The totalitarian states of Bolshevik Russia and Nazi Germany were the most dramatic examples of a fundamental change in the role of the state within the world economy. In 1914, the global trading system was torn apart by the outbreak of war between the great powers. As the fighting intensified, direct state intervention was needed to organise the production of munitions and other military supplies. In addition, welfare benefits had to be greatly expanded to relieve wartime poverty. Despite some relaxation of controls in the immediate post-war period, the advent of the 1930s Depression finally discredited the liberal economic policies of minimal state interference and free market competition. Within the industrialised countries, the slump had been precipitated by the advent of Fordism. By reorganising their methods and technologies of production, companies had greatly increased the quantity of commodities available in the marketplace. However the spread of Fordism didn't immediately lead to increased prosperity for ordinary people. Instead there was a global crisis of overproduction, which was caused by the lack of profitable markets for the output of the Fordist factories.
In response, the state was forced to intervene within the economy to ensure that the rapid growth in production was synchronised with a parallel increase in consumption. Without rises in wages and more welfare spending, the expansion of production remained limited by the low living standards of the working class. Without controls over the banks, the bulk of personal savings wouldn't be invested in industrial production. Under Fordism, the state could no longer simply provide the legal framework for market competition between independent producers. Instead, the state and the joint-stock companies had to collaborate in the joint management of the national economy. By the late-1940s, an alliance of politicians, bureaucrats and industrialists had been created to introduce new economic policies, such as the creation of a welfare system, minimum wage laws and controls over the financial sector. Although private ownership remained dominant within western societies, both left-wing and right-wing governments increasingly used nationalisations and regulations to combat the collapse in production and to direct the modernisation of the economy. In the aftermath of the Second World War, every developed industrialised country depended upon concerted state intervention to create a virtuous circle of rising production and consumption.
Within western Europe, interventionist economic policies were pioneered by the Socialist parties. In the late-nineteenth century, these organisations had been founded by the followers of Marx within the working class movement. According to Marx, the winning of universal suffrage would inevitably lead to a social revolution, which would extend democracy into the workplace. But, by the late-1940s, the Socialist parties had abandoned this revolutionary goal. Instead they adopted their own version of Jacobinism, which was centred on the control of private property by the state. But, in contrast to their Bolshevik rivals, the Socialists rejected the need for a revolutionary dictatorship. Far from leading to the end of political rights, they believed that the nationalisation of private property was needed to protect the democratic republic from the authoritarian ambitions of capitalists and bankers.
According to Blum, the leader of the French Socialists, the political rights of citizens were being undermined by the industrialisation of capitalism. In the past, the democratic republic had only needed to guarantee the juridical and constitutional rights of the individual property-owners. But, with the development of Fordism, the population had been divided into a majority of propertyless workers and a minority of property-owning capitalists. As a consequence, political and economic rights were increasingly in contradiction with one another, rather than being in symbiosis. For example, media freedom for all citizens could no longer be realised by the private ownership of printing presses. However, under a democratic constitution, the propertyless citizens could still elect representatives from different political parties to national and local assemblies. According to Blum, the Socialists and their allies had to use political power won in these elections to create the social and economic conditions for the continued exercise of political rights by all citizens. As under the Jacobins, the political rights of the whole Nation-People had to take precedence over the economic right of particular individuals. But, in Blum's version of Jacobinism, the 'general will' of the citizens couldn't only be created by the elected government. Crucially, individual citizens influenced the policies of the democratic republic through the continual electoral competition between different political parties. In contrast with traditional Jacobinism, Blum and the Socialists believed that both government and opposition parties were valid representatives of public opinion. Therefore the state had to act as an impartial umpire between the competing parties.
In the long-term, Blum and other Socialists hoped that the different political parties would reach a consensus over the administration of civil society. Instead of defending the interests of one group, political power would be exercised by a public service state, which would serve all citizens equally. After the liberation from Nazi occupation, left-wing and right-wing parties across western Europe did cooperate in rebuilding their devastated countries. In particular, this consensus was sealed by the introduction of interventionist economic policies. By regulating Fordism, the public service state could not only raise working class living standards, but also direct the modernisation of the major capitalist companies. Despite the economic benefits of these new policies, the consensus politics of the post-war governments only partially advanced the political rights of all citizens. In theory, state intervention imposed the interests of the whole Nation-People upon the individual owners of private property. However, in practice, the politicians and bureaucrats increasingly identified their own self-interest with the needs of the population. Although they were supposed to be loyal servants of the public service state, these professionals excluded the majority of the population from any involvement in political and economic decision-making between elections. Once again, the democratisation of the state had encouraged the bureaucratisation of power. By the late-1940s, most west European states acquired a new type of ruling class alongside the traditional bourgeoisie: the bureaucrats of the public service state.