adoption of Keynesian economic policies. Naomi Klein has argued the high growth enjoyed by Europe and America was the result of Keynesian economic policies and in the case of rapidly rising prosperity that this post war period saw in parts of South America, by the influence of developmentalist economics led by Raúl Prebisch.

Infrastructure spending

One of Eisenhower's enduring achievements was championing and signing the bill that authorized the Interstate Highway System in 1956. He justified the project through the Federal Aid Highway Act of 1956 as essential to American security during the Cold War. It was believed that large cities would be targets in a possible war, hence the highways were designed to facilitate their evacuation and ease military maneuvers.

Military spending

Another explanation for this period is the theory of the permanent war economy, which suggests that the large spending on the military helped stabilize the global economy; this has also been referred to as "Military Keynesianism". This also goes into hand with retired WWII vets with pensions to spend.

Financial repression

This period also saw financial repression—low nominal interest rates and low or negative real interest rates (nominal rates lower than inflation plus taxation), via government policy—resulting respectively in debt servicing costs being low (low nominal rates) and in liquidation of existing debt (via inflation and taxation). This allowed countries (such as the US and UK) to both deal with their existing government debt level and reduce the level of debt without needing to direct a high portion of government spending to debt service.

Wealth redistribution

  Top marginal income tax rates

• Tax brackets

  Lowest marginal income tax rates

Real income in the United States by percentile, normalized to 2007 costs. All social classes grew wealthier during the 1950s and 1960s, but the lower percentiles have only seen marginal improvement since then.

Much property was destroyed in war. In the inter-war period, the Great Depression also caused investments to lose value.

During both World Wars, progressive taxation and capital levies were introduced, with the generally-stated aim of distributing the sacrifices required by the war more evenly. While tax rates dipped between the wars, they did not return to pre-war levels. Top tax rates increased dramatically, in some cases tenfold. This had a significant effect on both income and wealth distributions. Such policies were commonly referred to as the "conscription of income" and "conscription of wealth".

a fundamental objection to the government's policy of conscription is that it conscripts human life only, and that it does not attempt to conscript wealth...

— Liberal party election platform, autumn 1917, Canada

The Economist, a British publication, opposed capital levies, but supported "direct taxation heavy enough to amount to rationing of citizens' incomes"; similarly, the American economist Oliver Mitchell Wentworth Sprague, in the Economic Journal, argued that that "conscription of men should logically and equitably be accompanied by something in the nature of conscription of current income above that which is absolutely necessary".

Rationing of goods was also widely used, with the aim of distributing scarce resources efficiently. Rationing was widely done with ration stamps, a second currency that entitled the bearer to buy (with regular money) a certain amount of a certain sort of good (for instance, two ounces of meat, or a certain amount of clothing or fuel). Price controls were also used (for instance, the price of restaurant meals was capped).

In the post-war period, progressive taxation persisted. Inheritance taxes also had an effect. Rationing in the United Kingdom lasted until 1954. Allied war bonds matured during the post-war years, transferring cash from governments to private households.

In Japan, progressive tax rates were imposed during the Allied occupation, at rates that roughly matched those in the United States at that time. High marginal tax rates for the wealthiest 1% were in place throughout Japan's decades of post-war growth South Korea, after the Korean War saw a similar trajectory. Marginal tax rates were high on the rich, until falling quickly in the 1990s. The state also legislated significant land reform, cutting deeply into a landholding elite's power and clientelism.

Low oil prices

The real oil price was low during the post-war decades, with this ending in the 1973 oil crisis.

In the 1940s, the price of oil was about $17, rising to just over $20 during the Korean War (1951–1953). During the Vietnam War (1950s–1970s) the price of oil slowly declined to under $20. During the Arab oil embargo of 1973—the first oil shock—the price of oil rapidly rose to double in price.

