Civilization: The West and the Rest

by Niall Ferguson

  Such movements might have dissolved into ill-tailored obscurity had it not been for the Great Depression. After the inflation of the early 1920s, the deflation of the early 1930s dealt a lethal blow to the Wilsonian vision of a Europe based on national identity and democracy. The crisis of American capitalism saw the stock market slump by 89 per cent, output drop by a third, consumer prices fall by a quarter and the unemployment rate pass a quarter. Not all European countries were so severely affected, but none was unscathed.76 As governments scrambled to protect their own industries with higher tariffs – the American Smoot-Hawley tariff bill raised the effective ad valorem rate on imported cotton manufactures to 46 per cent – globalization simply broke down. Between 1929 and 1932 world trade shrank by two-thirds. Most countries adopted some combination of debt default, currency depreciation, protectionist tariffs, import quotas and prohibitions, import monopolies and export premia. The day had dawned, it seemed, of the nationalist-socialist state.

  This was an illusion. Though the US economy seemed to be imploding, the principal cause was the disastrous monetary policy adopted by the Federal Reserve Board, which half wrecked the banking system.77 Innovation, the mainspring of industrial advance, did not slacken in the 1930s. New automobiles, radios and other consumer durables were proliferating. New companies were developing these products, like DuPont (nylon), Revlon (cosmetics), Proctor & Gamble (Dreft soap powder), RCA (radio and television) and IBM (accounting machines); they were also evolving and disseminating a whole new style of business management. Nowhere was the creativity of capitalism more marvellous to behold than in Hollywood, home of the motion-picture industry. In 1931 – when the US economy was in the grip of blind panic – the big studios released Charlie Chaplin’s City Lights, Howard Hughes’s The Front Page and the Marx Brothers’ Monkey Business. The previous decade’s experiment with the Prohibition of alcohol had been a disastrous failure, spawning a whole new economy of organized crime. But it was only more grist for the movie mills. Also in 1931, audiences flocked to see James Cagney and Edward G. Robinson in the two greatest gangster films of them all: The Public Enemy and Little Caesar. No less creative was the live, recorded and broadcast music business, once white Americans had discovered that black Americans had nearly all the best tunes. Jazz approached its zenith in the swinging sound of Duke Ellington’s big band, which rolled out hit after hit even as the automobile-production lines ground to halt: ‘Mood Indigo’ (1930), ‘Creole Rhapsody’ (1931), ‘It Don’t Mean a Thing (If It Ain’t Got That Swing)’ (1932), ‘Sophisticated Lady’ (1933) and ‘Solitude’ (1934). The grandson of a slave, Ellington took reed and brass instruments where they had never been before, mimicking everything from spirituals to the New York subway. His band’s long residence at the Cotton Club was at the very heart of the Harlem Renaissance. And of course, as his aristocratic nickname required, Ellington was always immaculately dressed – courtesy of Anderson & Sheppard of Savile Row.

  In short, capitalism was not fatally flawed, much less dead. It was merely a victim of bad management, and the uncertainty that followed from it. The cleverest economist of the age, John Maynard Keynes, sneered at the stock exchange as a ‘casino’, comparing investors’ decisions to a newspaper beauty contest. President Franklin D. Roosevelt – elected just as the Depression was ending – inveighed against ‘the unscrupulous money changers’. The real culprits were the central bankers who had first inflated a stock-exchange bubble with excessively lax monetary policy and had then proceeded to tighten (or failed adequately to loosen) after the bubble had burst. Between 1929 and 1933, nearly 15,000 US banks – two-fifths of the total – failed. As a result, the money supply was savagely reduced. With prices collapsing by a third from peak to trough, real interest rates rose above 10 per cent, crushing any indebted institution or household. Keynes summed up the negative effects of deflation:

