The shift had been foreshadowed in the later stages of the First World War, when the state had taken draconian powers to force individual capitals to concentrate their efforts on the military struggle. But in the aftermath of the war, the state had given up the power it had acquired. Now the sheer scale of the crisis forced a rethink. Political crises in the US and Germany brought governments to power early in 1933 prepared to implement radical change in order to save capitalism from itself.
In the US this took the form of Roosevelt's New Deal. It extended already existing public works schemes to mop up some of the unemployment, guaranteed the funds of the banks which had not gone bust, encouraged the self-regulation of industry through cartels, destroyed crops so as to raise agricultural prices and incomes, carried through very limited experiments in direct state production and also made it a little easier for unions to raise wages (and therefore the demand for consumer goods). Federal expenditure, only around 2.5 percent of GDP in 1929 reached a peacetime peak of just over 9 percent in 1936. It was a recognition that capitalism in its monopoly stage could no longer solve its problems without limited state intervention. But it was still limited intervention: federal expenditure fell back in 1937.
Such timidity could have only a limited impact on the crisis. All the efforts of the New Deal could not push the upturn that began in the spring of 1933 beyond a certain point. The number of unemployed fell by 1 . 7 million-but that still left 12 million jobless. It was not until 1937-eight years after the start of the crisis-that production reached the 1929 figure. But even then fixed investment in industry remained low47 and there was 14.3 percent unemployment. Yet this "miniboom" gave way in August 1937 to "the steepest economic decline since the history of the US" which "lost half the ground gained by many indexes since 19 32". 48
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Capitalism in the 20th Century