International cooperation

Poster for the Marshall Plan

 

See also: Aftermath of World War II

Among the causes can be mentioned the rapid normalization of political relations between former Axis powers and the western Allies. After the war, the major powers were determined not to repeat the mistakes of the Great Depression, some of which were ascribed to post–World War I policy errors. The Marshall Plan for the rebuilding of Europe is most credited for reconciliation, though the immediate post-war situations was more complicated. In 1948 the Marshall Plan pumped over $12 billion to rebuild and modernize Western Europe. The European Coal and Steel Community formed the foundation of what was to become the European Union in later years.

Institutional arrangements

Institutional economists point to the international institutions established in the post-war period. Structurally, the victorious Allies established the United Nations and the Bretton Woods monetary system, international institutions designed to promote stability. This was achieved through a number of policies, including promoting free trade, instituting the Marshall Plan, and the use of Keynesian economics. Although this was before modern eastern countries growing their workforce I.e. before the outsourcing problem protectionists point to.

US Council of Economic Advisers

In the United States, the Employment Act of 1946 set the goals of achieving full employment, full production, and stable prices. It also created the Council of Economic Advisers to provide objective economic analysis and advice on the development and implementation of a wide range of domestic and international economic policy issues. In its first 7 years the CEA made five technical advances in policy making:

1. The replacement of a "cyclical model" of the economy by a "growth model,"
2. The setting of quantitative targets for the economy,
3. Use of the theories of fiscal drag and full-employment budget,
4. Recognition of the need for greater flexibility in taxation, and
5. Replacement of the notion of unemployment as a structural problem by a realization of low aggregate demand.

Specific countries

The economies of the United States, Japan, West Germany, France, and Italy did particularly well. Japan and West Germany caught up to and exceeded the GDP of the United Kingdom during these years, even as the UK itself was experiencing the greatest absolute prosperity in its history. In France, this period is often looked back to with nostalgia as the Trente Glorieuses, or "Glorious Thirty", while the economies of West Germany and Austria were characterized by Wirtschaftswunder (economic miracle), and in Italy it is called Miracolo economico (economic miracle). Most developing countries also did well in this period.

Belgium

Main article: Belgian economic miracle

Belgium experienced a brief but very rapid economic recovery in the aftermath of World War II. The comparatively light damage sustained by Belgium's heavy industry during the German occupation and the Europe-wide need for the country's traditional exports (steel and coal, textiles, and railway infrastructure) meant that Belgium became the first European country to regain its pre-war level of output in 1947. Economic growth in the period was accompanied by low inflation and sharp increases in real living standards.

However, lack of capital investment meant that Belgium's heavy industry was ill-equipped to compete with other European industries in the 1950s. This contributed to the start of deindustrialisation in Wallonia and the emergence of regional economic disparities.

France

Main article: Trente Glorieuses

Between 1947 and 1973, France went through a boom period (5% growth per year on average) dubbed by Jean Fourastié Trente Glorieuses – the title of a book published in 1979. The economic growth occurred mainly due to productivity gains and to an increase in the number of working hours. Indeed, the working population grew very slowly, the "baby boom" being offset by the extension of the time dedicated to study. Productivity gains came from catching up with the United States. In 1950, the average income in France was 55% of that of an American; it reached 80% in 1973. Among the "major" nations, only Japan had faster growth in this era than France.

The extended period of transformation and modernization also involved an increasing internationalization of the French economy. France by the 1980s had become a leading world economic power and the world's fourth-largest exporter of manufactured products. It became Europe's largest agricultural producer and exporter, accounting for more than 10 percent of world trade in such goods by the 1980s. The service sector grew rapidly and became the largest sector, generating a large foreign-trade surplus, chiefly from the earnings from tourism.

Italy

Main article: Italian economic miracle

The Italian economy experienced very variable growth. In the 1950s and early 1960s the Italian economy boomed, with record high growth-rates, including 6.4% in 1959, 5.8% in 1960, 6.8% in 1961, and 6.1% in 1962. This rapid and sustained growth was due to the ambitions of several Italian businesspeople, the opening of new industries (helped by the discovery of hydrocarbons, made for iron and steel, in the Po valley), re-construction and the modernisation of most Italian cities, such as Milan, Rome and Turin, and the aid given to the country after World War II (notably through the Marshall Plan).

