“Advanced Welfare States in the International Economy: Vulnerabilities and Options”

The capitalist welfare state achieved its full development within the nearly closed national economies of the early postwar decades. After the rampant protectionism following the Great Depression, and after the complete breakdown of world markets in World War II, the restoration of international competition in the markets for industrial goods was a slow process, while agriculture and services remained largely protected, and capital markets tightly controlled in most countries. Behind these protective barriers, economically advanced democracies were finally free to exploit the economic efficiency of dynamic capitalism without having to accept its unequal distributional consequences, and they learned to control the recurrent crises that had been associated with unfettered international capitalism before World War One and, again, in the inter-war period.