Did the Internationalisation of Capital undermined the 'Golden Age' of Capitalism?

Term Paper (Advanced seminar) 2006 15 Pages

Politics - International Politics - Topic: Globalization, Political Economics


Table of Content


Section I
1 Introducing the Research Paper
1.1 Interpretations of Fordism
1.2 Development of the Golden Age
1.3 Explaining Booms and Dooms

Section II
2 The Rise of the Eurocurrency Market
2.1 The ‘Impossible Trinity’

Section III
3 Conclusion


“The international system in the 1960s was rather like a mini-golf course, with some hole or other always accessible, but others shut off and a variety of shifting obstacles to be negotiated.”

Hirsch and Oppenheimer (in Helleiner, 1994 , pp. 81)


It is claimed that the internationalisation of capital markets has caused a weakening of the economy of the ‘Golden Age’ - a period between 1950 and 1973. This paper looks into the development of the Golden Age period, explains booms and dooms as well as the creation of the Eurocurrency market. Using the concept of the ‘Impossible Trinity’ the paper concludes that the internationalisation and liberalisation of the capital market undermined the Golden Age.

1 Introducing the Research Paper

In order to answer the posed question on whether ‘the internationalisation of capital weakened the Golden Age of capitalism’ this research paper commences with an introduction of Fordism and the development of the Golden Age. Section I includes aspects mentioned during the presentation on December 9th, 2006, which however are extended in this paper. Section II expands on the overall topic and examines the rise of the Eurocurrency market as well as the concept of the so-called ‘Impossible Trinity’. The Golden Age forms a part of Fordism and describes in particular the period from 1950 until 1973, whereas Fordism stretches form the 1930s until the 1970s. In most countries the Golden Age was a period of social consensus, so Vroey (1984, p. 56).

1.1 Interpretations of Fordism

Fordism expresses the institutional shift in capitalist industrial countries and is used as an organising concept. Fordism can have different meanings and supports different kinds of historical interpretations.

Some say Fordism was invented by Antonio Gramsci and used by critical analysts to describe the 20th century. Gramsci associates Fordism with a constellation of cultural and political relations - ‘Americanism’ (Rupert). More recently, Fordism has been associated with more economically concerned regulation theories such as by Aglietta (Vroey, 1984, p. 45). Regulation Theory looks at the nature of capitalist regulation, the accumulation process and how this relates to society. Aglietta defines Fordism as a period of intensive accumulation; mass production and mass consumption, where the working class participates in consumption by spending their income. Lipietz (1997, p. 2) analyses Fordism as an organising principle of labour. He understands Fordism as taylorism plus mechanisation and the strict separation between the organisation of the production process and the execution of tasks.

The encyclopaedia of Marxism defines Fordism as a method of industrial management based on assembly-line method production of cheap uniform commodities in high volumes, and winning employees’ loyalty with good wages, but intolerant of unionism or employee participation. In contrast, the pro-fordist view is that workers were paid enough, in fact double, to be able to buy the products they create. It was a paternalistic ‘taking care of the workers’ – family like mentality. Workers could form unions, these labour unions became very strong because capital was not fluid, so their argument.

1.2 The Golden Age Period

Why was the ‘Golden Age’ golden? Hobsbawn (1994, p. 262) answer to this is that the Golden Age was golden due to the low price of a barrel of Saudi oil which averaged less than $2 (compared to $60 nowadays). The Golden Age was a period of harmonious functioning. It belonged to the developed capitalist countries and was primarily golden in capitalistic economies (Hobsbawn, 1994, p. 259). It is the marriage between economic liberalism and social democracy.

Major characteristics are that the Golden Age needed constant and heavy investments, less labour but consumers. A capitalist economy is based on mass consumption, full employment, well-paid jobs and a well protected labour force. The Golden Age labour productivity was initially high due to large investments. Labour however was scarce and expensive, therefore new developed technologies aimed on replacing humans. Research and Development is essential for economic growth, but this is a capital intensive and labour replacing activity. Technology transformed every day life in the rich world and to a lesser extent in poorer areas. As one might assume developing countries had a lot less scientists and therefore were not engaged in labour replacing technologies.

For the US the world boom was a continuation of old treaties. For the rest of the world it meant catching up and the productivity gap per man hour between the USA and other countries diminished over time. In 1950 the US enjoyed a national wealth more than double that of France and Germany. European countries and Japan aimed on war recovery, so Hobsbawn (1994, p. 258). Their success was measured against pre-World War II conditions and not the future. European prosperity started in the 1960s when Henry Ford’s mass production spread across the world. According to Parkin, Powell and Matthews (2000, p. 511) UK long term growth in real GDP per person for 1960 was 2.3%, for the US 2.9%, for Germany 3.5% and Japan grew at an astonishing rate of 8.2%. However, as section 1.3 shows: upswings are followed by downswings.



ISBN (eBook)
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Institution / College
University of Kassel
Internationalisation Capital Golden Capitalism




Title: Did the Internationalisation of Capital undermined the 'Golden Age' of Capitalism?