Japan

Main article: Japanese economic miracle

 

A transistor radio made by Sanyo in 1959. Japan manufactured much of the world's consumer electronics during this period.

After 1950 Japan's economy recovered from the war damage and began to boom, with the fastest growth rates in the world. Given a boost by the Korean War, in which it acted as a major supplier to the UN force, Japan's economy embarked on a prolonged period of extremely rapid growth, led by the manufacturing sectors. Japan emerged as a significant power in many economic spheres, including steel working, car manufacturing and the manufacturing of electronics. Japan rapidly caught up with the West in foreign trade, GNP, and general quality of life. The high economic growth and political tranquility of the mid to late 1960s were slowed by the quadrupling of oil prices in 1973. Almost completely dependent on imports for petroleum, Japan experienced its first recession since World War II. Another serious problem was Japan's growing trade surplus, which reached record heights. The United States pressured Japan to remedy the imbalance, demanding that Tokyo raise the value of the yen and open its markets further to facilitate more imports from the United States.

Soviet Union

In early 1950s, the Soviet Union, having reconstructed the ruins left by the war, experienced a decade of prosperous, undisturbed, and rapid economic growth, with significant and remarkable technological achievements most notably the first earth satellite. The nation made it to the top 15 countries with highest GDP per capita in the mid-1950s. However, the growth slowed by the mid-1960s, as the government started pouring resources into large military and space projects, and the civilian sector gradually languished. While every other major nation greatly expanded its service sector, in the Soviet Union it was given low priority. Following Khrushchev's ouster, and the appointment of a collective leadership led by Leonid Brezhnev and Alexei Kosygin, the economy was revitalised. The economy continued to grow apace during the late 1960s, during the Eighth Five-Year Plan. However, economic growth began to falter during the late 1970s, beginning the Era of Stagnation.

Sweden

Main article: Record years

Sweden emerged almost unharmed from World War II, and experienced tremendous economic growth until the early 1970s, as Social Democratic Prime Minister Tage Erlander held his office from 1946 to 1969. Sweden used to be a country of emigrants until the 1930s, but the demand for labor spurred immigration to Sweden, especially from Finland and countries like Greece, Italy and Yugoslavia. Urbanization was fast, and housing shortage in urban areas was imminent until the Million Programme was launched in the 1960s.

United Kingdom

The national debt of the United Kingdom was at a record high percentage of the GDP as the war ended, but was largely repaid by 1975.

A 1957 speech by UK Prime Minister Harold Macmillan captures what the golden age felt like, even before the brightest years which were to come in the 1960s.

Let us be frank about it: most of our people have never had it so good. Go round the country, go to the industrial towns, go to the farms and you will see a state of prosperity such as we have never had in my lifetime – nor indeed in the history of this country.

Unemployment figures show that unemployment was significantly lower during the Golden Age than before or after:

Epoch	Date range	Percentage of British labour force unemployed.
Pre-Golden Age	1921–1938	13.4
Golden Age	1950–1969	1.6
Post-Golden Age	1970–1993	6.7

In addition to superior economic performance, other social indexes were higher in the golden age; for example the proportion of Britain's population saying they were "very happy" fell from 52% in 1957 to just 36% in 2005.

United States

Main article: Economic history of the United States § Post-World War II prosperity: 1945–1973

See also: Economic stagnation § End of stagnation in the U.S. after the Great Depression

 

The period from the end of World War II to the early 1970s was one of the greatest eras of economic expansion in world history. In the US, Gross Domestic Product increased from $228 billion in 1945 to just under $1.7 trillion in 1975. By 1975, the US economy represented some 35% of the entire world industrial output, and the US economy was over 3 times larger than that of Japan, the next largest economy. The expansion was interrupted in the United States by five recessions (1948–49, 1953–54, 1957–58, 1960–61, and 1969–70).

