Loss of Control over Money and Finance

Abstract

From the end of the Second World War to the end of the 1960s the capitalist world economy enjoyed relatively stable growth. The profound instability of the interwar years, including the Great Depression of the 1930s, were not repeated, despite fears to the contrary immediately after the war. Although recessions occurred, for instance, in the US economy in 1953–4, 1957–8, 1960–1, 1966–7 and 1969–71, they were neither particularly severe nor persistent. Such recessions were often called ‘growth recessions’ since only the rate of growth and not the absolute level of real GDP declined. Economic growth was not merely stable but also rapid in historical terms. Annual output growth of the seven most advanced capitalist countries (the United States, France, Britain, West Germany, Italy, Japan and Canada) averaged an estimated 4.9 per cent in 1950–73, compared with 2.2 per cent in 1820–70, 2.5 per cent in 1870–1913 and 1.9 per cent in 1913–50 (Armstrong et al., 1984, p. 167). As a result the total output of these countries was almost three times as large in 1973 as it had been in 1950. Remarkably, throughout the high economic growth of this period prices remained relatively stable. There were isolated episodes of rapid inflation immediately after the war, but on the whole inflation remained subdued. Low inflation prevailed despite the predominant ideological belief that expansionary state economic policies could sustain effective demand. Annual consumer price inflation for the same seven countries was only 2.7 per cent in 1960–8, but it climbed to 5.5 per cent in 1968–73 and 9.8 per cent in 1973–79 (OECD, Historical Statistics, various issues).