  Modern business, being carried on largely with borrowed money, must necessarily be brought to a standstill by such a process. It will be to the interest of everyone in business to go out of business for the time being; and of everyone who is contemplating expenditure to postpone his orders so long as he can. The wise man will be he who turns his assets into cash, withdraws from the risks and the exertions of activity, and awaits in country retirement the steady appreciation promised him in the value of his cash. A probable expectation of Deflation is bad.78

  How to escape from the deflation trap? With trade slumbering and capital imports frozen, Keynes’s recommendation – government spending on public works, financed by borrowing – made sense. It also helped to abandon the gold standard, whereby currencies had fixed dollar exchange rates, to let depreciation provide a boost to exports (though increasingly trade went on within regional blocs) and to allow interest rates to fall. Yet parliamentary governments that adopted only these measures achieved at best anaemic recoveries. It was when authoritarian regimes adopted plans for industrial expansion and rearmament that unemployment came down fastest. This was where ‘socialism in one country’ (in Russia) and ‘national socialism’ (in Germany) appeared to offer solutions superior to anything available in the two big Anglophone economies. Uniquely in the world, the Soviet Union achieved an increase of industrial production between 1929 and 1932; few asked how many people died for every ton of steel produced under Stalin (the answer was nineteen). It did not take Hitler long to lose patience with the realities propounded by his Economics Minister Hjalmar Schacht; rather than slow the pace of rearmament to take account of balance of payments constraints (in short, the Reichsbank’s lack of gold to pay for imports in excess of exports), Hitler drafted a Four Year Plan in imitation of Stalin’s Five Year Plans. The two regimes were now in blatant competition, intervening on opposite sides in Spain’s civil war, erecting rival pavilions at the Paris World Exposition of 1937. Close scrutiny of the muscular giants atop those two totalitarian towers revealed only two meaningful differences: the superhumans of communism were a couple and were modestly clad in dungarees and a smock; the Aryan supermen were two naked males. The only thing stranger than the prudishness of socialist realism was the sexlessness of the Aryan nude. The naked body has been an integral part of Western art since the ancient Greeks, a reminder that what we do not wear is often as important as what we do wear. Since the Renaissance, Western artists had lovingly depicted women in various states of undress, producing masterworks of eroticism like Edouard Manet’s Déjeuner sur l’herbe and Olympia (both 1863), tributes, respectively, to Giorgione’s The Tempest (c. 1506) and Titian’s Venus of Urbino (1538). But Nazi nudes infallibly induced detumescence, the men implausibly musclebound, the women flat-chested and hipless.

  Both Stalin and Hitler promised growth and employment through a combination of nationalism and socialism. They delivered both. In 1938 the output of the American economy was still more than 6 per cent below the pre-crisis peak of 1929; German output was 23 per cent higher, and Soviet output even higher, if the official statistics for ‘net material product’ are to be believed. As early as April 1937 unemployment in Germany fell below the million mark, compared with 6 million just over four years before. By April 1939 fewer than 100,000 Germans were out of work; as good as full employment. The United States lagged far behind, even if one adjusts the official unemployment figures to count those on federal emergency relief work as employed. By a modern definition the unemployment rate was still 12.5 per cent in 1938. The problem was that totalitarian growth did not translate into significantly higher living standards. The economic model was not really Keynesian; it did not use increased public spending to kick-start aggregate demand through a multiplier effect on consumer spending. Rather, the planned economy mobilized manpower to work on heavy industry, infrastructure and arms; and it financed the process through forced saving. As a result, consumption stagnated. People worked and got paid, but because there was steadily less and less to buy in the shops, they had little option but to put the money in savings accounts, where it was recycled into funding the gov
ernment. Nazi propaganda was full of images of prosperous nuclear families, well fed, fashionably attired and driving along the Autobahns in spanking new Volkswagen Beetles. The statistics tell another story. As rearmament was stepped up from 1934, textile production stagnated and imports declined. Precious few civilians owned cars.79 And, with every passing year of the Third Reich, imported staples like coffee became harder to obtain. If German men wanted to look smart by 1938 they needed to be in uniform. Unlike in the Soviet Union, considerable attention was paid to the elegance of military outfits, with the black-clad Schutzstaffel (SS) enjoying the most sinisterly elegant attire, designed by Karl Diebitsch and Walter Heck and produced by Hugo Boss.* This was the height of fascist fashion.

