Europe was economically in rags following World War II. as a consequence of extra disbursement. the loss of work force and the devastation of its’ industrial installations due to bombing during the war. Despite these inexorable fortunes. the economic systems in western Europe surged during the old ages from 1948-1973 in an epoch that has been called “The Golden Age of Growth” . This paper will research how western Europe was able to retrieve so quickly and surge economically in such a short period of clip from the desolation caused by World War ll.
To supply some context to the astonishing recovery that occurred in Western Europe. it should be noted that after the terminal of World War ll. the GDPs of France. the Netherlands. and the Axis states of Europe ( Italy and Germany ) had reverted to pre World War One degrees ( Crafts and Toniolo. page 3 ) . Furthermore. many European states attempted to reconstruct after the war by utilizing public support to finance Reconstruction and increase industrial end product. while at the same time stop deading monetary values of indispensable goods and trade goods. This had the unfortunate consequence of doing many European states to run high one-year shortages. every bit good as supplying a disincentive for many enterprisers to put in these economic systems.
However. the U. S. came to the assistance of its European Alliess by traveling frontward with the Marshall program. a series of hard currency grants designed by U. S. Secretary of State George Marshall to help in the recovery of Western Europe. and halt the spread of communism. by allowing 13 billion dollars in grants over a period of four old ages from 1948 to 1951. As Stated By Eichengreen. ” The Marshall Plan therefore unraveled the Gordian knot of holding to first export in order to import but being unable to import with first exporting. Europe’s scheme of investment-led growing was sustained” ( Eichengreen. page 14 ) .
The Marshall program farther paved the manner for Europe to to the full encompass a market economic system by necessitating that states balance their budgets and stabilise monetary value controls. During the period from 1950 to 1973. the mean growing rate in Western Europe was 4. 6 per centum ( Crafts and Toniolo. page 2 ) . Furthermore. these high growing rates were experienced by all states of Western Europe. and were non confined to a lucky few. A possible ground for the rapid growing rate of Europe can be attributed to a “traditional catch-up form based on the imitation and version of foreign engineering. coupled with strong investing and back uping institutions” ( Timmer et al. page 4 ) .
Western Europe was besides aided by dwelling of states that contained a history of industrialisation. which in bend allowed them to use a much more educated public. leting them to take full advantage of these imported engineerings. Nevertheless. while “traditional gimmick up” had a function to play. it does non to the full explicate the growing experienced in Western Europe. Further probes make it clear that other outstanding factors helped to back up Western Europe’s “Golden Age of Growth” .
Besides the “catch up effect” . another major factor in the growing of Europe during its aureate age was a much higher rate of investing. coupled with an elastic supply of labor which fueled European growing in this period. “Net Investing rates in Europe were about twice every bit high in the 1950s and 1960s as earlier or since. ” ( Crafts and Toniolo. page 38 ) .
Further fueling growing in Western Europe was the presence of a big and turning supply of labor. States with a big sum of available labor saw much more rapid growing from investing than those without. ”The final payment on investing was high where there was an spread outing labour force with which the extra capital could be put to work. ” ( Eichengreen. page 23 ) . Large supplies of experient labor besides allowed concerns to maintain rewards reasonably low. and reinvest larger sums of capital back into corporations. farther increasing growing. The effects of the labour supply can be seen most clearly in the instance of West Germany. which had over 3 million refugees from East Germany cross into its boundary lines before the Berlin Wall was built.
Due to such an ample supply of labor. merely 3 extra per centum points of investing translated into an extra per centum point of growing ( Eichengreen. page 22 ) . Further supplementing the labour pool was the displacement from the less productive agribusiness. into the much more efficient fabrication sector. In add-on to a high rate of capital investing. the Golden Age of Growth saw increased cooperation between labor and capital in the workplace. During the postwar period. the authoritiess of western Europe had requested from their labour brotherhoods that they non dicker for higher rewards as it may harm investing and later. growing. The statement was that without brotherhoods forcing for higher rewards. the industrialists would be able to reinvest more. therefore spread outing growing. Cooperation between capitalists and workers was reached through. “a series of institutional deals. some informal. some codified in jurisprudence. ” ( Eichengreen. page 25 ) .
