Series: A Glance in the Rear View Mirror to Understand the Present (Part 3)

The 1930s to the 1970s: liberalism eclipsed Eric Toussaint

19 June 2009 by Eric Toussaint

Although a strong influence throughout the nineteenth and first third of the twentieth century, liberal thinking was eclipsed for the long period that lasted from the middle of the 1930s to the end of the 1970s [1.].

Yet during the 1920s financial markets had seemed irreversibly almighty. The 1929 crash and the long ensuing crisis made it necessary for governments to strictly monitor financial and banking activities.

During this withdrawal of free trade prevalence (from the 1930s in North and South America and after the Second World War in Europe) various policies involving strong government intervention in the economy came to hold sway. This was true of the USA under Roosevelt’s New Deal in the 1930s, and 30 years later under the J.F. Kennedy and L.B. Johnson administrations. It was true of France with the Front populaire, of Britain during the 1930s and just after the Second World War under Beveridge (advised by J.M. Keynes) and under subsequent Labour governments. After the Second World War, it was also true of France, Germany, the Netherlands, Belgium and the Scandinavian countries. Keynesianism, whether of the social democratic, ’socialist’ or social-Christian variety, dominated economic thinking.

After WWII, private companies had been nationalised in Central and Eastern European countries before they were labelled ’popular democracies’ and controlled by Moscow.

In a number of key Third World countries, developmentalist, nationalist and even socialist policies came to the fore, as in China after the 1949 revolution. Anti-communist regimes in the Third World, such as the ones in South Korea and Taiwan, carried out radical agrarian reforms and built a strong government-controlled industrial sector. This is the central (and well-hidden) reason for the economic ’miracle’ that took place in those two ’tiger’ economies. The policies that created the past successes of South Korea and Taiwan stand in stark contrast to neo-liberal prescriptions [2.] . This point cannot be over-emphasised.

The eclipse of liberalism came about as a result of the prolonged economic crisis that began with the Wall Street crash in 1929, and as a result of the victory of fascism and Nazism and their subsequent defeat at the hands of the masses (strikes and armed Resistance) and of the Allied forces (USA, USSR, Britain, France). The War and the defeat of fascism opened the way to significant political and social changes in the world. These began with concessions to the working class, the crisis of the colonial empires and the liberation struggles of dominated Third World peoples. To this can be added the relative success of industrialisation by import-substitution in Latin America, the economic dynamism of India after it won independence from Britain in 1947, of Algeria after it won independence from France in 1962 to the 1970s, and of Egypt under Nasser in the 1950s and 1960s There was also economic progress in the so-called socialist countries (Eastern Europe after the War and the USSR from the 1930s onwards).

This period shows a number of striking features. Firstly, a large number of private companies came under public control (’nationalisations’), beginning in both Western and Eastern Europe in the wake of the victory over the Nazis and extending into the Third World until the mid-1970s. Secondly, social-welfare systems were set up and expanded as part of what became known as the Welfare State (from Roosevelt’s New Deal to policies implemented in several Third World countries such as Mexico in the 1930s, under Lazaro Cardenas). Thirdly, the economic model in place was ’Fordist’, in that it involved the development of mass consumption of durable goods in the industrialised countries. Fourthly, a social compromise was reached in these countries between the leadership of the labour movement (parties and trade unions) and ’their’ capitalist class. This compromise took the form of agreements contributing to social harmony. These features arose and prospered in a context of sustained growth - in the developed capitalist countries, the Third World and the so-called socialist countries.

These wide-ranging political and economic developments also included a world-wide renewal of non-dogmatic Marxism. In the developed capitalist countries we saw the publication of the works of Ernest Mandel, Paul Sweezy, Paul Baran, André Gunder Frank, to name but a few. In Cuba, after the revolutionary victory on 1 January 1959, came the works of Ernesto Che Guevara in the 1960s. In Eastern Europe, Kuron and Modzelewsky in the Poland of the 1960s, Karel Kosik, Rudolf Bahro, and others - gave the foundation to a non-dogmatic Marxism that emerged in opposition to the fossilised Stalinist system.

It is also worth noting the emergence of the Marxist-influenced dependency school of thought in Latin America (Theotonio Dos Santos, Rui Mauro Marini, Fernando Henrique Cardoso). Finally, there was the work of Samir Amin on de-linking.


