With high inflation, soaring energy prices, and slowing economic growth, many economists have drawn comparisons between today’s European economy and that of the 1970s oil crisis.
But while 1970s-style stagflation concerns loom large, another pivotal decade in the continent’s history may help explain today’s economic and political trends: the 1930s.
The decade leading up to World War II was marked by a general climate of fear and anxiety in the West. Economic crises and mass poverty broadened the appeal of populist right-wing parties, and lasting trauma from World War I, combined with the Great Depression, fueled isolationism and nationalist foreign policies.
Today, after the pandemic and the Ukraine war disrupted global supply chains, countries are turning away from globalization and looking inward once more. And European populism is having a moment in the sun, as citizens take their resentment over a rising cost of living and a bleak economic outlook to the polls.
“This is one thing that’s kind of worrying and echoes the 1930s: namely, this widespread disenchantment with what liberal democracies can do,” Cristina Florea, a historian of Central and Eastern Europe at Cornell University, told Fortune.
Europe’s largest democratic institutions have been able to hold firm, but harsher challenges lie ahead as a mounting energy crisis on the continent has sent prices soaring, and discontent has already begun spilling out onto the streets and sowing divisions between European nations.
“Things could be exacerbated this winter by what’s happening in Europe with prices going through the roof and fuel shortages. It will really put Europeans to the test,” Florea said. “What’s coming in the following months will tell us how far we are willing to go to back up this vision of democracy.”
The strongest resemblance between now and Europe’s 1930s economy, experts say, is the transition from a highly globalized world to one that is quickly becoming more regionalist.
“The most important similarity is that these are eras of, to some extent, deglobalization,” Mark Harrison, emeritus professor of economics and an economic historian at the University of Warwick in the U.K., told Fortune.
In the 1930s, the fallout from the Great Depression created an era of protectionism: a retreat from international trade around the world, with countries in Europe, Asia, and the Americas creating their own small trade circles.
“The Depression just sent one state after another into an economic abyss,” Florea said. “The lessons that different states took from this was that they need to turn towards economic nationalism. That the solution is autarky and to just break off ties. A turn against globalization or global connections.”
One of the most famous examples was Britain’s policy reversal in 1931 to discriminate against trade from outside the British Empire. The new policy imposed tariffs of up to 100% on products manufactured outside the empire, and many items were immediately taxed by a rate of 50%. By comparison, today’s average import tariff rate for products coming into the U.S. is 2%, although half of industrial goods are imported duty-free.
In the 1930s, rising and established powers including Germany, Japan, and the U.K. created their self-sufficient trading blocs through strict tariffs on imports from outside their circle, according to Harrison, producing an intense regionalization of trade and deglobalization of the world economy.
Globalization eventually picked up again after World War II, spearheaded by the U.S. with the creation of international monetary organizations and global trade norms at the Bretton Woods Conference in 1944. But over the past several decades, global trade volume has been declining, and with economic disruptions brought on by the pandemic and the Ukraine war, the world might be reorganizing itself into a more isolationist era once more.
Populist governments have argued for protectionist economic policies in the U.S. and Europe, and U.S. tariffs on China that have remained in place since the Trump administration. Putin’s invasion of Ukraine only accelerated the shift to a smaller world, with European dependence on Russian energy becoming a major liability. Countries sanctioning Russia have seen exports to the country fall by 60%.
The shifts toward more regionalized economic activity has also been spurred on by the COVID-19 pandemic, and the disrupted global supply chains it created.
Plans are now in place in the U.S. and Europe to shore up domestic supply of critical commodities that were mainly imported before the pandemic, including semiconductor chips. And the ongoing lockdown policies in manufacturing hubs like China have popularized so-called nearshoring, with many U.S. and European companies bringing production back home to guard against future supply-chain disruptions.
A right turn
In the 1920s, European nations had just exited bruised and battered from the World War I—the most expensive war in history at the time.