These understandings frequently took the signifier of the direction leting worker’s representatives to sit on the direction boards. and reexamine investing scheme to vouch that the industrialists were carry throughing their promise of reinvesting net incomes. Similarly. the capitalists were aided by the authoritiess of their several states. which offered trades to the brotherhoods in exchange for them to restricting their pay demands. For illustration in 1956. Denmark offered to spread out the system of ill wage when it appeared that old understandings with brotherhoods were get downing to interrupt down. while the German authorities indexed retirement incomes to populating criterions in 1957 ( Eichengreen. page 26 ) .
As the states in Western Europe jointly were get downing to retrieve. they besides commenced and pursued a series of policies aimed at greater economic cooperation. Two noteworthy understandings signed by European powers was the European Payments Union ( EPU ) . and the Organization for European Economic Cooperation ( OEEC ) . The EPU worked by taking both the trade shortages and excesss of European states onto it. while leting its members to do claims on payment or give payment straight to the EPU. This had the consequence of liberalising trade in Europe as the states involved did non care about which state they traded with. as their balances would be paid for by the EPU. The OEEC was an understanding amongst states in Western Europe in which take parting states agreed to take down import controls at an agreed upon rate ( Eichengreen. page 20 ) .
The European Coal and Steel Community ( ECSC ) was the following major measure in the integrating of trade between the states of Western Europe with the end of liberalising trade in the coal and steel markets. The integrating of different European markets played a big function in the economic growing of Western Europe. Intra European trade grew from $ 10 billion in 1950 to $ 20 billion in 1959 entirely. ( Eichengreen. page 20 ) .
In 1958. Germany. France. Italy. the Netherlands. Luxembourg. and Belgium formed the European Economic Community ( EEC ) leting a free trade part to be established. The free trade established under the EEC was further complemented by the General Agreement on Tariffs and Trade ( GATT ) . the GATT reduced planetary duties. promoting Europe to merchandise with the remainder of the universe. Britain while non a member of the EEC besides established a free trade understanding with Austria. Denmark. Norway. Portugal. Sweden. and Switzerland. naming their understanding The European Free Trade Area ( EFTA ) .
While similar to the EEC. EFTA was much more limited in range. These understandings allowed states to shut down underachieving concerns they may hold been protecting. while the more efficient corporations became more successful due to being able to utilize economic sciences of graduated table to farther addition end product. Overall. the integrating of European markets was an built-in portion of the growing of Europe during the Golden Age. and laid the basis for what would finally go the European Union.
As stated earlier. Europe enjoyed what is known as the “catch up” consequence. In kernel. this meant that Europe could import and use already bing engineerings to augment economic growing. As a consequence of these policies. by the sixtiess. Europe had reached a similar degree of industrialisation as the U. S. coercing it to switch its’ focal point to invention and engineering. Correspondingly. the 1960s were marked by more intensive research disbursement.
A survey by the OECD in 1968 found that a country’s portion of inventions was about indistinguishable to its portion of OECD end product ( Eichengreen. page 43 ) . Therefore. by puting in research and development. Western Europe had put itself in a strong place for future economic growing after the “catch up” consequence could no longer prolong the rapid rate of growing. The switch from importing bing engineerings to developing more advanced engineerings aided Western Europe in prolonging growing through the 1960s and into the early 1970s.
In drumhead. the growing experienced in Western Europe between the old ages of 1948-1973 was the combination of a myriad of factors including alterations in authorities policies. enlargement of trade every bit good as scientific and technological progresss. It is clear nevertheless. that the accelerator which ab initio fueled this Golden age of Growth was foreign assistance injected shortly after the terminal of World War ll spearheaded by United States and the Marshall Plan. The importance of the Golden Age of Growth is that it serves to exemplify how rapidly states ravaged by war or lagging productiveness can retrieve from dire fortunes to break the lives of their citizens.