  The raison d’être of the SS, and of National Socialism as a whole, was destruction not consumption. Hitler’s economic model, as he made clear in the document we know as the Hossbach Memorandum, necessarily entailed the acquisition of ‘living space’ – the annexation of adjoining territory – as a way of acquiring the raw materials Germany could no longer afford to import. The forced march to full employment via rearmament thus made war ever more likely. And war in its late 1930s variant, given the state of military technology, was a spectacularly destructive affair. As early as 1937 it was revealed what havoc aerial bombardment could wreak, not only in Guernica, where German and Italian planes dive-bombed Spanish Republican positions, but also in Shanghai, which was severely damaged by Japanese air raids. Air power was a terror weapon, designed to sow panic among soldiers and civilians. On the ground, tanks and other forms of mechanized artillery solved the problem of immobility that had defined the First World War in the West; it thereby revealed the advantages of trench warfare. For ‘lightning war’ was far more costly in terms of human life, not just to exposed combatants but even more so to civilians, who made up a clear majority of the Second World War’s casualties.

  Superficially, the Second World War was between four distinct versions of Western civilization: national socialism, Soviet communism, European imperialism (which the Japanese had adopted) and American capitalism. Initially, the first and second joined forces against the third, while the fourth remained neutral. After the pivotal year 1941, when the Nazis attacked the Soviets and the Japanese attacked the Americans, it was the Axis powers – Germany, Italy and Japan – plus their hastily conquered empires and a few hangers-on, against the Big Three – the Soviet Union, the British Empire and the United States – plus everybody else (hence ‘the United Nations’, as the Allies liked to call themselves). In reality, however, a remarkable convergence occurred as the industrialization of destruction reached its horrific zenith. All the major combatants evolved highly centralized state apparatuses designed to allocate resources – manpower and matériel – by non-market mechanisms, according to preconceived and highly complex plans. All of them subordinated individual freedom to the goal of total military victory and the unconditional surrender of the enemy. All placed an unprecedented proportion of their able-bodied men under arms. All treated civilian population concentrations as legitimate military targets. All discriminated against selected civilian groups in the territory they controlled, though neither the British nor the Americans – nor the Italians – remotely approached the savagery of the Germans and Russians towards mistrusted ethnic minorities. Even the crimes of the Japanese against Chinese civilians and Allied prisoners of war pale into insignificance alongside Hitler’s ‘Final Solution of the Jewish Question’ and Stalin’s earlier ‘Liquidation of the Kulaks as a Class’, both euphemisms for genocide.80

  Everyone, it seemed, was in uniform. By 1944 the six biggest combatants had more than 43 million people, nearly all men, under arms. For all combatants, the total certainly exceeded 100 million. That was, at most, between a fifth and a quarter of the population, but it was still a far larger proportion than at any time in modern history, before or since.81 More than 34 million Soviet citizens served, 17 million Germans, 13 million Americans, nearly 9 million loyal subjects from all over the British Empire and 7.5 million Japanese. Young men from those countries who did not end up in government-issue (hence ‘GI’) clothes were a minority. As a result, a vast proportion of the world’s textile industry was given over to the manufacture of military uniforms. What people did in these uniforms varied widely. The majority of Germans, Japanese and Russians were involved in some form or other of lethal organized violence. The majority of Americans and British were behind the lines, leaving the combat to an unlucky minority. The war against Germany was won by a combination of British intelligence, Soviet manpower and American capital; the British cracked the German codes, the Russians slaughtered the German soldiers and the Americans flattened the German cities. Victory over Japan was preponderantly though not exclusively the achievement of the United States, whose Manhattan Project (named after the Manhattan Engineering District where it began in 1942) produced the three war-ending and world-changing atomic bombs tested in New Mexico and dropped on Hiroshima and Nagasaki in 1945.

