The Second World War was among the Houdini-like exercises that capitalism has emerged with in its antiquity to escape the huge crisis. In this instance, the economic conflict of the dejection in the years 1929-1939 that followed the political uproar of the First World War and the revolution of Russian. The Second World War by dissimilarity and at the huge social cost of an ancestry into totalitarianism on the section of representatives of capital raised the global frugality into full-fledged salvage, with special interests in the United States, the contemporary universe hegemon.
Marxist David R. 2010 argues that, before the war in the United States, the contemporary Deal policies established by Delano Franklin Roosevelt's authority had confirmed to be moderately fruitful, but the United States economy still encountered serious problems. In 1939, for example, fifteen percent of the American labor force that was unemployed. The war exertion quickly raised the US work force into a full service through huge rates of output investments and growth. In other words, the financial prudence was quite busy, with factories engaging many workers manufacturing many varieties that mean more revenue that then re-enters into the system and contributing an edge in efficiency within the universe system. This lively growth was ambitious first by the industrial manufacture for the warfare, then by the development of production for dissemination. The economy of American however, hyper-charged with industrialization accompanied in the post-world war II Golden Age capitalism (David, 2010).
It is essential to note "Golden Age" denotes only to the situation of capital accretion from the year the 1940s to the year 1970s and to the upsurge of the "well-being state" in consolidated economies inside the capitalist compass, primarily in the Western Europe, the United States and Japan. These are the countries that converted synonymous with the expression "First World." It does not designate the condition of multifaceted social life nearby the universe in an era that also conveyed the Chinese and Cuban revolutions, the Vietnam warfare, the decolonization in Asia and Africa, the Cold War, intense class battle and McCarthyism and political commotion around the world.
To comprehend what was occurring in the Golden Age, it is essential to analyze the rate of interest in Karl Marx"s view. The universe economy created situations for quite high business rates, high production growth, squat inflation and astonishingly low joblessness. This economic condition created extremely promising conditions for interest rates to rise. What permitted the interest rates to endure to develop year after year, starting from the middle 1930s till the termination of warfare in the year 1945, was a design of technical alteration in which labor force productivity skyrocketed at accumulating rates and capital efficiency kept solid growth rates. Technical alter during the Second World War created extra jobs than it devastated, not the conflict, as conventional understanding would expect (David, 2010).
Higgs 2006 points out that, the Golden Age drifts in profits, accumulation, investment, employment and output growth are linked with these certain historical situations. For instance, they laid the basis for the usual of institutional organizations that commended capitalism towards the variegated economies of the year 1950 (Higgs, 2006). In addition, the menace of collectivism and the US conquest in the Second World War recognized the relationships of the Pax Americana. Globally, this meant a rising responsibility for the United State that had previously been the chief creditor of the First World War, and currently proved to have two chief objectives:
First, the economic and political containment of the Soviet inspiration in Europe that was recognized as the greatest strategic area of the world. This notion materialized in the renovation of Western Europe via a series of capital transfers and straight investment such as the short-term substitute relief from the Rehabilitation Administration and United Nations Relief and especially European Recovery Programme (the Marshall Aid) that initiated in April year 1948 and was outstanding to past four years. The Marshall strategy offered aid to pay 13.365 dollars ($13.365 billion) for services and commodities (Samuelson, 1943).
In 1947-49 in Germany, 57% of imports were sponsored by this kind of aid that remained at 2.3% regarding GDP for about five years, and emaciated at 5% therefore, assisting Germany to reach pre-war manufacture degree in three years. Second, subsequently 1950s, United State emphasis swung to global military suppression, a plan that demanded a universe American military attendance, and wars in Vietnam (1957-75) and Korea (1950-53). As well, there was a faction of the United State government and capitalist classes that wanted to make a collection of long-lived international organizations capable of regulating and rebuilding universe capitalism (Higgs, 2006). Therefore, the United State took a leading responsibility in the arrangements of the Bretton Woods contract, which was arrayed in the current set of international establishments:
- Return to the Gold Standard and Exchange Rate Stability: One of the chief aims of Bretton Woods was the notion of exchange rate constancy in order to evade (according to Keynes) a "mendicant thy neighbor" strategy, through competitive deflation of national bills in order to improve exports. The representatives at Bretton Woods invented rules of conduct designed to circumvent unilateral depreciation. A significant crucial component in this new plan was a return to the gold-backed trade rate system. This exchange system was referred to as the gold standard. It worked through a mechanism which connected non-American currencies to gold through the US dollar. Practically, this indicated that the gold-value of a single US dollar was the fundamental of the global monetary system. The dollar-backed also was known as the fixed-exchange rate indicated that depressions of currencies needed American accord.
