During the Covid-19 crisis, many commentators have talked about a ‘new Bretton Woods’ and the need for post-crisis international capitalist cooperation and reconstruction. War and global crises led to the reconstruction of global relations after the Second World War, with many lessons today for the workers’ movement.
The United States emerged from the carnage of World War One immeasurably strengthened, both economically and militarily. The socialist revolutionary, Leon Trotsky, in a speech analysing inter-imperialist and global relations, in July 1924, observed: “For the master of the capitalist world – and let us firmly understand this! – is New York, with Washington as its state department,” adding that despite “draping itself in the toga of pacifism, American capitalism is seeking the position of world domination; it wants to establish an American imperialist autocracy over our planet. That is what it wants.”
Twenty years on, Trotsky’s prophetic words were further borne out by the decision of American imperialism to take the controlling role in reshaping the world economy and geopolitical affairs in the form of the installation of the Bretton Woods financial agreement in 1944, the Marshall Aid Plan four years later, and the North Atlantic Treaty Organisation (Nato) in 1949.
America’s ruling class chose an isolationist path after 1918, largely cutting itself off from any involvement in assisting war-torn Britain and France, both struggling with unpayable war debts that dragged their economies into deep and persistent recessions.
Defeated Germany was punished with punitive war reparations that further devastated its economy and political stability. US indifference to promoting international economic recovery was to become a contributory factor towards both the Great Depression in 1931 and the rise of fascism in Germany.
As the world’s undisputed economic colossus after 1945, the US now realised that it must move quickly to stabilise Europe and Asia. The first step was taken even before the end of the war, in July 1944, with the ratification of the Bretton Woods agreement.
Under this treaty, the mighty US dollar was to become the financial ambassador for dominant US imperialism. A new financial order was established that henceforth would govern monetary relations among signatory states.
The dollar became the world’s new reserve currency with a fixed relationship to gold at an exchange rate of $35 to an ounce. Massively benefiting US imperialism, the dollar was now “as good as gold”, and had additional qualities in that it could earn interest and was more flexible than the precious metal.
Other capitalist countries were powerless to stop the imposition of the dollar’s new status. Members of the Bank of England smarted at the indignity of seeing sterling lose its former preeminence as the world’s ‘most trusted currency’ with one claiming that Bretton Woods represented “the greatest blow to Britain next to the war.”
Bretton Woods paved the way for the setting up of the International Monetary Fund and the World Bank, institutions still functioning today. Despite the eventual break-up of the Bretton Woods monetary system in 1971, as the post-war boom was stuttering to a halt, these still act largely under the guidance and interests of American imperialism as financial instruments dictating capitalism’s agenda on its 189 participants.
The election in 1945 of a Labour government committed to the implementation of a new welfare state in the UK, was one sign that across the entire European continent millions were determined to avoid a return to the inter-war era of depression and hunger, with many sympathetic to socialist and communist ideas.
Post-war revolutionary movements took place in countries such as Italy and France but were derailed by the communist and social-democratic parties entering into government with capitalist parties.
In this political context the US ruling class moved to use its economic and military power to restore war-shattered economies in Europe, and in so doing avert the growing and very real threat of Soviet subversion, and even outright social revolution. In undertaking this task, America would benefit from expanding markets for its rapidly developing exports.
‘Europe must be made stable’, was the cry echoing from the White House to the Pentagon. They were fearful of the emergence of a strengthened Stalinist Soviet Union, a temporary wartime ally after 1941, but beginning to be perceived again as a dangerous geopolitical adversary. It had begun to massively develop its influence in eastern Europe and would, over the next few years, draw into its sphere Poland, Hungary, Czechoslovakia, Romania, Bulgaria and, most decisively, the eastern part of dismembered Germany.
The new ‘Cold War’ rapidly emerging between US imperialism and the Soviet Union, the former based on capitalism, the latter on a bureaucratic planned economy, was a crucial impetus to the unveiling in 1948 of the European Recovery Programme, popularly known as the Marshall Aid Plan, and a year later the formation of Nato.
These momentous steps shored up the consolidation of western Europe, laying the basis for what was to become the development of a golden period for world capitalism, often referred to as the post-war boom, which was to last for a generation.
Between 1947 and 1951 the Marshall Aid Plan saw the US pump $13 billion (equivalent to $800 billion today) in foreign aid to European countries. The non-repayable aid benefited America hugely, as European nations were directed to buy US manufactured goods and raw materials, which were then contracted for shipment on American merchant vessels.
The war had flattened European economies, with railways, roads, bridges and ports destroyed. Agricultural production was in tatters, and some countries stood on the brink of widespread famine.
Marshall Aid provided US assistance to 16 countries, with Britain receiving around 25% and France a further 18%. It was seen as vital too that West Germany be rescued in order to restore stability – unlike in 1918 when the German republic, still engulfed in the flames of social revolution, was deemed responsible for the war, and made to pay crippling reparations enshrined in the 1919 Treaty of Versailles.
Simultaneously, the US provided military assistance to Greece and Turkey in order to assist those regimes in defeating left-wing insurgents and becoming part of the newly-crystallising Soviet bloc.
The Marshall Aid programme helped to stimulate demand, and by 1952 European industrial output had grown by 35%. A little-acknowledged fact is that the CIA (US spy agency) received 5% of the total funds allocated through this policy, using the money to establish ‘front’ businesses in several European countries in order to further assist in neutralising the Soviet threat, creating pliable trade unions, and blacklisting suspected ‘communist agitators’.
Thus was laid the basis for the long economic recovery with the US at the steering wheel. New technologies, unable to be brought into production in the 1930s now began to flourish.
Keynesian infrastructural investments, including a huge surge in housing and construction, all stimulated demand, expanding markets and creating rapid increases in productivity, along with full employment levels and rising wages.
The threat from Stalinist Russia, which in 1949 had created a rival economic bloc around COMECON, ensured that the US was compelled to continue its largesse, including to Japan which was put under an American umbrella, protected economically and militarily as a vital counterweight to Soviet and later Chinese Stalinist influence in East Asia.
Today’s landscape is very different. US capitalism, already weakened by the 2007-2009 crisis, is unable to play the same dominant economic and geopolitical role as in the post-war period. And the ideas of neoliberalism, which have dominated economic thinking over the last 30 years, now lie in tatters as Covid-19 threatens to plunge the world economy into the deepest crisis since the 1930s.
A repeat of the post-1945 boom is ruled out in these crisis conditions for capitalism. But if you listen carefully, you can hear the impending march of the approaching socialist revolution.