  Inspired by Albert Einstein’s warning to Roosevelt that the Germans might be the first to develop such a weapon, and propelled forward by the British discovery of the fissile properties of the isotope uranium-235 – the significance of which the Americans were slow to grasp – the atomic bomb was an authentically Western achievement. The scientists who devised it were of multiple nationalities: Australians, Britons, Canadians, Danes, Germans, Hungarians, Italians and Swiss as well as Americans. Many (notably Otto Frisch and Edward Teller) were Jewish refugees from Europe, reflecting not only the disproportionate role played by Jews in every area of intellectual life since the emancipation that had followed the French Revolution,* but also the cost to the German war effort of Hitler’s anti-Semitism. Two were Soviet spies. It may seem odd to identify the A-bomb as one of the greatest creations of Western civilization. Though it dramatically increased the capacity of man to inflict death, the Bomb’s net effect was to reduce the scale and destructiveness of war, beginning by averting the need for a bloody amphibious invasion of Japan. To be sure, it did not abolish conventional warfare; no sooner were the 1940s over than another big and bloody war of planes and tanks was under way in Korea. But the atomic bomb, and even more so the vastly more destructive hydrogen bomb tested in 1952 (and a year later by the Soviets), circumscribed that war and all subsequent conflicts, by deterring the United States and the Soviet Union from colliding head on. All the wars waged by the two superpowers, as they came to be known, were limited wars waged against, and sometimes through, proxies. Though the risk of a nuclear war was never zero, with hindsight we can see that the age of total war ended with the surrender of Japan.

  If the Cold War had ever become hot, the Soviet Union would very likely have won it. With a political system far better able to absorb heavy war losses (the Second World War death rate as a percentage of the pre-war population had been fifty times higher than that for the United States), the Soviet Union also had an economic system that was ideally suited to the mass production of sophisticated weaponry. Indeed, by 1974 the Soviets had a substantially larger arsenal of strategic bombers and ballistic missiles. Scientifically, they lagged only a little way behind. They were also armed with an ideology that was a great deal more appealing than the American alternative in post-colonial societies all over what became known as the Third World, where poor peasantries contemplated a life of drudgery under the heel of corrupt elites who owned all the land and controlled the armed forces.82 Indeed, it could be argued that the Soviets actually won ‘the Third World’s War’. Where there was a meaningful class war, communism could prevail.83

  Yet the Cold War turned out to be about butter more than guns, ballgames more than bombs. Societies living in perpetual fear of Armageddon nevertheless had to get on with civilian life, since even the large armies of the 1950s and 1960s were still much smaller than the armies of the 1940s. From a peak of 8.6 per cent of the population in 1945, the US armed forces were down below 1 per cent by 1948 and never r
ose above 2.2 per cent thereafter, even at the height of the American interventions in Korea and Vietnam. The USSR remained more militarized, but the military share of the population nevertheless declined from a post-war peak of 7.4 per cent in 1945 and remained consistently below 2 per cent after 1957.84 The problem for the Soviet Union was simple: the United States offered a far more attractive version of civilian life than the Soviets could. And this was not just because of an inherent advantage in terms of resource endowment. It was because centralized economic planning, though indispensable to success in the nuclear arms race, was wholly unsuited to the satisfaction of consumer wants. The planner is best able to devise and deliver the ultimate weapon to a single client, the state. But the planner can never hope to meet the desires of millions of individual consumers, whose tastes are in any case in a state of constant flux. This was one of the many insights of Keynes’s arch-rival, the Austrian economist Friedrich von Hayek, whose Road to Serfdom (1945) had warned Western Europe to resist the chimera of peacetime planning. It was in meeting (and creating) consumer demands that the American market model, revitalized during the war by the biggest fiscal and monetary stimulus of all time, and sheltered by geography from the depredations of total war, proved to be unbeatable.