Fundamental changes of the world economy and, consequently, humanity suffered during the post-war period were indisputable. However, in 1970ies, when the rapid welfare’s growth ended, the experts have come to understand that the world, especially the world of advanced capitalism, experienced an exceptional period in its history. The main feature of the ‘Golden Age’ was a constant substantial investment’s requirement with less need for the human labor, seeing people only as consumers.
During the 1950ies many people, mostly residents of developed countries, were convinced that their living conditions dramatically improved comparing to the period before the World War II. There were several reasons why an awareness of the Golden Age’s exceptional nature took a good piece of time. The revolutionary Golden Age was not particularly noticeable in the United States after World War II (Cairncross & Cairncross, 2014). The economic growth of the war years continued in the country. The growth and development of the American economy in golden years was not as noticeable as in other countries, which had more modest performance. The productivity gap between the US and other countries declined. Recovering after the war became a major challenge for European countries and Japan. After the war years they measured their success only by how close they could come to own goals comparing the results with the past, rather than rushing into the future.
Thus, the world economy was booming. Already in the late 1960ies it became clear that nothing like this had ever happened. World’s commodity output has increased fourfold and the growth in the volume of world trade increased by ten times (Cairncross & Cairncross, 2014). Growth in world agricultural production also occurred fairly quickly, although not as impressive. It was carried out not due to the development of new land, mainly as it was before, but because of the rise in productivity.
At first, this amazingly rapid growth of the economy seemed just a repetition on a gigantic scale that occurred in the past. It was like the worldwide sample’s spread of the prosperous United States until 1945. To some extent it was that way. Goods and services that previously a few could afford were now produced for the mass market. What once was considered a luxury has become a usual standard.
New technologies required extremely high investment and lower cost of human labor or, the latter was replaced by automation. However, the paces of economic recovery were so high that contemporaries were not able to notice it. In contrast, the economy was growing so intensively that even in industrialized countries the share of industrial workers among the employed population remained the same or even increased. In all developed countries, except the United States, labor market reserves increased during the pre-war depression and post-war demobilization were exhausted (Vonyó, 2008). The residents of rural areas and immigrants began to fill the market in large numbers. Nevertheless, the Golden Age’s ideal was the production and service without the use of scaled human labor. People were needed as consumers of goods and services for such an economy. This was the main problem. However, during the Golden Age it still seemed distant and unreal.
On the contrary, there was an impression that all the problems that existed under capitalism in the era of catastrophes have ended. Frightening and inevitable sequence of ups and depression’s cycles during the period between the First and Second World Wars has evolved into a series of moderate fluctuations through prudent macroeconomic management. Unemployment virtually disappeared in developed countries in the 1960s. In Europe it was only 1.5% on average and 1.3% in Japan (Vonyó, 2008). Incomes of citizens grew from year to year, almost automatically, and it seemed as something never-ending.
A truly satisfactory explanation of Golden Age of the world capitalist economy, with its unprecedented social consequences, does not exist. Of course, many countries have vigorously sought to apply the model of the economy of the industrial society, namely, the United States’ economy. They systematically tried to imitate the United States, which accelerated the process of economic development, since it is always easier to improve existing technologies than to invent new ones. This started later, as shown by the example of Japan. However, the Golden Age had more important consequences. Thanks to it there was a major reorganization and reform of capitalism. There has been a breakthrough in the area of internationalization and globalization of the economy (Cairncross & Cairncross, 2014). It created a mixed economy that facilitated state’s planning and management of its modernization, as well as increased demand.
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Internationalization of the economy increased productive capacity of the global economy by making complex international division of labor possible. Initially, it was mainly limited by the circle of developed market economies. The socialist part of the world has been largely isolated. However, seeing changes that the advanced capitalism made to world trade these countries activated planned economies making evident technological breakthrough. The most dynamic economies of the third world in the 1950ies preferred to independently carry out a planned industrialization, replacing the imported products with their own products. Thus, these changes of communist and third world countries would not happen any other time. The circumstances of Golden Age led them. Trade in manufactured goods has increased dramatically mainly between the major developed countries. Golden Age has established itself in the economies of the major capitalist countries, even in purely quantitative terms. In 1975, the share of all private cars of the Big Seven accounted for three-quarters globally (International Bank, 1982). However, a new industrial revolution was not limited to any particular region. The restructuring of capitalism and advancement in the field of internationalization of the economy were the main areas. The successes of the Golden Age cannot be explained only by the technological revolution, although it certainly played a role. The post-war capitalism, of course, was a system reformed beyond recognition. Overcoming the issues between the world wars it has not simply returned to normal functioning but maintained a high level of employment and a certain degree of economic growth. In essence, there was a sort of unity between economic liberalism and social democracy.
