A Second Twenty Years’ Crisis?

E.H. Carr’s The Twenty Years’ Crisis (1939), has a well-deserved reputation as a classic text that helped launch the academic discipline of International Relations (IR). Not only did Carr identify and dissect what would emerge as the two leading schools of thought in IR—utopianism and realism—he also applied a keen eye to the tumultuous decades after the Great War, when efforts to re-establish a functioning international political system foundered on a fundamental disruption to its most important operating principles. Carr framed these in terms of the relationship between power and morality, arguing that the latter had ultimately to accommodate itself to the changing dynamics of the former. Subsequent IR scholarship has mostly located Carr in the realist tradition of the discipline, concerned primarily with the balance of power and pursuit of national interest.¹

In what follows, however, I present him as part of a small group of mid-twentieth century intellectuals who tried to understand not so much the political irruptions of their time, but rather deeper disruptions within the world’s political economy. The Twenty Years’ Crisis certainly highlights how the balance of power within the international political system became dysfunctional during the 1920s and 1930s. But Carr did not confine his analysis to the diplomatic maneuvering of states, whether among themselves or at the League of Nations in Geneva. Instead, he drew on a broader tradition of political economy to place such maneuvering into the context of a fundamental disequilibrium in the international economy. It was not simply morality that had to accommodate itself to power during the interwar period; politics were also being recast to take account of new forms of international economic organization. Power, morality, politics, and economics were all in flux during the twenty years’ crisis. Carr reached for a political economy reading of this period across a number of publications before, during, and just after World War II.²

Carr had fellow travelers in his effort to provide a foundational analysis of the twenty years’ crisis. Key among them were Karl Polanyi and David Mitrany, who like him offer a broad explanation of the wholesale re-organization and re-scaling of the international political economy between about 1890 and World War II. Polanyi of course is best known for The Great Transformation (1944), which was published only a few short years after The Twenty Years’ Crisis (and which lauded its analysis of the balance of power). Mitrany, a pioneering scholar of what we now call global governance, published A Working Peace System (1943), and was like Carr a prolific contributor to debates on international politics throughout this period.³

Together, these scholars offer acute insights about the future prospects for world order in a period of tumultuous change, when established norms, social conventions, political relations, and economic dynamics were all facing upheaval. Using some of their ideas to reflect on the parallels between the first twenty years’ crisis and today can offer productive pointers about the future.

The key insight we can take from the work of Carr and his compatriots is that the near term future of world order continues to rest primarily on how the rich world organizes its political economy. This means that solutions to the so-called crisis in world order need to come first and foremost from the global North rather than its purported “challengers” in the global South.⁴ It also suggests the future is perhaps a bit more open-ended than often portrayed. The past may be a foreign country, as the famous saying goes, but it is not yet entirely unrecognizable.

To have and have not

One of the central insights of The Twenty Years’ Crisis is that the distinction between “have” and “have not” states was a critical problem for the international system. Carr not only recognized how far the prevailing distribution of power had changed; he also called attention to the arbitrary ideational basis of world order, what he identified as the “harmony of interests” doctrine. The twenty years’ crisis, then, arose from the erosion of the dominant position of “have” states, who were unwilling to relinquish or renegotiate any aspect of their long-established privilege.

The twenty years’ crisis reflected the untethering of long held assumptions about how economic production and exchange relations around the globe ought to work. In a part of his book that receives little attention, Carr addresses how the political economies of the Great Powers (which were in his view the principal belligerents of the Great War) had changed so extensively in their internal relations over the preceding half century that the operational principles of laissez-faire liberalism no longer applied. In other publications he expounded on the drivers of these changes, which included the political consolidation of an organized labor movement, the advent of mass democracy, and the extension of social security to a broader cross section of societies throughout the rich world.

Polanyi and Mitrany agreed entirely with Carr on these points, adding in their own work that these developments pushed capitalist societies towards a more functional organization. The critical point is precisely that developments within the Great Powers, arising from the remorseless logic of the terms of engagement between the needs of large business organizations, workers, and governments, had altered the operational dynamics of their economies. The form of the challenge may have appeared as a struggle between “have” and “have not” states, but the source of this challenge was the growing tensions in the internal organization of all Great Powers.

Today no one disputes that the redistribution of economic and political capabilities from the global North to the global South, and especially to China, has generated significant geopolitical tensions. Together with Russia’s invasion of Ukraine, the question of how to manage this redistribution between “have” and “have not” states now constitutes one of the most pressing problems for world politics. But a close reading of Carr and his contemporaries suggests that our geopolitical inflection point is not simply a matter of “have not” states challenging what is often described as the rules-based liberal international order. It is more than a moral play about the clash between liberal and illiberal values or the insatiable ambitions of autocrats. It is also a question of how inequality and poverty are playing out on a world-scale, where the “have” and “have not” division is as much a problem for the rich world as it is for the global South.