$200 billion in war bonds matured, and the G.I. Bill financed a well-educated work force. The middle class swelled, as did GDP and productivity. The US underwent its own golden age of economic growth. This growth was distributed fairly evenly across the economic classes, which some attribute to the strength of labor unions in this period—labor union membership peaked during the 1950s. Much of the growth came from the movement of low-income farm workers into better-paying jobs in the towns and cities—a process largely completed by 1960.

West Germany

Main article: Wirtschaftswunder

 

Assembly of the Volkswagen Beetle in West Germany

West Germany, under Chancellor Konrad Adenauer and economic minister Ludwig Erhard, saw prolonged economic growth beginning in the early 1950s. Journalists dubbed it the Wirtschaftswunder or "Economic Miracle". Industrial production doubled from 1950 to 1957, and gross national product grew at a rate of 9 or 10% per year, providing the engine for economic growth of all of Western Europe. Labor unions' support of the new policies, postponed wage increases, minimized strikes, supported technological modernization, and a policy of co-determination (Mitbestimmung), which involved a satisfactory grievance resolution system and required the representation of workers on the boards of large corporations, all contributed to such a prolonged economic growth. The recovery was accelerated by the currency reform of June 1948, US gifts of $1.4 billion Marshall Plan aid, the breaking down of old trade barriers and traditional practices, and the opening of the global market. West Germany gained legitimacy and respect, as it shed the horrible reputation Germany had gained under the Nazis. West Germany played a central role in the creation of European cooperation; it joined NATO in 1955 and was a founding member of the European Economic Community in 1958.

Effects

The increased free time of adolescents caused the rise of youth subcultures such as Mods.

The post-war economic boom had many social, cultural, and political effects (not least of which was the demographic bulge termed the baby boom). Movements and phenomena associated with this period include the height of the Cold War, postmodernism, decolonisation, a marked increase in consumerism, the welfare state, the space race, the Non-Aligned Movement, import substitution, counterculture of the 1960s, opposition to the Vietnam War, the civil rights movement, the sexual revolution, the beginning of second-wave feminism, and a nuclear arms race. In the United States, the middle-class began a mass migration away from the cities and towards the suburbs; it was a period of prosperity in which most people could enjoy a job for life, a house, and a family.

In the West, there emerged a near-complete consensus against strong ideology and a belief that technocratic and scientific solutions could be found to most of humanity's problems, a view advanced by US President John F. Kennedy in 1962. This optimism was symbolized through such events as the 1964 New York World's Fair, and Lyndon B. Johnson's Great Society programs, which aimed at eliminating poverty in the United States.

Decline

The sharp rise in oil prices due to the 1973 oil crisis hastened the transition to the post-industrial economy, and a multitude of social problems have since emerged. During the 1970s steel crisis, demand for steel declined, and the Western world faced competition from newly industrialized countries. This was especially harsh for mining and steel districts such as the North American Rust Belt and the West German Ruhr area.

Era of Stagnation

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Era_of_Stagnation 

 

Politics of the Soviet Union

The "Era of Stagnation" (Russian: Пери́од засто́я, romanized: Períod zastóya, or Эпо́ха засто́я Épokha zastóya) is a term coined by Mikhail Gorbachev in order to describe the negative way in which he viewed the economic, political, and social policies of the Soviet Union that began during the rule of Leonid Brezhnev (1964–1982) and continued under Yuri Andropov (1982–1984) and Konstantin Chernenko (1984–1985). It is sometimes called the "Brezhnevian Stagnation" in English.

Terminology

During the period of Brezhnev's leadership, the term "Era of Stagnation" was not used. Instead Brezhnev used the term "period of developed socialism" (Russian: период развито́го социализма) for the period that started in 1971. This term stemmed from Khrushchev's promise in 1961 of reaching communism in 20 years. It was in the 1980s that the Soviet leader Mikhail Gorbachev coined the term "Era of Stagnation" to describe the economic difficulties that developed when Leonid Brezhnev ruled the Soviet Union from 1964 to 1982. Scholars have subsequently disagreed on the dates, significance and causes of the stagnation. Supporters of Gorbachev have criticised Brezhnev, and the Brezhnev administration in general, for being too conservative and failing to change with the times.

