1.) In less than twenty years after 1945, Western Europe was able to rise from the ashes like a phoenix despite being physically, economically, and psychologically destroyed. Accurately distinguishing and assigning appropriate significance to the factors behind this remarkable recovery is crucial.
Europe’s triumph can be credited to the initial support it received from the United States. Despite the considerable devastation caused by the U.S., it offered economic aid through The Marshall Plan, which was named after Secretary of State George C. Marshall. Marshall stressed the significance of U.S. guidance in assisting a world in distress.
Aside from the task of preserving peace, we also need to confront the problems of limited food, clothing, coal, and housing. Their concerns extend beyond this issue as they also face more urgent worries about securing food, finding shelter for tonight, and obtaining warmth. These two issues cannot be addressed separately. According to DeLong’s research, “In the initial two years following World War II, the United States allocated around four billion dollars per year for relief and reconstruction via this initiative.”
The Marshall Plan provided consistent financial aid to Europe for several years at comparable rates. From 1948 to 1951, a total of $13.2 billion was given to support European recovery. Specifically, the United Kingdom received $3.2 billion, France received $2.7 billion, Italy received $1.5 billion, and the Western-occupied zones of Germany received $1.4 billion (DeLong). Before the implementation of the Marshall Plan, Europe had already received an astonishing $15.5 billion in aid (Wegs, 66). The availability of Marshall Plan assistance offered European countries a pool of resources that could be utilized to mitigate the economic losses experienced during reconstruction.
Countries that received significant funds from the Marshall Plan were able to increase their investments. The aid provided by the Marshall Plan allowed these countries to buy needed amounts of coal, cotton, and petroleum, which were limited resources at that time. For example, Great Britain used the Marshall Plan aid to reduce its public debt (DeLong). However, it is worth mentioning that the Marshall Plan did have specific requirements.
To achieve a balanced budget, restore stability in internal finances, and stabilize exchange rates at reasonable levels, the countries needed to reach an agreement. The Marshall plan’s aid was contingent on Europe’s commitment to a “mixed economy” that heavily relied on market forces (DeLong). Some countries managed to independently rebuild or partially repair damaged factories and warehouses. It is important to note that Western Europe did not experience complete or near-complete destruction of factories and capital assets as commonly believed. Only one-fifth of the factories in the western part of the continent were in ruins (Wegs 65). Even if there were instances where factories, machines, and capital assets were destroyed, the losses were not significant.
Thanks to financial support from United States assistance, companies were able to acquire more modern and technologically advanced equipment. This aid was crucial as these companies would not have been able to afford such equipment on their own. The introduction of this new industrial machinery proved to be beneficial in multiple ways. It improved productivity by being faster and more efficient, while also prioritizing safety. Consequently, this contributed to long-term economic growth that sustained over time.
In addition, the extensive rebuilding efforts required after bombing destruction further boosted the building trades’ development and prosperity. This was particularly evident in cities like Stuttgart that had to rebuild from scratch (Kindleberger, 113; Wegs, 66).
This resulted in a significant increase in job openings, with a surplus of available workers. Various factors contributed to the large number of laborers eager to find employment. Due to destruction or replacement workers, soldiers returning from war were left unemployed upon their arrival home. Additionally, many countries in the western part of Europe, particularly West Germany, had an influx of refugees from Eastern Europe, further contributing to the labor force.
Even workers from southern Europe arrived to work, resulting in a population increase of almost 60 million in Europe within thirty years following the commencement of World War II (Wegs, 67). Abundance of affordable labor was available. The immigrants and refugees contributed to cheap labor, enabling numerous businesses to maintain low costs, achieve remarkable profits, and consequently stimulate investment (Wegs, 67).
Because of the rapid population growth in Western Europe and the devastation caused by war, there was a need to build many new homes. This created a strong demand for necessary household items like carpeting, furniture, and appliances. As a result, job opportunities in these industries increased, which positively affected employment rates. In the end, this rise in employment resulted in higher incomes.
The concept of money involved spending and buying, which in turn involved the purchase of consumer goods and automobiles. This led to an increase in employment in steel plants, road building crews, and mechanic shops, resulting in the circulation of more money within the economy (Wegs, 69). This created a continuous cycle of growth and output. Both West Germany and Austria experienced a significant boost in their economies and industrial output. Additionally, there was a notable modernization of transportation systems, particularly railways, throughout Europe. France, in particular, took action by closing down unnecessary railroads and electrifying twenty percent of the remaining ones.
France had an advantage over Great Britain in transporting goods due to their superior railways. Their rail system was faster, longer, and capable of carrying a larger quantity of goods at a lower cost (Wegs, 66). Improved transportation and shipping methods contribute to enhanced trade. Restrictive trade measures that were implemented throughout Europe were significantly relaxed. Furthermore, France and Germany established a free trade alliance, eliminating tariffs. As part of this alliance, Germany trades its coal in exchange for French-manufactured steel.
The European Payments Union and the European Agricultural Agreement were vital in addressing the exchange rate issue and facilitating the exchange of agricultural products within Europe, leading to the removal of tariffs. Consequently, foreign trade post-1949 boosted personal income, foreign sales, and ultimately fostered economic growth (Wegs, 67). Embracing free trade emerged as the most beneficial action Europe could have taken for its own prosperity.
