“And now win the peace”: Ten lessons from history for the next normal

Here is an excerpt from an article written by Kevin Sneader and Shubham Singhal for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out others, learn more about the firm, and sign up for email alerts, please click here.

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Two months after Germany surrendered, Britain held a general election. “And now win the peace,” exhorted the Labour Party, which promised massive social and economic change. The words struck a chord and Labour won big, sweeping Winston Churchill out of leadership.Western Europe, Japan, and the United States did win the peace, enjoying more than two decades of broad-based economic growth that not only raised living standards and brought a better quality of life to their citizens but also helped to fuel global growth (Exhibits 1 and 2).As the world considers how to navigate the post-COVID-19 future, the only certainty is that it will be different, or as we wrote in a prior article, “the future is not what it used to be.” But then, the future is always different, and always uncertain. The past is less so. Considering the lessons of history can help business leaders and policy makers figure out how to manage the challenging years ahead.Considering the lessons of history can help business leaders and policy makers figure out how to manage the challenging years ahead.

With that in mind, we looked specifically at the post–World War II era—a time when much of the world rose, quite literally, from the ashes. Not everywhere, of course, or to the same degree. Indeed, many countries would not want to revisit the decades after the war. Eastern Europe went behind the iron curtain; China suffered civil war, starvation, and the Cultural Revolution; much of Africa, Latin America, and the Middle East was unstable and wracked by conflict (although there were bright spots in these regions, too). So the following discussion draws chiefly on the experience of Japan, the United States, and Western Europe, which were conspicuous in their success. Technologies developed for war were adapted for peace-time use. Poverty, government debt, and inequality fell, while living standards improved and prosperity spread broadly.

In this article, we address two questions. First, what accounted for this record of inclusive growth, sustained for more than two decades? And second, while acknowledging that the world has changed enormously since 1945, are there ideas and actions taken then that can inspire us now?

The lessons of the past: Factors behind postwar recovery

When everybody else thinks it’s the end, we have to begin.
—Konrad Adenauer, chancellor of West Germany, 1949–1963

The French have a phrase for it—“les trente glorieuses,” or the “glorious 30”—the period from 1945 to 1975 in which faster growth, greater productivity, higher wages, and generous social benefits transformed the country. The German term is “wirtschaftswunder,” or economic miracle, and the Italian is similar, “il miracolo economico.” In 1964, a rebuilt Japan successfully hosted the Tokyo Olympics.

The coronavirus pandemic is not nearly on the scale of the tragedy of World War II, in which an estimated 60 million people died and many cities were leveled. But COVID-19 has killed more than 600,000 people so far and shut down huge swathes of the global economy, with all the suffering that implies. By any standard, that constitutes a global catastrophe. So it may be useful to think about how Western Europe, Japan, and the United States recovered from a previous catastrophe. We think the following factors were particularly relevant.

There was a sense of purpose around rebuilding lives and livelihoods

In June 1941, when Britain was near its wartime nadir, a British civil servant named William Beveridge was tasked with writing a report on the country’s social-insurance programs. In November 1942, he produced something much more substantive. What became known as the Beveridge Report made the case for eradicating what Beveridge called five “giant evils”: want, disease, ignorance, squalor, and idleness. The report had both a sense of urgency, and of possibility: “Now, when the war is abolishing landmarks of every kind, is the opportunity for using experience in a clear field. A revolutionary moment in the world’s history is a time for revolutions, not for patching.” The report argued for “cooperation between the State and the individual” but without stifling “incentive, opportunity, responsibility.” These principles, adapted to local conditions, to a large degree describe the basis for the development of many of the postwar European welfare states.

The United States also played an important role. It suffered little physical destruction during the war and endured nothing like the postwar distress of Japan and Europe, where even several years after the war, tens of millions of people remained hungry and cold. The United States recognized that, for both humanitarian and geopolitical reasons, it needed to help. The most famous effort to meet these pressing needs was the Marshall Plan. From 1948 to 1952, the United States gave $13 billion in aid to 16 European countries (equivalent to $126 billion today) to get European economies back on their feet. Assistance went to everything from funding the French aircraft industry (to help buy propellers) to fighting tuberculosis to bringing European specialists to the United States to learn new industrial and agricultural techniques to financing Portugal’s cod-fishing fleet. By 1952, when funding ended, each participating country’s economy had surpassed prewar levels. Japan also received considerable aid and other support that fostered the structural adjustments it needed to transition from a war-focused to a peacetime economy. All told, US economic aid totaled $44 billion by 1954—the equivalent of $420 billion today.

No two countries are alike, and there were no magic multinational bullets that solved these countries’ problems. What can be said, however, is that after World War II, there was a broad sense that it was time to do better for the millions of people who had suffered so terribly and whose leaders had previously failed them so badly.

Global institutions created the structures to promote technology sharing, economic growth, and political stability

It’s a veritable alphabet soup: EAEC, ECSC, GATT, IMF, NATO, UN. 1 All of these were created in the years after the war in an effort to forge a more constructive economic and international order. The creation of GATT, for example, created a framework that liberalized international trade. As trade barriers fell, technological transfer between industries and countries rose. Global foreign direct investment grew eight times from 1950 to 1970. At the same time, the formation of NATO in 1949 created the geopolitical security that allowed Western European governments breathing room to reconstruct their countries.

The creation of these international institutions allowed individual economies and businesses to get on with the job of deploying the capital and technology available to rebuild their countries—with far-reaching effects. The European Coal and Steel Community, for example, eventually evolved into what is now the European Union

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Here is a direct link to the complete article.

Kevin Sneader is the global managing partner of McKinsey and is based in the Hong Kong office; Shubham Singhal is a senior partner in the Detroit office.

The authors wish to thank Scott Moore for his contributions to this article.

This article was edited by Cait Murphy, a senior editor in the New York office.


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