History

After the death of Soviet leader Joseph Stalin in 1953 a program of policy change was begun, later known as de-Stalinization. Nikita Khrushchev, who succeeded Stalin's brief successor Georgy Malenkov as Soviet leader, introduced relatively liberal reforms during the period known as the Khrushchev Thaw. This period also brought an economic increase that topped at 6%. However the Manege Affair of 1962, during which Khrushchev publicly criticised an exhibition of Soviet art, led to the reassertion of Communist Party control over the arts and marked the beginning of the end of the Cultural Thaw.

Brezhnev replaced Khrushchev as Soviet leader in 1964. The Brezhnev Era (1964–1982) began with high economic growth and soaring prosperity, but gradually significant problems in social, political, and economic areas accumulated. Social stagnation began following Brezhnev's rise to power, when he revoked several of Khrushchev's reforms and partially rehabilitated Stalinist policies. Some commentators regard the start of social stagnation as being the Sinyavsky–Daniel trial in 1966, which marked the end of the Khrushchev Thaw, while others place it at the suppression of the Prague Spring in 1968. The period's political stagnation is associated with the establishment of gerontocracy, which came into being as part of the policy of stability.

The majority of scholars set the starting year for economic stagnation at 1975, although some claim that it began as early as the 1960s. Industrial growth rates declined during the 1970s as heavy industry and the arms industry were prioritized while Soviet consumer goods were neglected. The value of all consumer goods manufactured in 1972 in retail prices was about 118 billion roubles. Historians, scholars, and specialists are uncertain what caused the stagnation, with some arguing that the command economy suffered from systemic flaws that inhibited growth. Others have argued that the lack of reform, or the high expenditures on the military, led to stagnation.

Brezhnev has been criticised posthumously for doing too little to improve the economic situation. Throughout his rule, no major reforms were initiated and the few proposed reforms were either very modest or opposed by the majority of the Soviet leadership. The reform-minded Chairman of the Council of Ministers (Government), Alexei Kosygin, introduced two modest reforms in the 1970s after the failure of his more radical 1965 reform, and attempted to reverse the trend of declining growth. By the 1970s, Brezhnev had consolidated enough power to stop any "radical" reform-minded attempts by Kosygin.

After the death of Brezhnev in November 1982, Yuri Andropov succeeded him as Soviet leader. Brezhnev's legacy was a Soviet Union that was much less dynamic than it had been when he assumed power in 1964. During Andropov's short rule, modest reforms were introduced; he died little more than a year later in February 1984. Konstantin Chernenko, his successor, continued much of Andropov's policies. The economic problems that began under Brezhnev persisted into these short administrations and scholars still debate whether the reform policies that were followed improved the economic situation in the country.

The Era of Stagnation ended with Gorbachev's rise to power during which political and social life was democratised even though the economy was still stagnating. Under Gorbachev's leadership the Communist Party began efforts to accelerate development in 1985 through massive injections of finance into heavy industry (Uskoreniye). When these failed, the Communist Party restructured (perestroika) the Soviet economy and government by introducing quasi-capitalist (Khozraschyot) and democratic (demokratizatsiya) reforms. These were intended to re-energize the Soviet Union but inadvertently led to its dissolution in 1991.

Economy

Analysis

Robert Service, author of the History of Modern Russia: From Tsarism to the Twenty-first Century, claims that with mounting economic problems worker discipline decreased, which the government could not counter effectively because of the full employment policy. According to Service, this policy led to government industries, such as factories, mines and offices, being staffed by undisciplined and unproductive personnel ultimately leading to a "work-shy workforce" among Soviet workers and administrators. While the Soviet Union under Brezhnev had the "second greatest industrial capacity" after the United States, and produced more "steel, oil, pig-iron, cement and ... tractors" than any other country in the world, Service treats the problems of agriculture during the Brezhnev era as proof of the need for de-collectivization. In short, Service considers the Soviet economy to have become "static" during this time period, and Brezhnev's policy of stability was a "recipe for political disaster".

