Rebuilding a World Economy: The Post-war Era The Second World War broke out a mere two decades after the end of the First World War. It was fought between the Axis powers (mainly Nazi Germany, Japan and Italy) and the Allies (Britain, France, the Soviet Union and the US). It was a war waged for six years on many fronts, in many places, over land, on sea, in the air. Once again death and destruction was enormous.
At least million people, or about per cent of the world’s population, are believed to have been killed, directly or indirectly, as a result of the war. Millions more were injured. Unlike in earlier wars, most of these deaths took place outside the battlefields. Many more civilians than soldiers died from war-related causes.
Vast parts of Europe and Asia were devastated, and several cities were destroyed by aerial bombardment or relentless artillery attacks. The war caused an immense amount of economic devastation and social disruption. Reconstruction promised to be long and difficult. Two crucial influences shaped post-war reconstruction.
The first was the US’s emergence as the dominant economic, political and military power in the Western world. The second was the dominance of the Soviet Union. It had made huge sacrifices to defeat Nazi Germany, and transformed itself from a backward agricultural country into a world power during the very years when the capitalist world was trapped in the Great Depression. .
Post-war Settlement and the Bretton Woods Institutions Economists and politicians drew two key lessons from inter-war economic experiences. First, an industrial society based on mass production cannot be sustained without mass consumption. But to ensure mass consumption, there was a need for high and stable incomes. Incomes could not be stable if employment was unstable.
Thus stable incomes also required steady, full employment. But markets alone could not guarantee full employment. Therefore governments would have to step in to minimise Fig. – German forces attack Russia, July .
Hitler’s attempt to invade Russia was a turning point in the war. Fig. – Stalingrad in Soviet Russia devastated by the war. Briefly summarise the two lessons learnt by economists and politicians from the inter-war economic experience?