Models of Capitalism: The Welfare State
The organisation of social insurance should be treated as one part only of a comprehensive policy of social progress. Social insurance fully developed may provide income security; it is an attack upon Want. But Want is one only of five giants on the road of reconstruction and in some ways the easiest to attack. The others are Disease, Ignorance, Squalor, and
Idleness.1 The Beveridge Report, 1942
Many statesmen expected that the war’s end would restore the old principles of economic politics—a symbol of this sort of thinking was various countries’ efforts to reintroduce a gold
The interwar period can be seen as a kind of trial period for social democracy (not in the sense of the political party, but as a model of capitalism). States increasingly interfered in the free market, pressured to do so by the more and more powerful labor unions. Certain reform acts from before 1914 were improved when it came to unemployment and retirement insurance, and wider access to
Unfortunately, these experiments did not cover a large swath of the population, and moreover, they were thoroughly disrupted by the Great Depression. It is hard to pay support to millions of people while maintaining the gold standard… The result was a slow departure from the principles set before World War One. The process had two aspects. On the practical side, events forced governments to sometimes take more radical steps, whether this meant changing the currency rate or nationalizing some branches of industry. On a theoretical level, in A General Theory of Employment, Interest, and Money (1936), John Maynard Keynes offered a new way of understanding the relationships between the free market, the state, and society. Before 1939, none of the states managed to achieve an economic dynamic that gave hope for stable and calm development—up until the war broke out, they were more licking their wounds from the Great
illustration: Maja Starakiewicz
The world conflict introduced a third element to the puzzle after 1945: the hegemony of the United States. Before 1914, London was a center ensuring the world’s financial stability. After 1919, the global economy had three important financial centers—New York, London, and Paris—but no “regulator.” Only after another conflict did the USA take this burden (and privilege) upon itself. The Bretton Woods System facilitated the rebirth of international trade, tying European currencies to the dollar (which was, in turn, based on gold), and creating a range of institutions to ensure smooth transactions. Washington also supported the reconstruction of Western Europe in the form of the “Marshall Plan,” making itself a shield from communism.
This was the basis for a system that joined high income taxes, investment in new technologies, and an assurance of the “social minimum,” which was quite high compared to previous living standards.
Many European nations (West Germany, Italy, Spain) experienced “economic miracles” after the war, or even Les Trentes Glorieuses (France). The psychological element was not irrelevant here—after the collective sacrifices that came with the world war, it was impossible to tell the workers to get to work and stop lazing