Richard Sakwa, author of the book The Rise and Fall of the Soviet Union: 1917–1991, takes a dimmer view of the Brezhnev era by claiming that growth rates fell "inexorably" from the 1950s until they stopped completely in the 1980s. His reasoning for this stagnation was the growing demand for unskilled workers resulted in a decline of productivity and labour discipline. Sakwa believes that stability itself led to stagnation and claimed that without strong leadership "Soviet socialism had a tendency to relapse into stagnation."

According to Edwin Bacon and Mark Sandle, authors of Brezhnev Reconsidered, the economy under Brezhnev was as dynamic as the economy presided over by Nikita Khrushchev, but this dynamism had stalled by the time Yuri Andropov, and subsequently Konstantin Chernenko, became General Secretary. Mark Harrison claims that the economic performance of the Brezhnev era has not been looked at objectively as analysis of the period sometimes used lower estimates. Harrison further claims that in the period between 1928 and 1973 the Soviet economy grew in a phase that would surpass the United States "one day". During the international oil crisis, growth in the Soviet Union and the Eastern Bloc halted abruptly and stalled for a longer period than in the West causing the economy to begin stagnating. One explanation, according to Harrison, is that the Soviet economy could not sustain its extensive growth patterns. Other explanations include: the lack of Soviet, and communist bloc, transparency with other nations hindering globalisation and misinterpretation of a "permanent" post–World War II economic boom leading to faulty economic decisions. He claims that the economic policies of Andropov, and Chernenko, had improved the economic situation in the country and Mikhail Gorbachev inherited a more dynamic and vibrant economy in a "pre-crisis situation" where the economy was still growing with low internal and external debts, compared to the economy that Andropov and Chernenko inherited.

Archie Brown, author of The Rise and Fall of Communism, claims in his book that the term Era of Stagnation "was in many ways a fitting description, for this was a period of declining growth", but noted it could be misleading in non-economic spheres. Brown states there were high growth rates in the mid-to-late 1960s (during the Eighth Five-Year Plan) claiming that the Soviet economy "enjoyed stronger growth in the second half of the 1960s than it ever did thereafter". The link between these growth rates and the Kosygin reform is, according to Brown, "tenuous", but says that "From the point of view of communist rulers, the Brezhnev era was in many ways successful". The Soviet Unions natural resources provided a strong economic foundation, which bore fruit during the 1973 oil crisis and "turned out to be an energy bonanza". On the other hand, Brown states it was a sign of weakness that the Soviet Union grew so dependent on her natural resources, as she did in the 1970s.

Scholars are generally unsure as to what effect the "Kosygin reform", named after its initiator Alexei Kosygin, had on economic growth

Philip Hanson, author of The Rise and Fall of the Soviet economy: an Economic History of the USSR from 1945, claims that the label stagnation is not "entirely unfair". Brezhnev, according to Hanson, did preside over a period of slowdown in economic growth, but claims that the era started with good growth that was at a higher rate than during the end of Khrushchev's rule. Economic slowdown began in 1973 "when even the official estimates began to show Soviet per capita production no longer closing the gap with the US." Before 1973, there was a reform period launched by Alexei Kosygin, which many believed would become as radical as those in the Socialist Republic of Czechoslovakia and the previous reform attempts in Hungary. According to Hanson, many assumed that growth during the Brezhnev era did not stop but started to stagnate. Not everything stagnated, however, as per capita consumption grew by 1.9% during the 1970s, which is a "highly respectable rate" of growth. Another point that Hanson makes is that, in contrast to the repressive policies of Joseph Stalin and instability-inducing policies of Khrushchev, the Brezhnev era was stable and a "period of (comparative) plenty".

