[ 28 ] The Great Transformation
the nations so that trade might be liberated without danger to stan-
dards of living. Currency was at the heart of the campaigns launched
by Wall Street to overcome the transfer problem and, first, to commer-
cialize, then to mobilize reparations; Geneva acted as the sponsor of a
process of rehabilitation in which the combined pressure of the City
of London and of the neoclassical monetary purists of Vienna was put
into the service of the gold standard; every international endeavor was
ultimately directed to this end, while national governments, as a rule,
accommodated their policies to the need of safeguarding the currency,
particularly those policies which were concerned with foreign trade,
loans, banking, and exchange. Although everybody agreed that stable
currencies ultimately depended upon the freeing of trade, all except
dogmatic free traders knew that measures had to be taken immedi-
ately which would inevitably restrict foreign trade and foreign pay-
ments. Import quotas, moratoria and standstill agreements, clearing
systems and bilateral trade treaties, barter arrangements, embargoes
on capital exports, foreign trade control, and exchange equalization
funds developed in most countries to meet the same set of circum-
stances. Yet the incubus of self-sufficiency haunted the steps taken in
protection of the currency. While the intent was the freeing of trade,
the effect was its strangulation. Instead of gaining access to the mar-
kets of the world, the governments, by their own acts, were barring
their countries from any international nexus, and ever-increasing sac-
rifices were needed to keep even a trickle of trade flowing. The frantic
efforts to protect the external value of the currency as a medium of
foreign trade drove the peoples, against their will, into an autarchized
economy. The whole arsenal of restrictive measures, which formed a
radical departure from traditional economics, was actually the out-
come of conservative free trade purposes.
This trend was abruptly reversed with the final fall of the gold stan-
dard. The sacrifices that had been made to restore it had now to be
made over again so that we might live without it. The same institu-
tions which were designed to constrict life and trade in order to main-
tain a system of stable currencies were now used to adjust industrial
life to the permanent absence of such a system. Perhaps that is why the
mechanical and technological structure of modern industry survived
the impact of the collapse of the gold standard. For in the struggle to
retain it, the world had been unconsciously preparing for the kind of
efforts and the type of organizations necessary to adapt itself to its loss.
Conservative Twenties, Revolutionary Thirties [ 29 ]
Yet the intent was now the opposite; in the countries that had suffered
most during the long-drawn fight for the unattainable, titanic forces
were released on the rebound. Neither the League of Nations nor in-
ternational haute finance outlasted the gold standard; with its disap-
pearance both the organized peace interest of the League and its chief
instruments of enforcement—the Rothschilds and Morgans—van-
ished from politics. The snapping of the golden thread was the signal
for a world revolution.
But the failure of the gold standard did hardly more than set the date
of an event which was too big to have been caused by it. No less than
a complete destruction of the national institutions of nineteenth-
century society accompanied the crisis in a great part of the world, and
everywhere these institutions were changed and re-formed almost out
of recognition. The liberal state was in many countries replaced by to-
talitarian dictatorships, and the central institution of the century—
production based on free markets—was superseded by new forms of
economy. While great nations recast the very mould of their thought
and hurled themselves into wars to enslave the world in the name of
unheard-of conceptions of the nature of the universe, even greater na-
tions rushed to the defence of freedom which acquired an equally
unheard-of meaning at their hands. The failure of the international
system, though it triggered the transformation, could certainly not
have accounted for its depth and content. Even though we may know
why that which happened happened suddenly, we may still be in the
dark about why it happened at all.
It was not by accident that the transformation was accompanied by
wars on an unprecedented scale. History was geared to social change;
the fate of nations was linked to their role in an institutional transfor-
mation. Such a symbiosis is in the nature of things; though national
groups and social institutions have origin of their own, they tend to
hitch on to one another in their struggle for survival. A famous in-
stance of such a symbiosis linked capitalism and the seaboard nations
of the Atlantic. The Commercial Revolution, so closely connected
with the rise of capitalism, became the vehicle to power for Portugal,
Spain, Holland, France, England, and the United States, each of them
benefiting from the chances offered by that broad and deep-seated
movement, while, on the other hand, capitalism itself was spreading
over the planet through the instrumentality of these rising Powers.
[ 30 ] The Great Transformation
The law applies also in the reverse. A nation may be handicapped
in its struggle for survival by the fact that its institutions, or some of
them, belong to a type that happens to be on the down grade—the
gold standard in World War II was an instance of such an antiquated
outfit. Countries, on the other hand, which, for reasons of their own,
are opposed to the status quo, would be quick to discover the weak-
nesses of the existing institutional order and to anticipate the creation
of institutions better adapted to their interests. Such groups are push-
ing that which is falling and holding on to that which, under its own
steam, is moving their way. It may then seem as if they had originated
the process of social change, while actually they were merely its bene-
ficiaries and may be even perverting the trend to make it serve their
own aims.
Thus Germany, once defeated, was in the position to recognize the
hidden shortcomings of the nineteenth-century order, and to employ
this knowledge to speed the destruction of that order. A kind of sinis-
ter intellectual superiority accrued to those of her statesmen in the
thirties who turned their minds to this task of disruption, which often
extended to the development of new methods of finance, trade, war,
and social organization, in the course of their attempt to force matters
into the trend of their policies. However, these problems themselves
were emphatically not created by the governments which turned
them to their advantage; they were real—objectively given—and will
remain with us whatever be the fate of the individual countries.
Again, the distinction between World Wars I and II is apparent: the
former was still true to nineteenth-century type—a simple conflict of
Powers, released by the lapse of the balance-of-power system; the latter
already formed part of the world upheaval.
This should allow us to detach the poignant national histories of
the period from the social transformation that was in progress. It will
then be easy to see in what manner Germany and Russia, Great Britain
and the United States, as power units, were helped or hampered by
their relation to the underlying social process. But the same is true of
the social process itself: fascism and socialism found a vehicle in the
rise of individual Powers which helped to spread their creed. Germany
and Russia respectively became the representatives of fascism and so-
cialism in the world at large. The true scope of these social movements
can be gauged only if, for good or evil, their transcendent character is
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