EH 12: Prosperity At Last

Describe destruction of Europe

physical destruction: Hamburg, Dresde, Warsaw all rubble

10s of millions dead

loss of resources, infrastructure, housing, production, and international trade systems

impact of war on Europe’s primary sector

land destroyed, livestock lost

Why did US see it necessary to revive Europe?

• needed buyers for its exports

• Fear of communism spreading across a desperate Europe

Marshall Plan 1948

1948-1951 US supplies 13.5 billion USD (150 billion today) to Western Europe

forms of aid to Europe

• capital goods and raw materials: fuel and steel to boost industry

• educational tours: learn from US production and management

  • coordination of ERPs to optimize spending

Effect of aid to Europe

Industrial production grew at double, triple rates

foreign trade increased

rise in labor productivity— workers became skilled

world avg growth of GDP from 1950-1973

+115%

International Monetary Fund

1944

Monitor exchange rates, currency stability, etc

IBRD

1944

finance rebuilding

Committing for European Economic Cooperation

1947 OEEC

coordinated marshall aid

European Coal and Steel Community

1951

first steps towards EU

General Agreement on Tariffs and Trade GATT

1947

reduced tariffs, revived trade

The Comecon

1948

Soviet Union’s rejection of the Marshall Plan

Council for mutual economic assistance

Eastern bloc

European Economic Community

1957

Goal of institutional architecture following WWII

prevent isolationism and protectionism. Preserve global economy

Post-war Mixed Economy in Europe

“social market economy”

market drives growth, state ensures stability

public enterprises (energy, transport)

welfare state expansion (education, healthcare, pensions)

public spending in Europe’s post-war mixed economy ____

rose from 25% in 1950 to 35% of GDP by 1965

Growth rates of countries 1950-1973

• SU and E. Europe: 7-8%

• Japan: 8%

• West Europe: 4%

  • US: 2.5%

Following WWII, productivity ____

rose dramatically

income ____ causing consumption to ____

rose

explode