We got very rapid growth and tremendous new science and technology. But that happened at a price. A few people got very rich indeed but the vast majority of them did so with little or no thought for the consequences for others of what they were doing. So we got horribly polluted rivers full of sewage. We got air that was clogged with smog. And we got 10 year old kids crawling below moving machines to pick up scraps of raw material in order to earn a living.
When the sewage released into the Thames finally produced a smell that was so offensive that it stopped Parliament from meeting the Victorian's realised that they needed the government to step in and start building sewage works. Cholera outbreaks eventually convinced them it was a good idea for reliable clean water to be supplied by the public. The state also stepped in to educate children properly and ban them from working under age. Gradually they discovered that far from ruining the economy, sensible state intervention strengthened it.
But there was one other really important trend in the economy of the UK during its complete free market era. There were periodic uncontrolled booms and busts. When times were good investors had a tendency to pile in, invest their money, buy stocks, start new businesses. The result of everyone investing at the same time was strong surges forward in the markets. As people chased the profits the price started to lose contact with reality and before long there was a horrible crash. Banks played a central role in this by lending easily during the boom and pulling back during the crash. The economy was subject to wild fluctuations which was bad for investors and really bad for ordinary workers and the poor when jobs were lost en masse.
This anarchy of the markets convinced Karl Marx that the capitalist system was inevitably driven to create its own destruction. Indeed after the 1930s Stock Market Crash and the Great Depression it did indeed look to many as if he was being proved right.
It turned out that he was very badly wrong. Political leaders learned that the state could do more than fix the water supply. It could also guide the national economy. We didn't have to have uncontrolled booms and slumps if the central government stepped in and invested when times were hard whilst cutting back when a boom was underway.
John Maynard Keynes developed the theory and Roosevelt implemented the New Deal Practice. Immediately after the war the approach became standard economic theory. The result was 30 years of healthy growth without major booms and busts. The Marshall Plan policy of trying to build up weak nations and get them back on their feet instead of demonising them also proved spectacularly successful. Germany and Japan recovered with speed and provided a healthy object lesson that co-operation was better than war.
But now we have a global economy. No one nation can deal with the CO2 concentrations that we have pumped into the air. No one nation can control the flows of highly mobile footloose money. No one nation can manage its way out of a banking crisis when panic rips through the markets.
There are two possible reactions to this situation. It is tempting to try and retreat into our own little nation and hope that we can pull up the drawbridge and shut out the world. We could blame the government for the failure of the markets in 2008 and try to shrink it to cut costs. We could blame and punish those nations which have 25% unemployment and require them to go for even more austerity. That way lies a guarantee of failure. When every nation starts to cut back at once and every bank is trying to rebuild its balance sheet by lending less then you are guaranteed a deeper slump.
The other option is to apply the solution that worked last time round but this time do it on an international scale. We could pressure our leaders to work together to undertake the hard but unavoidable job of developing stronger international mechanisms to guide the world economy.
In Paris later this year there is a serious opportunity to make some real progress on one of our two major global problems - the environment. It is desperately important that the big economies come together to develop and implement a programme of action sufficiently serious to tackle the reality of CO2 levels higher than at any time in human existence. There are some encouraging signs particularly from China where the leadership is beginning to really seriously understand how much they need to do to sort out the environment. But the work will be difficult and is way behind schedules of what is needed.
When it comes to global management of the economic crisis things look even worse. After the 2008 crash there were some hopeful signs. Having stared at complete disaster the central bankers of the world co-ordinated their efforts to cut interest rates and prevent a collapse of banks. Several also made serious efforts to pump money into the economy. $3,000,000,000,000 in the USA and £375,000,000,000 in the UK of money creation is what has kept the world economy afloat. Politicians as diverse as George Bush and Gordon Brown both recognised the danger signs and acted together to fight off the worst symptoms of the problem.
But since then efforts to structurally change the economy have faltered because you cannot do so without going beyond the ideology that the free market always and everywhere has the answer. As a result there are no new institutions or international agreements or powerful mechanisms that can help world leaders work together to manage and control a global slump. Instead there is a sour atmosphere of cutbacks and blame where the immigrants and the poor are seen as the cause of the problem rather than the victims of our failure to create effective world guidance of an out of control world economy.
We do not know when the next bubble will come. We do not know what form it will take. It could be happening right now as a result of the Chinese stock market crash. Or it could happen in ten years with a panic over the constant balance of payments deficits in the US leading to a panic run on the dollar. But we do know another crash will come and we do know that on a worldwide scale we have nothing like the power of the nation state to manage and control it when it does. It is time for a radical change of approach that recognises the power of international collaboration and of co-ordinated planned government action to repair the weaknesses of the free market.
A global economy requires effective global planning. I leave you to judge how effectively the UK government is responding to the challenge!