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The road to riches
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Woman at a well
Great divisions of wealth remain
Programme six

THE END OR THE BEGINNING?

1945 AD - 2300 AD

The challenge at the end of the last war was to build a new economic order that would lead to a more prosperous and stable world. In the West governments took a greater role in running their economies to ensure maximum efficiency and to attempt a fairer division of wealth. In Eastern Europe and elsewhere around the world, communism spread beyond its Russian birthplace. The communist era remains the largest economic experiment of human history. In other parts of the world colonialism ended and there were various attempts to help the economic progress of the many millions of people who had been left behind on the road to riches.

Over half a century later how have those hopes been realised? The role of government in running the economy has been disputed. The post war certainty in the ability of the state to provide the best leadership is no longer with us, but can the marketplace alone provide for everyone? Communism has collapsed but has it been replaced by a better system for the people of the former Soviet Union? And what has half a century brought to the poorest people on the planet?

CLICK HERE for an interview about the secret of economic progress with Professor Douglass North, 1993 winner of the Nobel Prize for economics.

In the final programme Road to Riches takes a journey around the world to meet people whose lives have been touched by these turbulent years.

The Golden Age - 1945-1976

The victorious allies in 1945 were determined to make a better job of winning the peace than they had in 1918. The slogan as they gathered to plan for a new era was "never again". Never again the turbulent fortunes of the 1920s and 1930s. Never again the depressions or the economic nationalism that played such a large part in pushing the world once again to the catastrophe of war. There was also a strong belief that more people should share in the wealth nations produced. This stemmed from ideas of social justice and a desire to promote stability at home in the industrialised countries.

Macmillan
UK prosperity increased
under PM Harold Macmillan
There was a consensus that these important aims could not be delivered in the chaotic world of the free market. Planning and organisation was required and the government was to take the lead in running the economy. This meant some key industries would be nationalised, for others central government would provide a strategic plan. The state would lead the investment needed to rebuild shattered economies and to keep all the workforce employed. Welfare provision was to be provided for all - healthcare, free education, housing, pensions, and a social security safety net for the poorest members of society.

CLICK HERE to read an interview with retired UK couple Stanley and Dorothy Beaumont

The post war years saw high rates of economic growth coupled with a wider distribution of wealth than ever before. These were the years when ordinary families got better homes, could always see a doctor if they were ill, could give their children a good education. They were also the years where the mass market moved to things like cars, household appliances, even foreign holidays, all items previously the preserve of the rich. Much of what we take for granted in our material lives today stems from the gains made during this period. It is not surprising that many have referred to the period as the golden age.

1976 and after

Golden ages seldom last for long. By the mid 1970s severe faults were developing in the post war economic system. Governments were losing the ability to steer economies successfully. As they spent public money to alleviate problems in the economy so inflation went up. As inflation went up unemployment usually followed. In Britain governments of both the main parties had generally supported the post war system of the state taking a leading role in economic management. It was a new Labour Prime Minister, James Callaghan, in 1976 who broke with the past.

CLICK HERE to watch Prime Minister James Callaghan make his 1976 landmark speech about the economy

Callaghan's speech marked the point at which government stopped taking the leading role in the economy. The market and the forces of private enterprise filled the gap. The greatest changes towards a less regulated free market system occurred during Margaret Thatcher's administrations in the 1980s - privatisation of state owned industries, the deregulation of markets and the general championing of private enterprise. The changeover had its costs.

Mrs Thatcher
Margaret Thatcher championed
the free market
There was a contraction in traditional industries that had often previously received state support. Adjustments in the labour market led to a high rate of unemployment. On the plus side many businesses prospered as they were freed of government regulation and interference. The markets were seen as more flexible and responsive than government to an ever faster changing world.

The Great Experiment and its aftermath

CLICK HERE to read an interview with Valery Yermilov, manager of a textile factory in Ivanovo, near Moscow.

The Communist Experiment in Russia and elsewhere was an extreme in the government versus market debate. The state ran everything, the market in any real sense was outlawed. For 70 years the Soviet system seemed a powerful alternative to the Western market economies. It appeared to be ruthlessly successful and there were even those in the West that foresaw a time when the communist economies would overtake them.


