World War II left the global economy essentially in ruins. It's understandable – international trade was nearly nonexistent, national economies were geared towards war, producing heavy machinery, weapons, ammunition and so on. But just like a forest fire leaves fertile ground for new growth, so had war given new opportunities to governments, companies and individuals, paving the way for a global economic expansion.
This economic boom is also known as the Golden Age of Capitalism – a period of economic prosperity which followed the devastating war and the Great Depression. Western European and East Asian countries, mostly Japan, were the primary benefactors of the new economy. This may sound counter-intuitive, but many countries which suffered the most through war were some of those who experienced particularly high and sustained growth – such as Germany, France and Italy, as well as the already-mentioned Japan. John Kenneth Galbraith, a renowned economist and public official, in his book and television series “The Age of Uncertainty,” highlighted the phenomenon.
In Europe and the United States the two decades following the Second World War will for long be remembered as a very good time, the time when capitalism really worked. Everywhere in the industrialized countries production increased. Unemployment was everywhere low. Prices were nearly stable. When production lagged and unemployment rose, governments intervened to take up the slack, as Keynes had urged.
Keynesian economics, for those unfamiliar with it, essentially argues that economic output driven by aggregate demand. In other words, we need to spend money for the economy to work – and if people cannot spend it, the government should do it, even if the government needs to borrow money for that. Keynesian economics are often cited as the primary reason for the post-war expansion. Other reasons include international and national institutions seeking stability of global and local economies, and increased productivity due to several factors. New technology – including military technology, soldiers returning to work, infrastructure built during the war boosted total productivity. Some argue that governmental war spending actually had driver the post-war economy – this is the so-called "Military Keynesianism".
The economic boom was not limited to the capitalist part of the world, despite one of its nicknames. Soviet Union required a few years to get its beatings – but in the 1950s the economy completely transformed from a military powerhouse into an industrial giant. It has launched a decade of rapid growth and prosperity.
Although Soviet Union's economy slowed down in the 60s – while capitalist countries had growing economies until the 70s – it had managed to regain some of the post-war momentum. Moreover, the growth spurt allowed the country to invent in multitude of areas, such as space exploration. Fueled by the economic growth, coupled with military and post-war research, Soviet Union became the first country to launch and object into space. Clare Boothe Luce, American politician, diplomat and author, said, following the satellite's launch n 1957:
An outer-space raspberry to a decade of American pretensions that the American way of life was a gilt-edged guarantee of our national superiority. We ourselves have made it an article of faith that the nation which builds the biggest bombs must be morally superior because it is materially superior. We need not be surprised today that Russia is making the same claim.
Even in peace, even in a period of global economic growth, the world was not free from adversarial relations. Despite a period antagonism was growing – this time between ideologies: capitalism versus communism.