AMIN, Samir. 1970. L’Accumulation à l’échelle mondiale. Critique de la théorie du sous-développement. Anthropos, Paris, 1971, 617 p.
BARAN, Paul A. et SWEEZY, Paul M. 1966. Le capitalisme monopoliste, François Maspero, Paris, 1970, 342 p.
CARDOSO, Fernando Henrique et FALETTO, Enzo. 1969. Dependencia y Desarrollo en América Latina, Siglo XXI, Mexico, 1970, 166 p.
DOS SANTOS, Theotonio. 1978. Imperialismo y dependencia, Era, Mexico, 1982, 491 p.
GREENSPAN ALAN. 2007. The Age of Turbulence: Adventures in a New World, Penguin press, New York, 2007.
GUNDER FRANK, André. 1971. Lumpen-bourgeoisie et lumpen-développe¬ment, Maspero, Paris, 142 p.
KEYNES, John. M. 1936. The General Theory of Employment Interest Interest An amount paid in remuneration of an investment or received by a lender. Interest is calculated on the amount of the capital invested or borrowed, the duration of the operation and the rate that has been set. and Money, MacMillan, London, 1964, 403 p.
MANDEL, Ernest. 1978. Long waves of capitalist development, The Marxist interpreta¬tion, Based on the Marshall Lectures given at the University of Cambridge, Cambridge University Press et Editions de la Maison des Sciences de l’Homme, Paris, 141 p.
MARINI, Ruy Mauro. 1973. Dialectica de la Dependencia, Era, Mexico, 101 p.
PREBISCH, Raúl. 1981. Capitalismo periférico, Crisis y transformación, Fondo de Cultura Económica, Mexico, 1984, 344 p.
TOUSSAINT, Eric. 2005. Your Money or Your Life, Haymarket Press, Chicago, 2005.
TOUSSAINT, Eric. 2007. The World Bank World Bank
The World Bank was founded as part of the new international monetary system set up at Bretton Woods in 1944. Its capital is provided by member states’ contributions and loans on the international money markets. It financed public and private projects in Third World and East European countries.

It consists of several closely associated institutions, among which :

1. The International Bank for Reconstruction and Development (IBRD, 189 members in 2017), which provides loans in productive sectors such as farming or energy ;

2. The International Development Association (IDA, 159 members in 1997), which provides less advanced countries with long-term loans (35-40 years) at very low interest (1%) ;

3. The International Finance Corporation (IFC), which provides both loan and equity finance for business ventures in developing countries.

As Third World Debt gets worse, the World Bank (along with the IMF) tends to adopt a macro-economic perspective. For instance, it enforces adjustment policies that are intended to balance heavily indebted countries’ payments. The World Bank advises those countries that have to undergo the IMF’s therapy on such matters as how to reduce budget deficits, round up savings, enduce foreign investors to settle within their borders, or free prices and exchange rates.

: A Critical Primer, Pluto Press, London, 2007
ZINN, Howard. 1966. New Deal Thought, Hackett Publishing Company, Indianapolis, 2003, 431 p.

Translated by Vicki Briault, Raghu Krishnan and Christine Pagnoulle.

The first part of this series ‘A Glance in the Rear View Mirror to Understand the Present’ was posted on the CADTM website on 12 June 2009 under the title ‘Adam Smith is closer to Karl Marx than those showering praise on Smith today’ and the second part was posted on 13 June 2009 under the title ’Neo-Liberal Ideology is a Hard Nut to Crack’


[1.Alan Greenspan tells in his autobiography that when he first read Adam Smith after the second world war interest in his theories was particularly low. He points out that ’free trade’ was almost a rude word and that the most prominent partisans of market capitalism were mavericks such as Ayn Rand and Milton Friedman. He adds that it was at the end of the 1960s, at the outset of his public career, that the pendulum of economic thinking swung back towards Adam Smith. In A. Greenspan, The Age of Turbulence, 2007.

[2.See Eric Toussaint, The World Bank : A Critical Primer, Pluto Press, London, 2007, chapter 11 (South Korea: the miracle unmasked).

Eric Toussaint

is a historian and political scientist who completed his Ph.D. at the universities of Paris VIII and Liège, is the spokesperson of the CADTM International, and sits on the Scientific Council of ATTAC France.
He is the author of Debt System (Haymarket books, Chicago, 2019), Bankocracy (2015); The Life and Crimes of an Exemplary Man (2014); Glance in the Rear View Mirror. Neoliberal Ideology From its Origins to the Present, Haymarket books, Chicago, 2012 (see here), etc.
See his bibliography:
He co-authored World debt figures 2015 with Pierre Gottiniaux, Daniel Munevar and Antonio Sanabria (2015); and with Damien Millet Debt, the IMF, and the World Bank: Sixty Questions, Sixty Answers, Monthly Review Books, New York, 2010. He was the scientific coordinator of the Greek Truth Commission on Public Debt from April 2015 to November 2015.

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