Then at the end of the 20th Century Communism spectacularly collapsed. As a system it had long ceased delivering the economic goods. As an experiment communism had cost countless lives, human freedoms and had plunged the world into decades of cold war.

In Russia, the birthplace of the Soviet system, communism was replaced by lightning political and economic reforms. The state rapidly sold off all its property and industries. The economy faced a savage period of readjustment to market priorities after generations of central planning and funding. For ordinary Russians this second great economic experiment has been very harsh.

Lenin
Lenin: the famous face of
Russian communism
In less than a decade they went from having a government that provided for everything to one that at times seemed barely in control of the most basic functions. Parts of the Russian economy have descended into near anarchy and the standard of living for large parts of the population has dropped significantly.

Russia's experience with economic experimentation is not over yet. The post communist era in Russia shows that systems cannot easily be dismantled. When government, the rule of law or social and economic organisation fail, an economy cannot prosper. Getting rid of the Soviet state apparatus was not enough in itself, it had to be replaced with other structures that worked.

China's New Revolution

In the post-war period the world's most populous nation also took part in the Communist Experiment. China has been ruled by a communist government for half a century. Although different in many ways from communism on the Soviet model, the Chinese version suffered many of the same economic shortfalls.

China
China: Wealth and poverty side
by side
The Chinese, however, have approached reforms in a very different way. Rather than dismantling the communist state from top to bottom the Chinese authorities are allowing the two systems to work alongside each other. As the architect of the Chinese reforms, Deng Xiaoping, remarked: "It doesn't matter whether the cat is black of white, so long as it catches mice." His government set up special economic zones where the free market was given a free rein. The Communist government remains very firmly in control yet in the special economic zones the market economy is booming, exhibiting incredible rates of growth and development.

Of China's 1.2 billion citizens, only a minority are taking part in the market explosion. The majority live in rural areas, often in great poverty. While the Beijing administration appears successful in promoting economic growth, its record in many areas such as human rights is not an example of good government. Greater prosperity across China could possibly bring pressure for a more democratic system in the future. What is certain is that China will be a major economic force in this century.

Tanzania
Life is a struggle in Tanzania
Left by the wayside

Over a billion people in the world live on less than a dollar (60 pence) a day. Such poverty, aside from the great suffering it causes, represents an appalling waste of human potential. When we began our story the leap that really started the human journey was the ability of people to get beyond day to day subsistence and unlock the clever creativity of our species. Ten thousand years down the road we have still not freed many millions from the daily struggle to survive.

Africa is home to many of the world's poorest people. The final journey on the Road to Riches is to Tanzania, one of the poorest countries in the world. Its history over the last 50 years has been one of hope and then disappointment.

The great hope for Tanzania and many other underdeveloped countries after the war was independence. Freed from colonialism new nations could divert all their energies and resources to their own development. With their own government their own priorities would come first. Tanzania saw many improvements in the early years of independence. Basic healthcare and education was brought to people who had never had it before, attempts were made to improve agriculture and create surpluses for export to fund further development. However Tanzania was already so far behind in a world economy that was changing faster than ever, that it lost rather than gained ground.

CLICK HERE to read an interview with Tanzanian head teacher Nicolao Melea

It is not easy to be optimistic about the future in Tanzania. Development in the country is stagnating. It is hampered by countless failed projects, weighed down by debt and buffeted by natural disasters. The gap between the richest and the poorest in the world is widening.

Government Matters

The experience of countries like Tanzania illustrates that however much may be known in theory about the conditions that lead to economic success, putting those theories into practice can be extremely difficult.

Good government, strong legal structures, an entrepreneurial heritage are all essential ingredients in a successful economy. The Russian experience has shown that structures are easier to dismantle than to rebuild and that government does matter.

Without a reasonable government, without reliable institutions like property rights, the market lapses into anarchy if not criminality. The Chinese Communist Party may not seem a likely catalyst for success in market capitalism but their structures are surprisingly successful in the transfer from state to market enterprise.

The West has been able to rely on stable government, the rule of law and fundamental institutions like property rights for generations, even centuries. These conditions have generally brought prosperity. The challenge now is to learn how to propagate these conditions elsewhere. It is a challenge that has not yet been met.

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TRANSMISSION DATE
BBC Two:
20.10 hrs 20 August 2000

Transcript