The Golden Age of Capitalism Luiz Carlos Bresser-Pereira Chapter of the book being written, Rentiers’ Capitalism. March 2020.
In the nineteenth century Western Europe and the United States experienced a remarkable economic and cultural progress but was tarnished by the domestic exploitation of the workers and by the reduction of the peoples of Asia and Africa to the condition of colonies. This was also a period of peace among the major potencies under the leadership of Britain, which had begun with its victory over the France of Napoleon. A period that end tragically with the irrational 1914-18 First World War, whose main cause was the resentment of Germany and Italy. The internal division of these two countries retarded their industrial revolution and lost the opportunity of building a colonial empire as The UK and France had been able to build. This war divided and fragilized Europe, opener room for the socialist 1917 Russian Revolution. and marked the transition of the dominant country from The UK to the United States. The postwar 1920s were euphoric years in the US, but, not surprisingly, ended up with the 1929 crash of the New York Stock Exchange and the 1930s’ Great Depression. Followed a huge fall in GDP, mass unemployment, the discredit of the gold standard and of economic liberalism. The time was, now, for fascism in Italy and Germany, for Stalinism in the Soviet Union, which falsified the Democratic Revolution of the turn of the twentieth century, but was also the time for the New Deal in the United States, which showed that capitalism could be made democratic despite the power of capital and or organization – that a compromise was possible between capitalists, technobureaucrats and the workers.
The New Deal and the war The West (the sum of the rich capitalist countries) found its way out of the crisis under the leadership of a statesman, Franklin Delano Roosevelt, and a genial economist and intellectual, John Maynard Keynes. Roosevelt, with the New Deal, launched an innovative and bold project of reform of the American economy out of economic liberalism, while Keynes, with The General Theory, offered the macroeconomic theory that turned economics into an operational science, instead of just a way of legitimizing this same economic liberalism. With New Deal’s innovative institutions, the US was back to a developmental strategy – for sure, the moderate developmentalism of a mature capitalist economy, but a policy regime where the state had again a say. The 1944 Bretton Woods agreements, with the creation of the IMF, the World Bank, a system of fixed exchange rates and the convertibility of the dollar in gold at US$ 35.00 per ounce assured international financial stability in the economic side. Yet, the supposition that the US would continue to present indefinitely large current account surpluses was the foundation of the agreement – a foundation that, in the late 1960s, would prove to be wrong _________ Luiz Carlos Bresser-Pereira is emeritus professor bresserpereira@gmail.com, www.bresserpereira.org.br
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