Indeed, given the continuing disparity in the global distribution of economic and political capacity—where a mere handful of states still produce the bulk of the world’s economic output—it is the condition of the “have nots” within the global North that arguably poses more of a threat to world order than the “have not” states in the global South, including China.⁵ Taking a cue from Carr, it is more helpful to consider the “have” versus “have not” problem as a distributional issue that goes beyond the confines of inter-state relations, involving classes and people on a world scale.

Seen from this angle, the central argument made by Carr, Polanyi, and Mitrany is that the twenty years’ crisis was the culmination of a deep transformation in the industrial organization of the world that re-scaled its productive capacity; brought forth an organized labor movement which was able, through determined collective action, to extract a greater share of the economic product from capitalists; and witnessed a reinvigoration of democracy that pushed rich states to extend significant health, education, and welfare benefits to citizens. Polanyi tracked the social aspects of this transformation by pointing to the multifarious ways in which civil society worked to protect itself from the consequences of industrialization, a process he called the “double movement.”

Mitrany tracked its political dimension through the growth of the administrative capacity of institutions, both national and global. By calling attention to the benefits of organizing institutions according to functional rather constitutive requirements (such as a strict respect for sovereign jurisdiction), he helped to advance an understanding of modern democratic accountability in terms of the delivery of services to citizens regardless of their jurisdictional residence. Mitrany was in this sense an early proponent for a global dimension to citizenship, although he did not use this language.

Carr tracked the intersection of social and political changes in relation to the inter-state system. All were aware of how these changes affected the global South, but they also recognized that these developments had their most significant causes (and impactful effects) in the rich world, which needed to adjust the most to meet the challenges of the great transformation. One hundred years on from the first twenty years’ crisis, our geopolitical inflection now points to the need for a further reorganization of domestic political economies: the “haves” need to give at home as well as abroad.

The new economic whip

All three mid-twentieth century scholars recognized the central importance of what Carr called, in a prescient set of lectures first delivered on the BBC in 1951, the “economic whip.”⁶ This term signified the incentivization to work, which since the advent of the Poor Laws in Elizabethan England had become a central pillar of the new capitalist economy. Balancing the need for an incentivized labor force against the social and moral consequences of abject poverty—a previously unknown condition—generated Polanyi’s “double movement.” This was a broad range of popular mobilizations whose actions ultimately blunted the economic whip. By the time Carr delivered his lectures, he believed the economic whip to have been discarded as a feature of modern life. And for much of the post-1945 period this was the consensus in the rich world: our three observers lived out the final years of their lives secure in the belief that living standards would improve, while poverty and inequality levels fell, however these were measured.

But the threat of the economic whip has sharpened over the past several decades, although its return has not yet taken us back to the circumstances of the first twenty years’ crisis. Indeed, by one important measure, the world is significantly less unequal than that of the interwar period: economic growth in the global South over the past several decades, led by stunning growth rates across much of Asia, has reduced national income differentials between the global North and global South.⁷

At the same time, this has been countered by the alarming rise of inequality within countries, across the board. With few exceptions, countries with the fastest economic growth rates around the world have also become more unequal.⁸ This is how the economic whip has returned, by widening the gulf in standards of living and generational life chances for growing swathes of populations within national economies, even as these economies and their societies grow richer.

In the rich world, these developments have led to upsurges in populism and nativism along with governmental efforts to recalibrate the openness of cross border trade and investment, which have been the lifeblood of economic growth for much of the global South. Carr, Polanyi, and Mitrany would not be surprised at this development, for it reprises in certain respects the response to the first twenty years’ crisis from within the rich world. Fascism and Japanese militarism, after all, arose within the most “advanced” societies of their time: although they were “have not” states in relation to Britain, France, and the United States, they would be seen as part of the rich world of their day. It is important to recall that in the 1930s fascist movements were active in nearly every European and North American country. It was not a foreign implant. The principal challenge to world order during the first twenty years’ crisis came from within the rich world.

Solutions?