Robert Vincent Daniels in his book, Russia's Transformation: Snapshots of a Crumbling System, claimed that the hallmark of the Brezhnev era was the status quo, which in turn led to the development of a great paradox; "the contradictions of what it was and what it could be became obvious". Net growth, in excess of 50% and as high as two thirds, was primarily in the urban sector resulting in high population growth and urban growth higher than that of the United States. Industrial development continued to grow rapidly, and in certain sectors surpassed the United States. As an example, coal production in the Soviet Union increased from 85 million metric tons in 1964 to 149 million metric tons in 1981 while in the United States it grew from 100 million to 130 million metric tons in the same period. The Soviet Union became the largest exporter of petroleum in the world and by the end of the Tenth Five-Year Plan (1976–1981) the Soviet GNP "reached about 60% of the American level, and the net current investment was actually greater in absolute terms". The failure then, according to Daniels, was that the Soviet economy was not able to deliver in certain sectors; agriculture is a sector where this failure occurred. Throughout Soviet history, deficiencies in agriculture and consumer goods always existed. During Brezhnev's reign, the Soviet Union became the largest producer of wheat in the world but was unable to produce meat in sufficient quantities. According to Daniels, the economy began to stagnate in 1975 rather than 1973 and that the following period contradicted the previous one "in almost every way".

The research in second economy of the Soviet Union, pioneered by Gregory Grossman, indicated that during 1970s-1980s the effects of the central planning were progressively distorted due to the rapid growth of the shadow economy. It is suggested that failure to account for it by Gosplan contributed to the stagnation, and ultimately to the collapse of the Soviet economy.

Causes

One of the suggested causes of stagnation was the increased military expenditure over consumer goods and other economic spheres. Andrei Sakharov, the veteran dissident, claimed in a 1980 letter to Brezhnev that the increasing expenditure on the armed forces was stalling economic growth. David Michael Kotz and Fred Weir, authors of Revolution from Above: The Demise of the Soviet System, argue that militarisation cannot be the prime cause for the economic stagnation, as military spending had historically been high (17% of GNP in 1950) and had increased on par with economic growth without previously destabilising the economy.

During the Nixon Shock and the 1973 oil crisis, economic growth in the rest of the world plummeted but the Soviet hard currency earnings grew as a result of oil exports. Following the crisis, overall economic activity decreased markedly in the Soviet Union, the Western Bloc and Japan, but in the Soviet Union it was much more pronounced. Kotz and Weir argued that ultimately, economic stagnation in the Soviet Union could only have been caused by internal problems rather than external.

Some Marxist–Leninist writers have argued that economic stagnation was a result of revisionism in Soviet economic policy during Khrushchev's leadership. According to authors like Harpal Brar, Khrushchev's de-Stalinization program was also used to implement economic reforms that would move the USSR away from central planning and towards market socialism.

Summary

One of the main causes for Khrushchev's dismissal from power was the relatively poor economic growth during the early 1960s. Overall economic growth was 6% from 1951 to 1955 but had fallen to 5.8% in the subsequent 5 years and to 5% from 1961 to 1965. Labour productivity, which had grown 4.7% from the 1950s to 1962, had declined to 4% by the early 1960s. Growth, capital out and investments were all showing signs of steady decline. Another problem was Khrushchev's unrealistic promises such as committing to reach communism in 20 years, a near impossibility with the then-current economic indicators. Ultimately, as a result of his failure to deliver on his promises and the problems engendered, Khrushchev was dismissed in October 1964 by a collective leadership led by Leonid Brezhnev and Alexei Kosygin. To counter Khrushchev's promise of reaching communism, the Soviet leadership created the term developed socialism, which meant that the Soviet Union had developed to a sufficiently advanced stage that the country would move "naturally" to communism (in an unspecified amount of time).

