Last week, we began our series on nationalism. In Part I of this report, we discussed social contract theory before and after the Enlightenment. We examined three social contract theorists, Thomas Hobbes, John Locke and Jean-Jacques Rousseau. This week, in Part II, we will recount Western history from the American and French Revolutions into WWII. From there, we will analyze America’s exercise of hegemony and the key lessons learned from the interwar period.
In two weeks, in Part III, we will begin with an historical analysis of the end of the Cold War and the difficulties that have developed in terms of the post-WWII consensus and current problems. We will discuss the tensions between the U.S. superpower role and the domestic problems we face. From there, an analysis of populism will follow, including its rise and the dangers inherent in it. As always, we will conclude with market ramifications.
The Unfolding of History
There were two primary tensions that unfolded from the early 1800s into WWI. The first was between the Enlightenment supporters who were opposed to empires and monarchies. The second was between the Locke wing and the Rousseau wing of representative government. Monarchies and empires continued to flourish in the 1800s. Britain, France, Spain, Portugal and the Netherlands all still had overseas colonies. Some of these governments had monarchs that held varying degrees of power. On the continent, the Ottoman, Russian and Austro-Hungarian Empires were multi-ethnic and multi-cultural. The German Empire was formed in 1870, but prior to that the region was a mix of principalities. The British Empire included not only its vast overseas holdings but also Ireland. Within these empires there were tensions; the Serbs broke away from the Ottoman Empire but had become dependent on the Austro-Hungarian Empire for security. The Serbs expanded their territory in the Balkan Wars that preceded WWI and were wanting greater freedom from the Austro-Hungarian Empire. Russia held Poland, Ukraine and Belarus.
Wars and revolutions were common. There was a major revolution in Europe in 1848. Germany was unified shortly after the Franco-Prussian War of 1870. One of the common themes of this period was economic disruption; the industrial revolution was moving through Europe, bringing massive changes to economies and labor. This flux created conditions of uncertainty and unrest. Job categories were created and destroyed. Massive wealth was created and inequality rose. It is worth noting that this was the period of the gold standard. As the industrial revolution led to increases in goods, the money supply was dependent on gold mining. In the absence of new gold, deflation would occur. This deflation often led to bank panics and deep depressions. The gold standard demanded nations using it to maintain their external accounts; in other words, trade deficits were “self-correcting” through rising unemployment. For the gold standard to work, voting enfranchisement had to be kept narrow, usually restricted to male property owners.
World War I was the second industrialized conflict (the U.S. Civil War is considered the first) and it spelled the death knell for monarchies in Europe. The Austro-Hungarian and Ottoman Empires disintegrated. The Russian Empire was replaced by a communist revolution; the royal family was executed. The German Emperor abdicated just before the armistice on November 9, 1918. Ireland became independent in 1922.