Golden Age of Capitalism

Contrary to early predictions, high growth was most striking in countries the war had devastated: Japan's economic miracle, the Wirtschaftswunder of West Germany and Austria, France's Trente Glorieuses and the Italian economic miracle. OECD members' real GDP grew by more than 4 percent a year on average in the 1950s and nearly 5 percent in the 1960s, against 3 percent in the 1970s and 2 percent in the 1980s. In the 27 years from 1945 to 1971 the world saw 38 financial crises; in the 24 years from 1973 to 1997, 139. Skidelsky notes that inequality generally decreased during the golden age, whereas it has increased since the Washington Consensus took hold.

Several explanations stand side by side. Some point to productivity growth continuing from before the war, automation, distribution innovations such as highways and containers, the shift from coal to oil, and farm technology such as chemical fertilisers and tractors. Keynesian economists credit governments' demand management; the theory of the "permanent war economy", or "military Keynesianism", holds that military spending stabilised the economy. Others stress "financial repression", which used low nominal and negative real interest rates to whittle down government debt; steeply progressive taxes introduced in wartime and kept afterwards; and, in institutionalist accounts, international arrangements such as the Bretton Woods system and the Marshall Plan.

Marxist readings see the period as a compromise between classes. David Harvey wrote that, to prevent a repeat of the Depression, "to ensure domestic peace and tranquility, some sort of class compromise between capital and labor had to be constructed." The French regulation school explained the same years as a "Fordist regime of accumulation" meshing mass production and mass consumption, and John Ruggie as "embedded liberalism", pursuing free trade together with domestic welfare and employment policy. In Britain Labour and the Conservatives alike accepted the welfare state and full employment in what was called the post-war consensus. In 1957 Prime Minister Macmillan said that "most of our people have never had it so good".

The Soviet Union too, having rebuilt from the ruins of the war, enjoyed rapid growth in the 1950s and technological achievements such as the first satellite. Growth slowed by the mid-1960s as resources poured into military and space projects, picked up again under the Eighth Five-Year Plan of the late 1960s, and faltered from the late 1970s into the Era of Stagnation. The Western golden age ended in the early 1970s: the Bretton Woods monetary system collapsed in 1971 and Nixon closed the gold window, followed by the 1973 oil crisis, the 1973–74 stock market crash and the recession of 1973–75. The oil price shock hastened the shift to a post-industrial economy, and in the steel crisis of the 1970s mining and steel districts such as the American Rust Belt and the West German Ruhr were hit hard.