Khrushchev's dismissal led to the establishment of a more conservative Politburo; Kosygin, Nikolai Podgorny and Andrei Kirilenko were the most liberal members, Brezhnev and Arvīds Pelše belonged to the moderate faction while Mikhail Suslov retained his leadership of the party's hardliners. Kosygin and Brezhnev strongly disagreed over economic policy; Kosygin wanted to increase investments in consumer goods and light industry whereas Brezhnev wanted to increase investment in heavy industry, agriculture and defence. In 1965, Kosygin introduced an economic reform, widely referred to as the "Kosygin reform", which aimed to reform the planned economy within a socialist framework. In a bid to improve the Soviet economy Kosygin copied some of the measures used in the Western Bloc, such as profit making, which Brezhnev agreed to as the Soviet economy was entering a period of low growth. Kosygin's reforms on agriculture gave considerable autonomy to the collective farms, giving them the right to the contents of private farming. As a result, during the Eighth Five-Year Plan (1966–1970), large-scale land reclamation programmes, construction of irrigation channels, and other measures, were enacted. Overall, the reform failed and links to any high growth rates during the Eighth Five-Year Plan are considered to be "tenuous".

The Brezhnev era, which had begun with high growth, began to stagnate some time in the early 1970s. Kosygin's "radical" reform attempts were halted in 1971 and his second reform was more modest. The second reform was halted because of the 1973 oil crisis, when an international increase in the price of oil prompted economic growth based on selling oil. Another reform was implemented in 1979 but this, too, failed as by this time the Soviet economy had become "addicted" to high oil prices.

In 1980, RIA Novosti reported that the Soviet Union showed the highest, in Europe, and second highest, worldwide, industrial and agricultural output. The Soviet statistics claimed that in 1960, the Soviet Union's industrial output was only 55% that of America, but this increased to 80% by 1980. The 18 years of Brezhnev's leadership of the Communist Party saw real incomes grow by more than 1.5 times. More than 1.6 billion square meters of living space was commissioned and provided to over 160 million people. At the same time, the average rent for families did not exceed 3% of the family income. Housing, health care, and education were affordable and low priced. As the circulation of the work force could not be balanced by salaries, there was a lack of workers in some areas, largely in the agricultural sector. This was partly solved by forcing "nonproductive" urban population (older pupils, students, scientists, soldiers, etc.) to work during the harvesting time as agricultural workers. The practice has been informally called "naryady na kartoshku" (Russian: наряды на картошку "assignments to potato fields").

Opposition

Acts of protest took place in reaction to the Warsaw Pact invasion of Czechoslovakia with protesters being dismissed from their jobs, beaten or arrested. Eight protesters held a demonstration in Red Square in Moscow and were subsequently imprisoned. A number of suspected dissidents had their homes and property searched and a group of Moscow lawyers specialised in defending people charged with anti-Soviet activity. Supporters of these meetings and demonstrations claimed that the arrests were illegal, because there is no criminality in the realization of the human right to obtain and distribute information. They asserted this right was part of the Universal Declaration of Human Rights (1948) and the final act of the Conference on Security and Co-operation in Europe (1975).

Art and science

During the introduction of glasnost, many writers claimed that they did not know about the repression of citizens who did not support the Brezhnev politics. Artists propagating "Soviet values" within the framework of Socialist realism, however, formed a well paid, elite group that enjoyed an easy life and high social status.

Nevertheless, a noticeable part of Soviet scientists and artists (collectively known as "the dissidents") continued both open and clandestine political opposition to the regime that they began during the Khrushchev rule. Prominent nuclear physicist Andrey Sakharov and Soviet Army General Pyotr Grigorenko are well-known representatives of this movement.

Many other members of the Soviet intelligentsia systematically criticized the social and moral manifestations of the Stagnation without overtly challenging the authorities. Examples include writers Viktor Astafyev and Oles Honchar, playwright Grigory Gorin, directors Eldar Ryazanov and Mark Zakharov.

Comparison with the United States: slowdown or stagnation

In the years 1975–1985 the US industrial output grew at a rate of 2.6% per year. The Soviet net material product is a partially corresponding measure. It increased at yearly rate of 3.8%.