FDR bailed out the Americans after a Depression.
Attlee implemented a welfare state in an almost bankrupt Britain post WWII.
How did they pay for it?
Loans, loans and loans.
From either other countries, international organisations (guessing that’s more the case now than before) or from their own population (in form of bonds).
But those loans must then be paid off. This is done in essentially two ways: taxes, taxes, taxes and inflation, inflation, inflation.
Obviously, kinda. The basics is that the investment we take the loans for will give enough revenue (taxes) to pay back the loans we took to get the economy going again.
It’s the same as with any normal company, you take loans to get things going and hope you make enough money to pay back the loan and make a comfortable living.
Don’t forget that most (if not all) investors believe/expect that countries can’t go totally bankrupt (can’t imagine what that looks like). At some point in the future countries will be able to repay the loans, so people and investors are willing to lend. Note that this is the big difference with companies; here you just loose your money when they go belly up.
Plus, if the country’s policies result in an expanding economy, the ratio of debt to GDP goes down, meaning that the tax base increases, making it easier to service the debt without increasing taxes. It’s a large scale gamble that countries take, just as businesses gamble that they will take in enough revenue to allow them to service their debt.
As well, I agree with footballisplayedwithyourfeet that the OP’s reference to “bankrupt countries” is a bit misleading. Bankruptcy means not just that your debts exceed your assets, but that you can’t service that debt as it comes due. Countries have immense financial resources compared to any company, particularly the power of taxation. They also have a greater capacity to borrow than do companies.
I know that normally countries can get loans, but I was wondering what the strategies used in the two examples were, given that the countries were in such trouble that borrowing was doubtlessly harder.
Let’s take the current example of Iceland, where the Government already owes about 10 times GDP due to the falling of the banks.
Even in this case, it’s possible for Iceland to get loans from other countries (and the IMF), as long as they adhere to the conditions set.
So the worse the country is set, the more stringent the conditions will be (and the higher the interest rate), just like when companies take loans.