Looking at the rich world as the source of the twenty years’ crisis one hundred years on brings some crucial insights, although no easy solutions. First, the rich world needs to better attend to the return of the economic whip. While it may be true that the first twenty years’ crisis was not resolved until war hauled the rich world out of the Great Depression, it is equally true that high and sustained public investments in welfare, pensions, education, and healthcare after the war spurred decades of strong economic growth that removed the specter of the economic whip from these societies. These provisions have been hollowed out over the past three decades, resulting in today’s growing inequality, marginalized populations, and societies whose future prospects appear to have diminished in generational terms.

The good news is that we know how to reverse these trends, although it will cost money. Progressive taxation and redistribution will meet some of these costs, but economic growth will also have to make a contribution. This requires a growing labor force and higher wages, which in turn require productivity increases. The economic whip will only be retired once it pays to join the labor force; for that to happen, many of the expectations about what states provide to their citizens need to be upgraded. Higher immigration levels from the global South to the global North will need to be part of this solution as well.

The second insight from our mid-twentieth century observers is that more attention needs to be paid to the state, especially to its broader role in securing economic growth. Historically, the economic whip has been reduced by supporting growth alongside efforts to enable the broadest participation of citizens in the economy. Both of these propositions require strong and purposeful state intervention.

One of the iron laws of politics over the past century has been the rise of state responsibility for both economic growth and the health and well-being of its citizens. David Mitrany was concerned to trace the effects of this trend on international politics in the 1930s and 1940s; he concluded that the future of international cooperation was brightest where institutions could be fashioned on a functional basis. His ideas have lost some of their traction over the intervening decades, partly because of the Cold War but also because international cooperation has proven to be very difficult to depoliticize to the extent required by Mitrany’s vision of functionalism. But this does not erase his central insight (shared by Carr and Polanyi) that as people’s expectations about their standard of living rise (or come under threat), they look to states to secure the basic conditions of their prosperity.

None of our protagonists believed in state action without democratic oversight; they were proponents of modernizing political institutions through democratic means, which for them meant paying attention to mass political participation. Their third insight, therefore, is to work harder to provide citizens, especially those who are mobilized, with better avenues of engagement with democratic institutions. This extends to understanding why populist movements now command a significant political allegiance across the rich world, and considering how to renovate existing political institutions to better channel this activity.

During the first twenty years’ crisis, fascist political movements challenged democratic institutions across much of the rich world, but it was defeated politically where liberals took on board the key concerns of marginalized and vulnerable populations, and responded in ways to meet them. Fascism took root in the rich world but it could not compete with democratic practices when the state embraced the extension of what Carr, Mitrany, and others called the “service state.” Today the so-called “new right” is everywhere challenging how states engage with their citizens, and whatever the response, doing less for citizens (or worse, abandoning them) is neither a viable nor a responsible option.

Finally, the first twenty years’ crisis was not resolved by the rich world walling itself off from the rest of the globe. This was not really possible anyway, given the extensive colonial possessions of leading European states along with America and Japan. But a critical element of the first twenty years’ crisis was an international economy in disarray after being torn apart during World War I. The failure to re-establish a functioning global economy in the 1920s and 1930s left an indelible mark on those tasked with winning the next peace. A world of national capitalisms was one option to pursue, of course, but as Fred Block and others have convincingly detailed, this pathway involved too many concessions from capitalists to workers to be attractive, and a world of global capital emerged instead.⁹ It is this world that has enabled the global South to grow economically over the past century, even as much of the global North has also prospered. Cutting off or severely reducing the flow of resources between the global North and global South, much less restricting cross-border trade and investment, is probably one of the worst ways that the rich world could respond to the current geopolitical inflection point.

At the same time, Carr, Polanyi, and Mitrany all recognized that a functioning global economy could not rely on the principles of laissez faire for its organization. Political oversight and accountability were required, especially in a world of increasing state involvement in and responsibility for the health and well-being of citizens. This was a tough nut to crack for our observers, and their preferred solution to this problem—a combination of regional compacts together with select global institutions with clearly demarcated boundaries and remits—did not come to pass, not least because of the onset of the Cold War. Neither would their solutions work today. But one part of their insight bears repeating: if states in the rich world were to better redistribute their national incomes so as to strengthen welfare, health, and educational outcomes, which would in turn better support sustainable economic growth, they would ease the need for international organizations to manage or guide economic cooperation.

The reason for this is that sustainable economic growth—based upon a more equal distribution of national incomes and life chances—would better accommodate itself to increased levels of international trade and investment, even if that were to generate imbalances between national economies for current account and investment payments. In this scenario, a rising tide could in fact lift all boats. But the initiative here has to come from the rich world, where state capacities are better positioned to address growing inequality. Reading the future starts with a cold hard look in the mirror, followed by the resolve to tackle problems at their source.

Footnotes