The War of the World: History's Age of Hatred by Niall Ferguson Read Free Book Online

justbegin-ning to extend the scope of their operations beyond the provision of security, justice and other elementary public goods. Central banks were at least to some extent constrained in their operations by self-imposedrules fixing the values of national currencies in terms of gold; this made for long-run price stability, though also higher volatility ingrowth than we are now accustomed to. These things changed radically during and after the First World War, which saw a significant expansion of the role of government and a breakdown of the system of fixed exchange rates known as the gold standard. It seemed to many contemporaries that there was a conflict between what international market forces could do in allocating goods, workers and capital optimally, and what governments ought to strive for – for example, maintaining or raising levels of industrial employment, stabilizing the prices of primary products or altering the distribution of income and wealth. Yet the inter-war experiments with protective tariffs, deficit finance, confiscatory taxation and floating exchange rates generally had the unintended consequence of magnifying economic fluctuations. Planned economies did better, but at a considerable cost in both efficiency and freedom. Though the records of both the welfare state and the planned economy were markedly better in the two decades after the end of the Second World War, it was only by moving back in the direction of the free market after 1979 that governments were able to achieve relative stability in prices and growth. Only since 1990 has it been possible for some commentators to speak tentatively of the ‘death of volatility’ – though it remains to be seen how far this represents the improvement of international economic institutions, how far the success of fiscal and monetary pragmatism at the national level and how far simply a fortunate and quite possibly ephemeral conjuncture between Western profligacy and Asian parsimony.
    This stylized narrative, it should be stressed, applies to a limited sample of countries and to somewhat arbitrarily defined sub-periods. As will become clear, it would be a mistake to regard the performance of the major industrial economies as a proxy for the performance of the world economy as a whole. The severity of the inter-war extremes of inflation and deflation, growth and contraction, varied greatly between different European countries. And there were quite different trends in volatility in African, Asian and Latin American economies from the 1950s onwards.
    Economic volatility matters because it tends to exacerbate social conflict. It seems intuitively obvious that periods of economic crisiscreate incentives for politically dominant groups to pass the burdens of adjustment on to others. With the growth of state intervention in economic life, the opportunities for such discriminatory redistribution clearly proliferated. What could be easier in a time of general hardship than to exclude a particular group from the system of public benefits? What is perhaps less obvious is that social dislocation may also follow periods of rapid growth, since the benefits of growth are very seldom evenly distributed. Indeed, it may be precisely the minority of winners in an upswing who are targeted for retribution in a subsequent downswing.
    Once again it is possible to illustrate this point with reference to the best-known of cases, that of the Jews of Europe. Traditionally, historians have sought to explain the electoral success of anti-Semitic parties in Germany and elsewhere – as well as that of the occasionally anti-Semitic Populists in the United States – with reference to the Great Depression of the late 1870s and 1880s. However, the decline in agricultural prices that characterized that period provides only part of the explanation. Economic growth was not depressed; nor did stock markets fail to recover from the setbacks of the 1870s. What was galling to those trapped in