Great Britain’s delayed recovery after the war was partly due to their decision to not participate in free trade agreements. Instead, they focused on trading with the Soviet Union until its collapse. Afterward, Great Britain turned to trading with their colonies and the Commonwealth (Wegs, 77). In addition, advancements in technology and increased funding benefitted farmers and the agricultural industry, allowing them to experience abundance rather than scarcity. The introduction of new machinery, fertilizers, pesticides, and seed hybrids enabled European farmers to transform small subsistence farms into larger ones that catered to a wider audience.
Despite high demand in the 1970s, agriculture experienced a surplus as a result of the aforementioned changes (Wegs, 72). Great Britain’s slower economic recovery compared to other European countries was partially attributed to its struggle in joining the European Economic Community. This difficulty arose from the larger average size of farms in Great Britain, which enhanced their productivity but also led to a relatively small total acreage. Consequently, Great Britain had to import a significant amount of agricultural products. As part of its commitment to EEC membership, Great Britain pledged to discontinue purchasing inexpensive goods from the Commonwealth (Wegs, 73).
In a major shift from previous years, governments chose to implement regulations to their economies instead of following the laissez-faire policy. This decision was driven by the concern of an economic decline after a period of growth, which led to extensive and devastating unemployment. John Maynard Keynes, a British economist and theorist, played a crucial part in advocating for these emerging economic trends in Europe.
According to Keynes, higher wages and employment would lead to increased consumption levels and ultimately stimulate production. Many countries pursued maximum economic growth through long-term plans that allocated funding to sectors promoting growth. However, Great Britain took a different approach by adhering to a laissez-faire economy until 1961 when they finally embraced a long-term plan. In contrast, France quickly recovered by adopting this strategy.
In order to rebuild their own economy and prevent Germany from producing goods for war, France took control of industrial plants, materials, and raw materials in the German zone they occupied (Wegs 12). However, France faced some internal conflict as they aimed to increase industrialization. One half of the country adhered to traditional practices with small businesses, low wages, and low taxes. Meanwhile, the other half of France desired change and departure from old ways.
France aimed for economic modernization, particularly in the realm of airborne transportation during the 1970s, with the introduction of the Caravelle and Concorde jet passenger planes (Wegs, 73-74). In contrast, West Germany took a different approach, favoring short term planning over long term planning. This involved heavy regulation and intervention as well as close collaboration with German banks, which contributed to West Germany’s prosperity in the 1950s.
The industrial shares in West Germany were largely controlled by the Deutsche, Dresdner, and Commerz Banks, accounting for nearly 60 percent. These banks collaborated with industries to combat unfavorable competition and regulate output, thereby preventing overproduction. By manufacturing high-quality vehicles such as Volkswagen, Mercedes, and BMW, West Germany gained a strong position in the European automobile market. West Germany’s resurgence was further solidified during the 1960s when one third of Europe’s major corporations were based in the country (Wegs, 75-76). Italy, though initially slow, experienced a remarkable economic recovery during the 1950s and early 1960s. It trailed only behind West Germany’s economic resurgence (Wegs, 78).
Italy’s northern and southern halves were extremely different. While the north experienced growth, the south remained underdeveloped. This disparity caused issues as southern peasants migrated north in search of industrial jobs, resulting in the decline of agricultural production. Consequently, Italy had to rely on imported food to meet its needs (Wegs, 73). Even in the 1970s, the European Economic Community (EEC) continued to provide financial support to southern Italy.
Italy experienced a significant industrial surge due to its vast difference in wealth and concentration of industry and banking. In the 1960s, Italy became a major producer of home appliances (refrigerators) and cars (Fiat) (Wegs, 78). On the other hand, Great Britain did not extensively celebrate the war victory. Although Britain was physically devastated, it didn’t suffer to the same extent as Germany (Wegs, 45).
After World War II, Great Britain went from being a leading creditor to becoming the most heavily indebted country (Wegs, 3). Following the pre-war depression, the Labour Party gained power in 1945 as people desired change. Despite their efforts to redistribute wealth through revolutionary policies, the Labour Party fell short of achieving their intended goals. The establishment of a welfare state aimed to eradicate social classes and guarantee that all citizens met a minimum standard of living (Wegs, 46-47). Nevertheless, this did not lead to a swift economic recovery.
Despite rationing food until the 1950s, Great Britain gradually and steadily recovered. However, the country’s slow growth can be attributed to inadequate industrial management and the decision to reduce investments to increase exports, which ultimately had negative consequences. Unlike factories in other nations that were modernized, British factories were not updated. While some British firms performed satisfactorily, they were under the control of American owners.
Despite their reluctance to merge with other companies and their focus on producing different types of cars, the British were slow to enter the automobile production industry and failed to gain a significant market share. However, everything changed when the Mini was introduced, deviating from traditional large British cars and initiating a new trend (Wegs, 77-78). Nevertheless, Europe’s period of stability did not endure indefinitely. Eventually, like all good things, it came to an end and by the 1970s, the economy began to face challenges.
The western part of Europe experienced a remarkable recovery over almost twenty years. It swiftly emerged from a state of nothingness, thrived for an extended period, regained its status as a significant player in the global economy, and symbolically rose like a phoenix from the devastation of war.
Works CitedDeLong, J. Bradford, The Economic History of the Twentieth Century: Slouching Towards Utopia? (University of California at Berkely and NBER: http://www.j-bradford-delong.net/TCEH/Slouch_Present19.html, 1997). Kindleberger, Charles P., “The One and Only Marshall Plan,” National Interest, Vol.
11, 113-115. Wegs, J. Robert and Ladrech, Robert, Europe Since 1945: A Concise History, 4th ed. (Boston: St. Martin’s Press, Inc., 1996) 3, 12, 45-47, 65-79.
