Economic Transformation: From Post-WWII Boom to Modern Challenges and Lessons Learned
After World War II, Western democracies determined that their economies were not growing fast enough. They believed that being restrained by the gold standard, which maintained a 2% inflation rate of the money supply, was insufficient. This realization occurred during a period of rapid industrialization when Western economies were experiencing double-digit economic growth rates. They were, however, occasionally hindered by supply shocks related to energy and commodity inputs.
Fast forward more than 80 years, and the situation has changed drastically. Industrialization and manufacturing have shifted to the East, while Western economies have become service-based and heavily reliant on debt and credit to drive economic growth. Government deficits have ballooned to astronomical proportions of GDP, and economic growth has turned negative or remains barely positive. The gold standard has long been suspended, and any semblance of financial discipline is nonexistent.
A collapse of the entire Western financial system appears imminent, with no viable means of salvation. It may be a matter of mere months or even weeks before a sovereign debt default occurs in one country, triggering a cascading effect across the Western financial system.
What have we learned from this century-long experiment? We have learned the importance of financial discipline and that modern monetary theory is a detrimental myth. We must prioritize building resilient economies rather than focusing solely on profiteering. This involves maintaining key industrialization and manufacturing systems, even if it means redundancy. Additionally, we must incentivize saving and investment in research and development, emphasizing technology and innovation, even at the expense of disintermediating entrenched industries. Finally, we must recognize the value of decentralization and regional distribution of power, which is more effective than centralized power structures that foster polarization among nation-states.