- The Financing Trade Deficits- IMF Creation: The International Monetary Fund was started to prevent recessions and assist finance trade discrepancies. The Fund was to control a central pool of assets used whenever any member country had a temporary predicament in the balancing of their payments. America has maintained a tight restraint on the International Monetary Fund since its foundation. Historically, the US has been its major contributor.
- The Free Trade and General Agreement on Tariffs and Trade: America insisted on liberalization of trade. This led to the writing of new terms of trade in the General Agreement on Tariffs and Trade. The GATT was signed in 1947. In 1995, the World Trade Organization succeeded the GATT. The GATT meant that tariffs had to be removed. This is according to the principles of orthodox economic creeds, in a move which opened markets all over the world for the US products.
- Creation of the World Bank: It was important to establish the World Bank to fund the postwar development and reconstruction of postcolonial nations.
The Golden Age system was originated on a large-scale social contract or political compromise among the bourgeoisie and the middle and upper groups of the working class. The welfare state mediated in the form of monetary and Keynesian fiscal policies. The impressive conditions of effectiveness in the system throughout the Golden Age enabled the possibility of redistributing gains from amplified productivity back to the workers in the form of the real wage increases. This indicated the wages which were accustomed for inflation. This resulted in increased middle-class demand that established a growing market for the mass-produced commodities which is currently a fundamental characteristic of the modern industrialized communities.
The Golden Age exhausted itself by the end of the 1960s. There are many reasons explaining the fall and decline of the age. However, the clearest tradition explaining this decline is the precipitate fall in the rate of returns in the late 1960s. In the 1970s, there was continuous economic crisis including the breakdown of the Bretton Woods scheme. The involuntary reorganization of the original capitalist institutions which had legitimized the social contract of the post-war which meant that the declining rate of profit was merged with the intense shifts in the international relations. In this case, the importance of such a seismic movement in the fundamental global system is progressively evident in time.
The relative steadfast of post-war accretion that is; the long moment of stability in the time of the Golden Age was partly based on the monetary system rather than ran with respect to America's rules. For example, the gold standards in the post-war time owed its accountability to the US's huge gold reserves. This aspect of the monetary system offered American capitalism the capability to take on raising amounts of foreign obligations without the usual restrictions faced by other states, which are gratified to use the US dollars for monetary investments and as the international way of payments. According to Karl Marx"s view, the dollar's capability to hold its" worth depended on the mighty of the American standing economy and American capitals abroad (Karl, 1861). As rapidly as returns on dollars devoted by American businesses started deteriorating, the dollar-holdings on the foreign countries presumed the marked features of debt, with a raising pressure on the connection to gold. This circumstance generated a propensity for the deflation of dollars that was finally expressed in a fluidity crisis that stretched the world economies in the twilight 1960s (Samuelson, 1943).
Marxist Rockoff stated that, in the liquidity crisis, foreign authorities no longer receive the main currency in this instance, the US dollar at the rates formerly established. Initializing in the twilight of 1960s, a generalized liquidity conflict created a run on US investments comparable to the runs on panels that occur in times of financial crises (Rockoff 1984). Ultimately, the dollar prices of gold; the fixed association between gold and dollars grew increasingly reproduction as dollars mislaid their worth whilst still interchanging for gold at the ancient, fixed rate. The imaginary dollar price of gold was finally uncovered to the universe by President Nixon on 1971 when the raising discrepancy necessitated him to take the dollars of the gold standards.
With this declaration, the apparent steadiness established by the Bretton Woods bargain began to smash. Free-floating currencies proximately substituted the Bretton Wood-based permanent exchange rate systems and the world economy inflation shot up, with huge prices increases particularly for oil. With respect to Marxist, Geoffrey Pilling an economist, in his book, "The Crisis of Keynesian Economics", the resulting shocks to the capitalist systems were created by its adjustments from the authenticity of the experimental 1950s. This is when the US gold investments were seven times superior to the dollar investments of foreign powers, to the veracity of the initial 1970s, when that amount had lurched to around one fifth.
With rising inflation, that was facilitated by the increasing price of the Third World raw materials, came a lengthy period of sluggish output growth, huge unemployment, and raising political rivals that surfaced the means for the neoliberal centuries of the 1980s.