User:Jessicajoseph/sandbox

“Changing Role of State in the Economy”

Ever since world war one, the world became more separated. There was a time when passports were not necessary to travel, but after the war, countries all over the world did not trust what could happen because so many people were affected by the war. People starved, jobs were lost and territory that was expected was never granted. A pattern in the world’s movement from a global market economy to a state economy became popular after the war. The pattern was citizens expectation of the government intervention increasing when things in the country were bad and then less government involvement when things were good. Nonwestern countries preferred a free market while western countries preferred state control. The world was more integrated prior to world war 1. The US and other countries around the world began to be less open to other countries around the world.

Planned economy was prevalent. One thing people must understand is that was is expensive. The aftermath of war is devastating. Weapons are purchased, people get hurt, then after the war reconstruction must be done. A planned economy is inevitable after was so many countries decided to place people in charge of this which was the government. The Soviet Union was in control of every aspect of their economy. It eliminated the global market. Capitalist lost their private properties. Peasants were grouped into communes and land was turned to the state. In Italy, there were lots of strikes because of casualty loss from world war 1 and they did not get any land that was promised to them. Also, a lot of jobs were lost. Fascism started to take over the country in 1922.Germany’s economy almost collapsed after WW1. In 1933 Nazi came into power and ran with total control. State therefore played a more prominent roll.

The idea of government intervention being liberalized even was attempted. For an example, Gorbachez created the reconstruction of government only wanted to reform communism, and not get rid of it and it failed. Yeltsin served Gorbachev’s position and sided with Gorbachev. Private factories were sold to people that were friends with government officials and controlled industrial sectors in Russia. They became known as the Russian mafia. Russian government went to short term borrowing but did mortgage its own oil to other countries, but oil prices fell.

The Soviet Union was created during WW1 in 1917. To prevent a 3rd war with Germany a buffer zone was established. This buffer zone included countries Poland, Hungary, east Germany, and Czechoslovakia. In 1945 Soviet Union occupied these areas. In 1948, these areas were communist. Both Yugoslavia and Romania never aligned with the Soviet Union or NATO but they had a good relationship with China. Hungary and Czechoslovakia challenged Marxism and the Soviet Union. After Stalin died there was uproar in Hungary and Khrushchev relaxed the communist country. His goal was to get the economy like US and Great Britain.

State control of industries gave away to privatization because of fear of socialism. The believe in extensive state intervention in society became popular. In the 20’s and 30’s, the Great depression prevailed and citizens believed government should help with the market and they should practice capitalism. Deficit spending has been used since then. The U.S. feared the few big Monopoly players would take over and it eventually lead to the creation of the federal reserve. They regulate the financial system and trade. Before they controlled trade, it was unfairly handled by the big players in the market. After the great depression, the owner of the utilities company was caught in scandal involving in fraud. This scandal lead to an act that regulated utility companies.

In 1933 FDIC was created. President Roosevelt felt state regulation will save capitalism. Social security act was made law. Utility companies merged for more productivity. The great depression led to more government intervention because it was believed that that would save the democracy and save country from totalitarian. Roosevelt started bank holidays and bank regulations to prevent bankruptcies. Unemployment was also created.

After ww2 the same government approach was still desired. European countries were in ruins. Eastern Europe Socialism is popular in the west it was popular to depend on the state. There was no middle class. Indian and African countries were newly independent and looked to their mother countries for influence. Labor party became popular in Britain. Government was now in charge of education, transportation, utility and housing. Liberals practiced global market elements. Combination led to a productive market in Berlin. The disintegration of communism lead to smooth transition to capitalism in the region of Poland. This was because Poland was the only communist country with a catholic church. They supported the movement because of Pope John Paul the 2nd who lead this movement. The movement went from a regulated to a market economy. Inflation was bad and in the reelection of 1989, solidarity was elected into office. They went capitalist because the Soviet Union no longer wasted to support communism. Generation of communist leaders from World war 1 pasted away and this lead to the lack of interest in keeping the country communist. These deaths ended the soviet communist leaders. Gorbachez in Russia on the other hand did not have such a smooth transition. He was interest in building the Soviet Union economy. Major parts of the economy were controlled by the state. They appeared strong but really all its resources were used to make the heavy industry. People were starving and leaders did not care.

Overall, the patterns I noticed is when things get bad in the economy people look for state intervention to fix it which I can understand. There is a thin line between intervention and policing. This tends to keep people on opposite sides and makes this and economies different around the world. The biggest difference between a state regulated economy versus a free market is the economy. US and Great Britain have been examples of good economies and when countries like Poland and Czech Republic finally made the transition, their inflation rate also settled. Communism works for China. Communism did not work for the Soviet Union and it is best they made the transition towards liberating communism. I can agree that government intervention can be necessary but it is important that the use strategies that encourage a global market. If the government can liberalize practices like communism then it will make it easier for people to trade and profit around the world. Profits leads to better economies.