Concepts of Capitalism in the Twentieth Century

Posted: January 4th, 2023

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DATE: 18 May 2020

SUBJECT: Concepts of Capitalism in the Twentieth Century

The period after World War One was most trying for liberal capitalism and presented the largest existential threat to the world order at the time. The economic boom before the war gave way to a devastating global recession that changed several fundamental concepts of capitalism. In addition, the interwar period between 1918 and 1939 is marked by the Great Depression and significant changes in several capitalism concepts. 

Global recession is a concept that gained popularity in the 1930s, when economic recessions escalated to a global level for the first time in history. The term was coined to demonstrate the global effect of economic recession between 1929 and 1934 (Frieden 176). Prior to 1929, the world had experienced a boom period spurred by international free trade, export-oriented industrialization, and liberal capitalism. With this deflationary paralysis became a notable concept associated with the failure of deflationary strategies in forestalling the impact of the economic recession (Frieden 184). Gold became immovable and governments were incapacitated to intervene in the crisis causing economies to stagnate and drawing criticisms towards the gold standard regime. 

Contrastingly, autarky, as an alternative to free trade and the world economy, gained prominence during the Great Depression. Autarky is the coerced segregation from the rest of the world, which gained prominence after the global economic integration, had precipitated a devastating downturn (Frieden 197). States adopted autarky to protect their national interests and secure their domestic economies by adopting economic, social, and political self-sufficiency. In turn, fascism became a political ideology that advanced economic autarky (Frieden 197). However, the autarkic concept is criticized for founding the Nazi regime, which is renowned for its atrocities and militaristic expansionary policies. In turn, social democracy emerged to implement autarky through increased government involvement in economic affairs of its citizenry (Frieden 230). Political and social democracy operated under socialism, with democratic governments investing heavily in social welfare. This concept set the foundations of the welfare state.

Nonetheless, the Bretton Woods System emerged as a new concept of organized capitalism in western countries to revert autarkic tendencies back to global cooperation after the Second World War. Although the system was meant to increase the resilience of nations from economic downturns by centralizing economic decision-making and availing capital through the international monetary fund (IMF) and the World Bank, the United States used it become the global economic hegemony (Frieden 256). Contrastingly, some countries adopted central planning as an alternative concept to market capitalism, in which governments are in charge of all the economic activities in their countries (Frieden 273). Central planning was perfected by the Soviet Union and other communist countries. In this regards, governments plan the entire economy while engaging in large businesses to distribute economic benefits across the citizenry, as opposed to allowing a few individual to benefit as is the case with private sector-driven individualized capitalism. Therefore, rather than having the private sector run corporations for profit, as is the case in liberal capitalism, the government runs state-owned enterprises and makes profits for the nation rather than for specific industrial capitalists.

In conclusion, several concepts emerged to alter or contradict liberal capitalism during the interwar years and shortly after. Governments were called upon to help revamp nations from the First World War and Great Depression. Consequently, autarchy and central planning were the major threats to liberal capitalism as they discouraged globalization of trade.

Works Cited

Frieden, Jeffry A. Global capitalism: Its fall and rise in the twentieth century. WW Norton & Company, 2007.