The World System Since 1945
Notes from Richard Stacewicz
Today’s Global System dominated by the economic theory called neo-liberalism. Key tenets of neo-liberalism include, privatization, deregulation, and dismantling of the “welfare state” and cuts in social spending.
The theoretical underpinnings go back to the late 19th century and the work of Adam Smith and David Ricardo (classical liberalism) although this ideology was primarily pushed by the global core Britain in the 19th century as it sought to promote “Free Trade” across the globe the United States and other nation-states opposed this kind of approach between nations (other western powers promoted monopolistic policies regarding their colonies) but implemented elements of it for domestic purposes when those policies were advocated by members of the working class (no income taxes, no government programs and little or no regulation of internal economies, yet governments provided great deal of support for internal industries – such as the railroads in the United States).
Context: Capitalist class efforts to undo the government policies which had been erected throughout the west in support of Aristocratic interests (US Civil War can be explained in this way)
The “unfettered free-market” capitalist economy of the 19th century and into the 20th was characterized by continuous “boom and bust” cycles which became increasingly global in nature as the global economy became more integrated. The final and greatest depression of this era of classical liberal dominance took place between 1929 and 1941. The Great Depression unleashed a great deal of social unrest across the world and fears of revolutions among national leaders. In response to this threat posed to their control, elites across the west and other parts of the world adopted Liberal policies advocated by the economist John Maynard Keynes which called for strong governmental regulations to curb the excesses of capitalism, government economic stimulation and spending to stimulate economic activity (through job creation, etc.), and erection of the welfare state to provide social services for citizens (health care, social security, etc.). This form of capitalism became dominant across most of the west from the 1930s through the 1970s.
While a large enough segment of the capitalist class supported these policies, many across the industrialized world attacked these policies as “communistic and socialistic” and therefore un-American (at least in the US context). These government programs did place some controls on capital and were paid fro through progressive income taxes.
At the end of the Second World War, the United States emerged as the world systems new core (the United States was producing half of the world’s manufactured goods, had become the world’s leading creditor nation, and possessed the greatest military strength) with the Soviet Union controlling a small sphere of influence in Eastern Europe. US political and economic elite feared that the end of the war would bring a return of the economic depression and argued that in order to avert this and the social discontent that might follow, the United States needed to gain greater access to global markets and access to raw materials. US interests in promoting “Free-Trade date back to the end of the 19th century. As US secretary of State Cordell Hull stated in 1944, “Any serious failure to maintain the flow [of raw materials] would put millions [of Americans] out of business.”
In 1898, the United States (under McKinley’s administration pushed US interests beyond continental North America and published the “Open Door” notes which called for free trade access to China among the powers that were competing to gain monopolistic colonial control of that region. United States begins century-long informal colonial control over Latin America. While the US was unable to impose its will in other areas of the globe, as Britain had during the 19th century given that the global system was already dominated by various colonial powers, it did see the opportunity to Open Doors at the end of the Second World War and worked to develop a global system that would promote these interests and allow for the Welfare State to remain intact while increasing wealth for capitalist class. In 1947, Assistant Secretary of State George C. McGhee wrote, “Our tradition of Free Enterprise . . . has become so thoroughly ingrained in our economic thinking that it amounts to us to almost a religion. We are perfectly sincere in our conviction that it would be in the best interests of other nations to follow our example.”
Internationally: Creation of United Nations in 1945 with control in hands of US, Britain, France, Soviet Union and China.
Global Economic Institutions and policies: In 1944 at Bretton Woods, New Hampshire, the US and European allies created the World Bank, and IMF
1947: Marshall Plan developed to quickly rebuild Europe and keep flow of American products to Europe in order to keep US economy from sinking
1947: GATT talks initiated.
The United States also created a large National Security State at the end of the war essentially keeping the United States on a permanent war footing from that point on.
1947: National Security Act passed creating the National Security Council and Central Intelligence Agency (CIA)
New Military Bases opened across Europe and Asia
1948: Peace-time draft begins: 140,000 US troops in Asia, 100,000 in Europe, and 155,000 in US. By 1959, over 3 million in US forces with roughly 600,000 stationed overseas.
Military Alliances created (NATO, SEATO, etc.)
Across the “Global South” (peripheries, “developing” countries) many of the leaders of newly decolonizing nations sought to gain not only political independence but also economic independence. These countries were left impoverished after years of colonial control (term, 3rd World coined to describe these nations) and sought to develop their economies.
Decolonization:
India and Pakistan in 1947, Iran in 1948, Indonesia in 1950, Vietnam in 1946 and then 1954 after 8 years of wars with France, Ghana in 1958, Congo in 1960, etc. etc.
Countries in the periphery were influenced by Dependency (Dependencia) Theory developed by Argentinian economist Raul Prebisch after World War II. Dependency theorist argued that 3rd World countries were poor because of years of colonial exploitation and had become dependent in the process. (Contrasted with dominant view in the west, Modernization Theory, which argued that 3rd world nations were poor because something was wrong with them – they lacked a forward looking culture, they had been living unchanged for centuries, they lacked education, etc.. If they wanted to achieve economic growth, they had to allow for westerners to direct them on how to do it, bring in foreign capital, etc.). Prebisch and Dependency theorists argues that 3rd world nations had to break their dependent status by taking control of their resources (nationalization) and promoting government led industrialization through import-substitution. A direct conflict then began to develop between the aspirations of many 3rd world leaders and US corporate interests.
Result:
Covert and Overt removals of governments and military interventions in 3rd world with replacement with regimes friendly to US corporate interests– Iran in 1953, Guatemala in 1954, Vietnam from 1954 to 1975, Congo in 1961, Brazil in 1964, Indonesia in 1965, Chile in 1973, etc. etc.
By the end of the 1970s, many areas of the world brought under US influence and informal or formal control. This is where Making Globalization Work begins.