Day 29

This was indeed an age—economically, not politically nor ideologically—of enormous self-confidence. That confidence took two forms. There was the view— of neoclassical economists and their followers— that capitalism was doing very well, would continue to do well, and indeed bore within it the sources and resources of its own indefinite renewal. And then there was the parallel and no less modernist perspective which saw in capitalism—whether or not it was thriving in the present—a system doomed to decline and collapse under the weight of its own conflicts and contradictions. From very different starting points these were both, so to speak, forward-looking perspectives, and both more than a little self-satisfied in their analysis.

The two decades following the end of the late-nineteenth century economic depression were the first great age of globalization; the world economy was truly becoming integrated in just the ways Keynes suggested. For precisely this reason, the scale of the collapse during and after the First World War and the rate at which economies contracted between the wars is difficult for us to appreciate even now. Passports were introduced; the gold standard returned (in 1925 in the British case, reinstated by Chancellor of the Exchequer Winston Churchill over Keynes’s objections); currencies collapsed; trade declined.

One way to think of the implications of all this is the following: it took until the mid-1970s for even the core economies of prosperous Western Europe to get back to where they had been in 1914, after many decades of contraction and protection. In short, the industrial economies of the West (with the exception of the United States) experienced a sixty-year decline, marked by two world wars and an unprecedented economic depression. More than anything else, this constitutes the background and context for everything we have been discussing and indeed for the history of the world in the last century.

When Keynes came to write his General Theory of Employment, Interest and Money (first published in 1936), he was concerned—obsessed might be a better word— with the problem of stability and disruption. In contrast to the classical economists and their neoclassical heirs (his own teachers) he was convinced that conditions of uncertainty—with the attendant social and political insecurity—should be treated as the norm rather than the exception in capitalist economies. In short, he was proposing a theory of the world he had just lived through: far from being the default condition of perfect markets, stability was an unpredictable and even scarce byproduct of unregulated economic activity. Intervention, in one form or another, was the necessary condition for economic well-being and, on occasion, for the very survival of markets themselves. In a distinctively English key, this conclusion amounted to a version of Zweig:

we once thought everything was stable, now we know that all is in flux.

Yes, it is very striking, isn’t it—the very first chapter in Zweig’s World of Yesterday is about security, as the thing which has been lost. By this Zweig does not merely mean that there was a war and things changed. Everything of his young life that he recalls with such nostalgia and precision—his father’s household, the predictability of the roles that people performed—entailed and required a broader economic security which was never to return.

It seems to me that there’s a negative way of putting the point, as well. In the absence of reassuring and real global trade after the First World War, the project of making national economies self-sufficient is the dark side of the European twentieth century. After all, both the Nazis and the Soviets were consumed by the attraction of scale as the condition for well-being: with enough space, productive capacity and workers you could become self-sufficient and thereby recapture the security of global trade and exchange—on your own terms.

Thus, if you have, as Stalin put it, socialism in one country, it matters less that the world revolution has been indefinitely postponed. If you have sufficient Lebensraum, as Hitler believed, you can achieve something comparable: autarchy for the benefit of the master race.

So there is a desire to create new sorts of empire, combined with the sense that postimperial nation-states were just too small. The Austrians of the 1920s were obsessed with economic Lebensunfähigkeit, the assertion that having lost everything, and being reduced to so small and impoverished an alpine space, Austria could not possibly exist as an independent entity. The word itself illustrates the mood of those years: “incapacity for life.”

Recall, however, that interwar Austria, for all its reduced size and capacity, was blessed with an unusually sophisticated and well-established socialist movement, which was only defeated and ultimately destroyed as the result of successive reactionary coups: first in 1934 and then again in 1938. Austria was the distilled essence of everything that World War I had brought to continental Europe: the risk and even the likelihood of revolution; the longing for (and the impossibility of) a self-sufficient nation-state; the increased difficulty of peaceful political coexistence within a civic space unsupported by economic resources.
One is struck by the great historian Eric Hobsbawm’s comment regarding his childhood and youth in 1920s Vienna: you felt, he writes, as if suspended in limbo between a world that had been destroyed and one that was yet to be born. It was in Austria too that we find the origins of the other great current of economic theorizing in our times, running sharply counter to the conclusions associated with the work of Keynes and identified with the writings of Karl Popper, Ludwig von Mises, Joseph Schumpeter and, supremely, Friedrich Hayek.

~~Thinking The Twentieth Century--Tony Judt relating to Timothy Snyder