The 2020s are not new, the 1930s. The march towards fascism is not inevitable.


About the Author: Edouard Price, a former UK economics official, is a non-resident senior researcher at the Center for Global Affairs at New York University.

Connoisseurs have a new hobby: comparing the present day to the 1930s. Everywhere you look, parallels are drawn between the interwar years and today. From the Wall Street Journal’s reaction to Brexit, to the New York Times’ recent thoughts on Pearl Harbor, the same argument is made. The world looks like it was just before WWII. So buckle up. The conflict is on.

But this comparison with the 1930s misses a critical point. This is not the only one.

The Second World War was preceded by collapses of the international system. We know this story well. It is that of protectionism, financial turmoil and, ultimately, territorial aggression. Meanwhile, economies suffered from mass unemployment and an inactive capital stock. In all respects, the start of the 21st century is eerily similar. The 2007-2008 global financial crisis. Sino-American tensions. Domestic wealth gaps. The rise of so-called populism. We have to concede parallels between the 1930s and today, a point no less than Ray Dalio made in excruciating detail.

Yet these ingredients are not a sure sign of a global conflict. In fact, they are not a sure sign of anything.

If that sounds offhand, consider how the years before 1914 saw conditions quite opposite to those of the 1930s. Prior to World War I, the first wave of globalization had resulted in an unprecedented system of trade and financial integration. And while there was obviously tension between the great powers (Germany’s aggressive naval program), there was no equivalent of, say, Japan’s invasion of Manchuria in 1931. Edwardian political economy was, for lack of a better word, good.

Now here’s the thing. So far, the 21st century is similar to the 1930s. But it is Also very similar to the period before WWI. There is friction. There are economic troubles. But there are also functioning financial systems and integrated business relationships. The economy is truly global. The almighty dollar spans the world. The goods travel at will on the seven seas. The people of the world live, more or less, in any city they like. Once again, globalization is upon us.

So which past era echoes today’s? The years before the First World War? Or those before WWII?

For those obsessed with interwar parallels, like ubiquitous economic historian Adam Tooze, this is a problem. First, there is more of a global economic context in which the world wars have started. In fact, there are two. Second, these contexts are diametrically opposed. One was highly globalized, the other was not. And third, we are experiencing elements of both today. As much as the world looks like the 1930s, so it looks like the 1910s. Indeed, there are arguments that it also looks like the 1600s, a time of rapid scientific advancement. Or like the 300s, a time of an established but shaky empire. Does all of this mean that we are more likely to encounter another world war? Or less?

Trade is not a clear indicator. Like the interwar years, today’s economies are disrupting international economic integration. Just look at the effect of the pandemic on supply chains, Brexit and the ongoing conflict between China and the United States. All of them have made holes in the modern trading system. However, unlike the 1930s, trade integration is becoming more and more Following important to nation states. The regional blocs are busy consolidating their near-shore networks. The European Union, the China Belt and Highway, and the United States-Mexico-Canada Agreement are all efforts to deepen regional trade. So what is true of our time? Less emphasis on commerce or more? Are we witnessing self-sufficient behavior in anticipation of a conflict? Or a greater proximity trade, auguring for peace?

Then there is finance. Conventional wisdom holds that disruptions in global capital flows cause economic problems and, with a lag, political tensions. The interwar period bears witness to this. After 1929, the sudden scarcity of American capital in Europe kicked off what economists, after a few drinks, call very bad things. But one functioning international financial system can also cause friction. Today the dollar standard is doing very well. American debt is the only game in town. But a country that manages the world’s reserve currency is clearly a cause for discontent. In addition, international financial regulation can cement the system, but it has also become a source of resentment.

And, of course, there is populism. The January 6 coup attempt was truly bizarre. Some of those who stormed the Capitol were clearly on the far right. They were there to do damage, or worse. At the same time, others spoke at length about the sanctity of elections and democracy. All of them threatened democracy with their actions. But many also uttered pro-democracy rhetoric. Is it an echo of the subversive fascism of the interwar years? Or just a new kind of unfettered political aggression?

Our fixation on the 1930s is dangerous. He only proposes one cause-and-effect relationship that deserves to be studied, that between the depressions and fascism. But it’s ingrained. Avoiding a repeat of the economic turmoil of the interwar years was the very premise of the Bretton Woods agreement. This agreement promoted world trade, financial stability and national employment, all with the aim of avoiding another Adolf Hitler. So when this system started to fail, Americans doubled down on their original premise: avoiding low growth. So the United States chose to continue providing global dollar liquidity, its unsustainable gold peg was abandoned, and the current incomplete system of floating fiat currencies emerged. An era of easy money followed. Ultimately, if you want to blame anyone for the global financial crisis, blame Richard Nixon for introducing a fiat dollar. But the point remains. We worry about the dangers of low growth and international fragmentation (the origins of WWII) and forget about the dangers of growth and international integration (the origins of WWI). Now our concept chickens are coming home to roost.

There may be another major war. The ongoing conflict in Ukraine is on everyone’s lips. The Taiwan Strait is making headlines. Thucydides’ trap is constantly discussed. But we cannot extrapolate the future from the past. Times of globalization can lead to peace. Or they can lead to war. The same goes for periods of de-globalization. In addition, it goes without saying that there are a number of modern factors that were not present in the past. The big three are important: climate change, computer technology and the eastward shift in global economic power. Do these factors incline us towards competition or cooperation? War or peace? So far we don’t know.

Ultimately, the 1930s is not as useful an indicator as it first appears. There are important similarities. But there are also big differences. All in all, a valid comparison that excludes other valid comparisons is not a valid comparison at all.

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