Ukraine War’s Surprising Links to the 2008 Financial Crisis – and the Parallels With 1939

Source: Twitter/@ua_parliament

Ronen Palan, Professor of International Politics, City, University of London.

The historical parallels are uncanny. A decade or so after the two most devastating financial crises in modern capitalism, in 1929 and in 2008, a terrible conflict begins in Europe that threatens to draw in the entire world. So far, the Ukraine war is obviously of a different order to the second world war, but the clash of ideologies is just as fundamental.

If these parallels have not attracted a great deal of attention, I suspect it is because on the surface, they do not make a great deal of sense. The key is to realise that major financial crises and wars are both symptomatic of deeper structural problems in societies – underlying tectonic movements that created those fractures on the surface.

Something important happened to capitalism towards the end of the 19th century. Until then, humanity lived a precarious life. The supply of goods was subject to the weather, but demand was not usually a problem. This changed with the scientific method of production in agriculture and manufacturing, which introduced things like fertilisers and powerful machinery. Beginning with the US, which was the technological pioneer, there were now too many goods seeking too few people who could afford them.

This fundamentally destabilised capitalism, creating situations in which lenders were over-extended as producers who couldn’t find enough customers defaulted on their debts. There were numerous financial panics in the US in the late 19th century and early 20th century – up to and then most spectacularly in 1929. And according to what is known as the French theory of regulation, an oversupply of goods was the core of the problem.

It can be argued that the second world war was a colossal battle among four industrial models that each offered their own solution to this problem. The British solution was to try to recreate the pre-first world war imperial economy centred on Britain (in which, yes, Ukraine and Russia had played the role of grain producers).

Joseph Stalin in 1925
Stalin: ‘nyet’ to the British imperial model. Wikimedia

In the early 1920s, shortly after the Russian revolution, the British offered the Soviets the opportunity to reintegrate into this vision of a mercantile trading system. This was ultimately rejected in the debate that ensued in Russia.

But the debate partly led to Soviet leader Joseph Stalin’s model of “socialism in one country” (as opposed to Karl Marx’s view that communism required world revolution). Stalin’s system was one of a planned economy where supply and demand for industrial goods would be organized by the state.

While the British pivoted after the 1929 collapse to shielding themselves through a trading system that imposed high external tariffs beyond the empire, Germany’s national socialists had developed a different model. They envisaged a semi-planned economy which was essentially capitalist but key industries were nationalised, along with the unions.

From the US came yet another variation – the “New Deal”. This combined nationalised utilities, defence, education and pension systems with a planned corporate economy run by large conglomerates, but all built around private property rights. There were many similarities with the German model, though America’s was ultimately built on democracy.

In 1939, these four different systems went to war. The fourth version won. It has been adapted somewhat in the intervening years, but we basically call this victory, globalisation. That globalisation is now contested, which goes to the heart of the equivalent ideological struggle today.