Redefining the Global Economy
1914 marked a critical turning point in global affairs and the economy, as the Great War caused physical destruction in Europe, and destroyed the system of global capitalism of the Golden Age. During the interwar period, American isolationism from international trade and affairs left the major powers without the infrastructure or leadership to continue the international trade, investment, and currency stabilization which existed before 1914. As a result, the major powers continued their “great power rivalry,” which inhibited global cooperation and resulted in countries adopting nationalist policies to achieve their goal of stable national growth and equitable internal economic development (Frieden, 154). After World War Two, the United States emerged as the global leader, and influenced most of the major powers to reorganize their economic policies to promote growth and equality through multinational collaboration and global trade. In both periods, the major powers enacted economic policies to promote stable economic growth and equitable economic development; however, the policies were influenced by crucial differences in the levels of United States involvement, organized capitalism, and trade barriers in each period.
Before World War I, countries’ economic policies promoted interdependence and global trade. However, the Great War destroyed the financial infrastructure for interdependence, and promoted America into the role of the world’s “financial, commercial, and diplomatic” leader. After the Great War, the “European powers were dependent on the United States . . . to rebuild” (Frieden, 132). However, once the Republicans took control of the U.S. Congress, U.S. foreign policy became isolationist (Frieden, 139). According to Frieden, “Even if it had wanted to get involved – and it did not - the U.S. administration was prohibited by Congress from official involvement in international discussion of economic (and most other) issues” (144). Without the United States involved in global affairs, the other major powers had no leader to help them rebuild their economies or the international financial infrastructure. This prompted many of the major powers to develop their economies for nationalist growth, which also created economic rivalry (Frieden, 154).
The rise of organized capitalism, and large modern corporations, helped fabricate stable nationalist growth and equitable sharing of profits. Large modern corporations inspired technology and social progress, and they also influenced social change such as the growth of labor movements (Frieden, 168-9).With the labor movement, workers could organize for more equitable economic development. Additionally, large corporations promoted organized capitalism, the “idea that governments needed to act forcefully to save modern capitalism” (Frieden, 241). Organized capitalism allowed countries to rebuild their domestic economies, with governments financing business growth...