The First and Second World Wars significantly affected global economics. The Second World War resulted in intensive economic growth. The necessity of financial stability and development appeared in different countries around the globe. Western and Eastern countries chose different ways of market development. As a result of two wars, international financial institutions appeared and different strategies of national economic growth were introduced which led to the economic and political system development.
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Economic Effects of the World Wars
After the First World War, an economic recession affected all the countries-participants. This recession was connected with the economic intensification due to the war needs as well as the destruction of industrial plants, agricultural lands, and roads. In the United States, the recession was transformed into an economic depression. Mostly, the recession affected the German economy because of the conditions of the Treaty of Versailles. This financial situation formed the basis for the Nazi regime establishment.
On the contrary, after the Second World War, the economic boom had started and lasted until the 1970s. This period is known as The Golden Age of Capitalism. Many countries, including Western economic leaders, demonstrated high economic growth. After the war, several global institutions were set up. Firstly, the United Nations was established with the purpose to maintain political stability and economic growth. Besides, the International Monetary Fund (IMF), the World Bank, and the General Agreement on Tariffs and Trade (GATT) were established. These organizations were parts of the global postwar economic development framework. The role of the IMF was to control exchange rates. The World Bank provided countries with long-term loans for their economic development in the postwar period. The GATT became the main international trade organization. Its functions were to regulate international trade and settle possible disagreements.
“Washington Consensus” versus “Beijing Consensus”
The “Washington Consensus” (capitalism) was elaborated by mentioned above international economic organizations for countries with an economic crisis. It was supported by the United States. This consensus is a set of ten prescriptions for national economic growth. The set of rules was based on the principles of democracy and the free market economy. The consensus includes the policy of the trade and investment intensification, private type of ownership introduction, and economic deregulation. These crucial elements globally lead to the liberalization of the economics of developing countries.
The “Beijing Consensus” (socialism) was a model of the Republic of China’s economic development. In contrast to the “Washington Consensus,” the Chinese model was based on the authoritarian economic and political regime. The main conditions of the consensus are the gradual democratization, pluralism of the types of ownership, and export-orientated governmental policy. Under such conditions, the process of liberalization is slow, and the economy remains regulated by the government. Thus, “Beijing Consensus” and “Washington Consensus” are significantly different and usually are set against each other.
Democracy and Capitalism versus Socialism
Democracy could be considered as a political system that is required for successful capitalism development. Both democracy and capitalism are based on the freedom of choice, in contradiction to socialism as an authoritarian political and economic system. Capitalism is usually considered as an “optimistic” economic model. Due to it, anybody who works hard enough could reach a certain level of income or a certain job position due to all people’s equal rights, guaranteed by the democratic system. In contrast to it, socialism is usually defined as a “pessimistic” model. Socialists do not believe in freedom and its benefits for the social and economic life. According to their beliefs, all aspects of the country’s development should be controlled by the government.
Therefore, it could be concluded that global economics were significantly changed after the First and the Second World Wars. Two different models appeared: “Beijing Consensus” or socialism in the East world and “Washington Consensus” or capitalism in the western world. These two systems have different principles of development. Capitalism is based on free economic development (“optimistic” view) while in socialisms, all the aspects of the social life, including economy, should be controlled by the government (“pessimistic view”).