It was clear that the industry was reorienting from highly-paid jobs to low-paid ones as soon as it would become technically feasible and cost-effective. The discovery that the workers of the third world were not worse added benefits of high-tech industry which was located in the third world. However, there was even more convincing reason why the economic boom in the Golden Age was destined to displace production on a long distance from the old industrial centers. It was a kind of combination of economic growth of the capitalist economy based on mass consumption, full-time, high-paying and stable job security forces.
This combination was a political construct. It was based on an effective political consensus of the left and right-wing parties in most Western countries. It was also based on an open or tacit agreement between employers and workers ‘organizations to limit the workers’ demands not interfering with the profits; as well as on the prospects of high profits sufficient to justify the huge investment, without which the rapid growth of labor productivity in the Golden Age could not be achieved. However, in reality it was a tripartite agreement, as the governments were involved, formally or not, to coordinate negotiations between labor and capital, now commonly referred to as social partners. After the end of the Golden Age these agreements came under fierce criticism from free-market dogmatists, who called them corporatism.
These transactions were beneficial for all contracting parties. Employers, who have not objected to the high wages during the long profitable boom, welcomed the predictability, which simplified ahead planning. The workers had regular salary increase, fringe benefits and the growing generosity of the welfare state. Government received political stability, weakening of the communist parties and predictable conditions for macroeconomic management. Meanwhile, the policy of developed market economies was calm, sleeping. There was nothing to worry about except communism and nuclear war crisis. Therefore, the sharp student radicalism swept many countries in 1968 caught the politicians by surprise (Cairncross & Cairncross, 2014). It was a sign that the balance of the Golden Age could not be longer maintained. In economic terms, this balance was dependent on the correlation between the increase in production efficiency and earnings, to maintain stable profits. Reduced productivity growth and/or disproportionate rise of wages might end destabilization. It depended on the index, the absence of which so dramatically manifested in the period between the First and Second World Wars. Index was the balance between the growth of goods output and the ability of consumers to buy those.
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During the 1960ies, all this began to give signs of fatigue. The US hegemony began to decline. The world monetary system based on gold dollar collapsed. In some countries, there have been signs of decline in labor productivity. There were signs that a huge stock of internal migrants, feeding the industrial boom, was closed to exhaustion. Exactly this exhaustion was mentioned by Eichengreen. Over the past twenty years, there appeared new generations for whom the difficulties of the interwar years such as mass unemployment, social insecurity, and galloping prices were a history. They aligned their expectations only to the experience of their age group, the experience of full employment and continuing inflation (Cairncross & Cairncross, 2014). They all were based on the estate of a permanent job, on the fact that the long-awaited regular wage increased actually turned out to be much less than market could give. Therefore, 1968 was neither the beginning nor the end of the Golden Age becoming only a signal. In contrast to the sharp rise in wages, the destruction of the international financial system in 1971, commodity boom of 1972 – 1973 and the OPEC oil crisis in 1973, this year was almost never mentioned by economic historians as the reason for the end of the Golden Age. Its end was not a complete surprise.
The economic recovery in the early 1970s accompanied by a rapid rise in inflation, a massive increase in global money supply on the background of the vast US deficit, has acquired a feverish character. To put it in the jargon of economists, there was an overheating of the system. Thus, Golden Age has lost its gilding. Nevertheless, it has certainly risen and to a large extent carried out the bright, fast and comprehensive revolution in the development of further world events, which became historical evidence. Eichengreen’s exhaustion meant enormous labor masses which were seriously overheated by the Golden Age. The markets were overloaded trying to get another surplus or even artificial profit. Together it all exploded making the Golden Age a history.