Global Economic Shifts Between 1914 and 1945
Economic Vision of World War I
Item 5: Economy between the two World Wars (1914-1945)
During this period, several powers sought to overtake Britain both economically and politically, including Germany and France. In the First World War, the opposing sides were the Triple Alliance (Germany, Austria-Hungary, and other minor powers) and the Triple Entente (France, Russia, and other minor powers). Britain could no longer remain neutral and eventually joined the Entente. Initially, the U.S. did not interfere, making the conflict primarily a European war.
The Outbreak and Industrial Nature of War
The alliances supported their members, and the war began in June 1914 when the heir to the Austro-Hungarian throne was assassinated in Serbia. While war had existed before capitalism, World War I was characterized by its industrial nature. In a war economy, all resources are directed toward the conflict. Women, children, and foreigners entered the industrial workforce while traditional workers moved to the front lines.
State Management and Trench Warfare
The economics of war required decisive action; the State became the sole authority and manager of the economic effort. It was a war of position rather than movement, defined by trenches and psychological resistance. Taxation systems were often ineffective as they continued to benefit the wealthy, with Britain being the only nation to implement a fairer tax system.
Financial and Demographic Consequences
Europe faced a negative economic balance, ending the war as a major debtor, especially the losing nations. Regarding currency, the Bank of England and the Bank of France issued inconvertible notes, which could no longer be exchanged for gold. The Triple Alliance faced severe hardships due to isolation, leading to shortages of food and weapons. Peace was finally signed in November 1918.
The human balance was devastating. As a military-based conflict, it primarily killed men aged 20-39. Consequently, many children were not born, creating a significant notch in the population pyramid.
Post-War Crisis and State Intervention
Following the crisis, democracies found that intervention was required. The stock market alone is not self-regulating. There is a distinct difference between dirigisme and interventionism. Dirigisme occurs when the public sector replaces private operators or subjects them to strict policy guidelines. In contrast, interventionism involves subsidiary states creating laws to assist the economy.
Economic Models and Political Systems
Three main guidelines emerged: Social Democracy, Dirigisme, and Communism. Within these subclasses, both dictatorships and democracies existed. The London Summit, where nations agreed to act independently, failed to solve the issues and only deepened the global economic problems.
Political Economy of Dictatorships
The political economy of dictatorships is organismic, centered around a single people, a single direction, and a leader (Führer).