Real Socialism, Economic Shifts, and Decolonization
Real Socialism and Marxist Ideologies
Marxist ideologies created two kinds of movements: social democracy (believing Marx was right and a more egalitarian society could be implemented under a liberal democracy). In February 1917, a revolution occurred against the Tsar. In October 1917, the Bolshevik party took control of the revolution, changing the political and economic system. The goal was for one country to survive and become a new industrial power.
Stalin’s Five-Year Plan
How did it grow? Stalin’s Five-Year Plan in 1928 involved:
- Channeling investment into heavy and machinery production to build capital and increase the rate of investment in basic industry.
- Setting output targets to direct business operations.
- Collectivizing agriculture, impacting the Kulaks.
- Implementing mass education.
This inspired other countries like China. However, economic decline occurred in the 1940s and 1950s. After Stalin’s death in 1953, persecution decreased, and technological improvements were made, but the country lagged behind capitalist countries. There were no incentives for firms, and fixed production quantities made operations risky. Once industrialized, the central plan became more complex, requiring more goods to be produced. Solidarnosc in Poland attempted to change this but failed. In 1980, Gorbachev tried two reforms: Perestroika (market incentives) and Glasnost (political pluralism), which proved incompatible, leading to crisis and changes in Eastern Europe. In 1991, the Soviet Union split up. China adopted different incentives in some sectors and implemented policies sequentially, which was more successful.
End of Bretton Woods and Economic Crisis
The supply-side economics approach did not work. Politically, the right gained influence, advocating for neo-liberal policies. Stagflation (no economic growth and inflation) occurred, with rising prices. Too much action led to inflation, while inaction led to unemployment, according to the Phillips curve. High unemployment suggested expansionary policies, while low unemployment suggested contractionary policies. The 1973 oil crisis, caused by OPEC (a cartel), with Iran against Arab states and the West supporting Israel, led to high oil prices. Supply shocks are inelastic. Industries improved systems to reduce oil consumption. The Phillips curve was superseded by new school monetary theory from Milton Friedman and Edmund Phelps, who argued that policies were predictable. High nominal values led to high real values. Margaret Thatcher, Ronald Reagan, and Paul Volcker applied the Fisher equation, arguing that inflation in the long run does not help reduce unemployment. Policies included:
- Financial deregulation
- Tax reform
- Competition policies
- Industrial policies involving government intervention
- Privatization measures
- Labor market reform, reducing labor rights
In the mid-1980s, Europe aimed to reduce government expenditure, improve market regulation, ease labor constraints, increase competition from Newly Industrialized Countries (NICs), and address rising primary goods prices. Euroclerosis was characterized by real wages higher than productivity growth, high social spending, protection of inefficient industries, and technological failures. The Fontainebleau agreement in 1948 led to a higher EU budget, increasing inequality.
Decolonization
The Great Depression created a crisis because of colonies. During World War II, the USSR opposed slavery, and the USA pushed to leave territories. In Asia, Syria gained independence in 1945, and the Philippines in 1946.
India and the Middle East
India: The Indian National Congress (INC) was formed in 1885, a middle-class movement advocating for independence. Gandhi promoted non-violence. Nationalism was tied to religion. In 1947, Jinnah advocated for Pakistan, while Nehru advocated for India.
Middle East: Britain and France aimed to connect the Suez Canal but then abandoned the region.
Israel: Zionism advocated for a single country for Jews in Palestine. The Ottoman Empire dominated, but Britain promised the land to Arabs. Jewish people became wealthy. The Nazi persecution led to migration to the USA. The situation was controversial. The UN proposed a 50/50 split between Jewish and Arab territories, but Arabs rejected it. In 1948, war broke out, and Israel won, gaining the West Bank. Nasser nationalized the Suez Canal. Britain and France withdrew because they could not use force. Nasser promoted Pan-Arabism.
New Colonialism
Why did it occur? Reasons included:
- Improvement schemes, expanding cash crop production.
- Education advancements and better sanitation.
- Constitutional local areas.
Britain wanted gold, while France sought international power after losing World War II. French surplus trade had to be compensated with capital transfers to colonies. Colonial markets propped up technologically archaic industries. In the 1950s, France joined the EU market, making colonies expensive. Algeria was relinquished in 1962 (pieds-noirs). Portugal protected its old colonies until 1970.