History, Economics, and the Unlearned Lessons of the 1930s

Recent global developments have led many to draw parallels between our current era and the 1930s. The rise of nationalism, economic instability, protectionism, and the erosion of international institutions all resemble the conditions that preceded World War II.

While some have argued that today’s institutions are stronger and better equipped to prevent a repeat of the past, this perspective underestimates the extent to which these very institutions are faltering. Moreover, mainstream economics, with its emphasis on productivity, profits, and efficiency, has failed to address the societal dimensions that drive instability. This failure is reminiscent of the ideological blind spots that contributed to the collapse of global stability in the 1930s.

The United States, historically the primary architect of the post-World War II global order, is facing an era of institutional decline. Democracy, governance, education, and good cultural features are deteriorating, making the country less capable of managing global affairs effectively. Under Trump, this decline has already started showing deep and widespread consequences for the world order.

Political polarization, attacks on the media, and erosion of judicial independence have undermined democratic norms in the U.S., raising concerns about governance stability. Declining education standards and cultural fragmentation have weakened the intellectual and innovative strength that once gave the U.S. a competitive edge.

Trump's approach to global economic relations symbolizes a retreat from international cooperation, undermining long-standing alliances and institutions that the U.S. once championed. As the U.S. withdraws from multilateral engagement, other nations—especially China and regional powers—are making attempts to fill the vacuum.

The rise of artificial intelligence and big data has concentrated power in the hands of a few corporations, reinforcing economic inequality and limiting government control over financial markets and public discourse.

Trump’s economic strategy hinges on protectionism and aggressive tariff policies, which are fundamentally ill-informed about the realities of today’s global economic order. Tariffs may have been an effective tool in the past when trade was primarily focused on goods, but today’s global economy is driven by digital services, supply chains, and complex financial networks that cannot be controlled by simple tariff measures.

Protectionist policies are likely to result in higher prices for American consumers, as businesses pass increased costs onto buyers. Goods, then factories, and today even offices and services are traded across borders. Digital services, AI, and cloud-based industries cannot be tariffed effectively, rendering Trump's policies largely ineffective in addressing trade imbalances.

Unlike previous decades, the U.S. is no longer the world’s leading manufacturing hub. China has taken over as the primary global producer of goods, making it much harder for tariffs to force domestic production back to the U.S. Tariffs on Chinese goods only raise costs for American consumers and businesses without overhauling the manufacturing structure.

Instead of strengthening the U.S. economy, tariffs have the potential of creating retaliatory trade wars, economic uncertainty, and declining global confidence in the American market. Many American companies rely on global supply chains and export markets—tariff impositions on critical components and retaliatory measures by trade partners could damage domestic industries more than they help. Rather than rejuvenating American industries, protectionist policies may accelerate the decline of U.S. economic influence as companies move their operations to avoid tariffs.

While Trump’s economic strategies may be flawed, one area where he is achieving what he envisions is in pushing Europe toward increased defense spending. By repeatedly criticizing NATO allies for failing to meet their defense commitments, he has accelerated efforts among European nations to bolster their military capabilities.

In response to Trump’s pressure, NATO countries—particularly Germany and France—are expected to increase their defense spending. European leaders, wary of the U.S.'s unpredictable commitment to their security, have recently taken decisions to invest in independent defense capabilities to reduce reliance on Washington. If Europe becomes capable of increasing its defense spending, it may lead to greater military independence and a reconfiguration of global power dynamics, diminishing America’s dominant role in Western security affairs.

History suggests that globalization follows a cyclical pattern—expansion, dominance, crisis, and collapse. Every major era of globalization has ended in crisis, conflict, or retrenchment, raising fundamental questions about its sustainability. This pattern aligns with economic theories that emphasize how unchecked liberalization and financial concentration inevitably lead to instability.

Economists like E.F. Schumacher (Small Is Beautiful) and Karl Polanyi (The Great Transformation) have long argued that economies should serve people, not just markets. However, modern economic policies remain largely disconnected from social well-being. By prioritizing efficiency, profitability, and speculative financialization, policymakers have ignored the long-term structural weaknesses that fuel nationalist and authoritarian movements in times of economic distress.

Just as the laissez-faire policies of the early 20th century exacerbated wealth inequality and destabilized global economies, today’s economic frameworks have led to growing social discontent, rising protectionism, and political fragmentation. Without a fundamental shift toward a more inclusive, sustainable economic model, the failures of the past are likely to repeat themselves.

Today, the world faces multiple interlinked crises—geopolitical conflicts, climate change, economic instability, and the erosion of democratic norms. These challenges demand strong international cooperation, yet the world is far from achieving it. Instead, discussions of World War III have become increasingly frequent, reflecting the growing tensions between major powers. The inability of global leaders to find common ground is preventing meaningful solutions, ensuring that history continues to rhyme in dangerous ways.

Given these patterns, one could argue that globalization is inherently unsustainable—humanity repeats cycles of expansion and collapse without achieving lasting stability.

While the following recommendations may seem idealistic and unrealistic in today’s political and economic climate, they remain essential for breaking historical cycles.

• Unless a radically new approach to economic governance, equity, and conflict resolution emerges, history will continue to repeat itself.

• Economic policies should incorporate well-being metrics, environmental sustainability, and community resilience rather than focusing solely on efficiency and profit. Financial institutions should serve long-term economic stability rather than fueling speculative booms and busts.

• Without global coordination, challenges such as climate change, financial instability, and geopolitical tensions will only intensify.

• Without oversight, AI-driven monopolies will further consolidate power, shaping economies and political systems in ways that benefit a few at the expense of many.

• Inspired by Schumacher and Polanyi, future economic models must prioritize social cohesion, sustainability, and equity over unregulated growth.

The 1930s serve as a stark reminder of what happens when economic crises, political instability, and institutional failures converge. If today’s policymakers fail to recognize the deeper structural parallels between then and now, history may once again rhyme in ways that bring further turmoil.