Some countries, like France, had a Roaring ’20s experience similar to the U.S., but many others were faced with poverty and economic decline. In Italy, an industrial and banking collapse led to a prolonged economic crisis, while Germany—saddled with crushing debt after victorious World War I nations demanded reparations—experienced one of the worst cases of hyperinflation in recorded history.
Many European countries remained deeply distrustful of their neighbors in the interwar years, hindering early attempts to create robust international law-and-order systems and democratic institutions like the early plans for pan-European political unity and the failed League of Nations, considered a predecessor to the U.N.
“Efforts at bilateral treaties in the interwar years crumbled because the different states coming out of World War I were really incapable of overcoming their suspicion of each other,” Florea said.
Far-right and authoritarian regimes were able to seize on these divisions, and on the disruptions caused by World War I and the Great Depression, to pander to voters unsatisfied with the current order and eager for a change, according to Florea.
Today, after years of a pandemic and a worsening energy crisis and economic outlook in Europe, experts say a similar turn could still happen.
“What we don’t want to see happening once again is people equating economic impotence with democracy, which is just like running into the arms of these right-wing movements,” Florea said.
Hungary and Poland have been led by right-wing populist parties for years, but now other countries seem to be following suit. In France, centrist Emmanuel Macron narrowly won a second term as president earlier this year against far-right challenger Marine Le Pen. And just last weekend, a far-right coalition was elected in Italy, led by the country’s soon-to-be first female prime minister, Giorgia Meloni.
Meloni made rising energy prices a central part of her campaign, saying that families and businesses have been “brought to their knees” because of rising costs, and criticizing the EU for its energy policies. Viktor Orban, Hungary’s right-wing prime minister, has blamed the EU for high natural gas prices on the continent, recently demanding that European sanctions on Russia be lifted.
But aside from the individual policies of its leaders, populism carries a larger threat to European unity as the continent prepares to confront an economic downturn, a refugee crisis, and ongoing pressure from Russia.
“People who live through profound social disruptions look for security, and are likely to turn to parties that say that we’re going to uphold an order that favors ‘ordinary people,’” Harrison said, adding that it is in moments of crisis when populist movements tend to be the most vocal.
“There’s always scope for merchants of distrust to tell stories about the enemy at home that has led us into these disaster situations.”
A cold winter
While today’s spread of populism during Europe’s moment of economic crisis does have some similarities to the 1930s, it’s not an existential threat to the continent’s democratic institutions just yet.
“Transnational institutions were a lot shallower than they are now,” Harrison said. European democracy in general is much sturdier and more resilient now than it was in the 1930s, and so far, the EU has been able to keep nations united against threats like Putin and the Russian invasion of Ukraine.
“Putin has done a tremendous job in selling the benefits of Western cooperation, NATO security, and economic cooperation. It’s reminded us that values matter,” Harrison said.
But democratic Europe should still be wary that things could get a lot worse. With electricity prices already high, a cold winter may send them over the edge, and several banks have already predicted a major recession in Europe. It could be Putin’s best hope to erode support for Ukraine, and the accompanying economic crisis would be a welcoming opportunity for both incumbent and hopeful populist leaders to make a splash among voters.
European households could see their utility bills increase by as much as 2 trillion euros next year due to the energy crisis, and fuel shortages and rationing measures could see industrial capacity slow down or even shut down entirely in certain sectors. This could lead to a wave of economic slowdown and unemployment, Mauro Chavez, research director of European gas at energy consultancy Wood Mackenzie, told Fortune last week.
Some European nations such as Norway have already angered their neighbors by reducing energy exports, an issue that could become all too common if a cold winter sends energy demand surging.
Much will depend on how quickly natural gas suppliers other than Russia can ramp up shipments to Europe, but with protests against high living costs already breaking out across the continent, it is very likely that European nations will have to learn to adapt to a new reality soon, according to Harrison.
“People are generally more adaptable than is forecast and more adaptable than they themselves expect,” he said. “Europeans are not going to freeze this winter in a literal sense. And people will get by, often by doing things that they didn’t anticipate seeing themselves doing.”
“At the same time [the energy crisis] provides huge scope for troublemaking and for far-right politicians to play a blame game,” Harrison added.