The Western European Economy

A geography of post-war development

Allan M. Williams

• Publisher: Routledge
• Year: 2015
• Print ISBN: 9781138859609
• eBook ISBN: 9781317508953
• Edition: 1
• Topic: Physical Sciences
• Subtopic: Geography
• Index: Geography

This book, originally published in 1987, presents a broad overview of the spatial organization of the European economy, providing a valuable synthesis of recently published material by geographers and other social scientists. A major theme is the interdependence of economic development at various scales. The three main sections look at international and European economic context; detailed changes in particular sectors; specific types if regional economic formations. Case studies are used and reference made to historical processes.

Part 1 The International Context

1 The post-war international economy

DOI: 10.4324/9781315717098-1

Introduction

Europe’s economy in 1945 appeared weak and fragmented following the recession of the 1930s and the destruction of the Second World War. Yet, 15 years later, almost all of western Europe’s national economies had been carried along by a sustained wave of economic recovery. This was a period of remarkable expansion and transformation of the European economy but it proved to be relatively short-lived. By the late 1960s the economies of western Europe were already faltering, and the 1970s, punctuated by two oil price crises, were uncomfortable years of adjustment prior to descent into the second great economic recession of the twentieth century. Only since the mid-1980s has there been evidence of economic recovery.

This chapter seeks to unravel the economic and political changes which governed the course of post-war European development; but, first, it notes how, in the longer course of history, the European economy evolved up to the Second World War. In the fourteenth, fifteenth and sixteenth centuries the centres of economic power in Europe lay around the Mediterranean, especially in Italy (Venice), Spain and Portugal, which established the bases of overseas empires in Africa, Asia and Latin America. Their position was usurped by the rise of Dutch, and later British, commercial trade. Then, during ‘the long sixteenth century’ from about 1450 to 1640 (Wallerstein 1979), the UK came to dominate trade in the European and world economies. Its position was reinforced by the emergence of industrial capitalism in the eighteenth century as Britain became ‘the first industrial nation’ (Mathias 1969).

The UK maintained its leading role through both the water-powered and coalfield-based phases of industrialization. Then, after about 1850, new centres of industrialization emerged in Europe; to begin with in the Sambre-Meuse and Scheldt regions of Belgium and in France and, thereafter, in the Ruhr, Alsace and Lower Rhone. By the close of the nineteenth century, industrialization was established in many areas of the UK, France, Belgium, western Germany and the Netherlands. More selectively, it was established in southern Scandinavia, northern Italy, eastern Austria and Catalonia (Pollard 1981). Many northern European countries also expanded or consolidated their colonial empires in these years and, indeed, access to protected colonial markets was an important ingredient in their economic development. The UK remained the dominant economy but it was about to be surpassed by the United States of America and challenged by Germany. Within western Europe only Iberia (excepting Catalonia and, to a lesser extent, the Basque country and northwest Portugal), northern Scandinavia, southern Italy, Greece and Ireland remained largely untouched by industrialization. Europe’s premier financial centre continued to be London.

The early twentieth century was dominated by two major developments. Continued rapid expansion in the USA meant that it replaced the UK as the leading power in the world economy, although Japan also grew rapidly in this period. However, the growth potential of North America could not sustain a stagnant European economy which had been disrupted by the First World War; laden with debts, and in the face of over-production crises, it retreated into protectionism. The 1920s were years of irregular growth and recovery which ended, calamitously, in world recession. In the UK, for example, agriculture and manufacturing were both depressed so that unemployment peaked in 1933 at over 3 million people, while in Germany hyper-inflation and unemployment nurtured the rise of fascism. European recovery from this nadir was slow and was far from complete when, in 1939, the Second World War began.

Europe in 1945

The Second World War was one of the major turning points in world economic history, marking a transition between very distinctive eras. In some ways it devastated the economies of Europe, but it also provided conditions for US dominance and the creation of a new international economic order. Within Europe it led to a major reshaping of the international roles of individual states. This culminated, at the national level, in the relative decline of the UK and the growth of the Federal Republic of Germany and, at the international level, in the formation of such supranational bodies as the European Economic Community (EEC) and the European Free Trade Association (EFTA).

In 1945, however, devastation rather than the potential for recovery was most obvious. Yet the potential was real, for the economies of the UK, Japan and the USA had been restructured to meet wartime needs. There had been shifts from consumption to investment, while output had increased significantly – for example, by some 20 per cent in the UK (Aldcroft 1980). Among the defeated powers, however, production had been shattered by the close of the war, having been reduced in Italy to the levels of 1900. Germany had ruthlessly exploited the European continent, having diverted some 42 billion dollars in levies and credits to its war machine. As a result the standard of living in France, for example, had been reduced by 50 per cent in just six years (Pollard 1981).

War destruction was widespread in 1945. Much capital stock (factories, schools, roads, etc.) had been destroyed – for example, 20 per cent of all houses in West Germany, and some 6–9 per cent in Austria, France and the Netherlands. However, industrial capital fared better than housing; losses were cancelled out by wartime additions, so that net industrial capital changed little in this period (Dyas and Thanheiser 1976).

This aggregate picture is deceptive since there had been serious losses in some sectors in some regions among the major combatants. Chief among these was transport, for the railway network had been severely disrupted and the merchant fleet had been reduced to 40 per cent of its 1939 level (Aldcroft 1980). Even in those countries, such as the UK, where capital stock had increased, there were serious arrears on maintenance and renewal of old capital stock; long-term economic requirements had been sacrificed to short-term strategic needs. One serious and lasting consequence of this was that it allowed the USA to extend its technological lead over Europe, where research and development had been virtually abandoned save in the realm of armaments. In addition, many European colonial powers, such as the UK, France and the Netherlands, lost some of their overseas assets and shipping earnings during this period. In the UK these assets had been sold to pay for the war, notably the lifeline of imports from the USA.

It was not simply capital stock which had been destroyed between 1939 and 1946; the stock of labour had also been reduced and disrupted. In total, some 40 million people are estimated to have died in the Second World War. Russia, with 20 million, was worst affected, but Germany lost 6 million. As with all wars the losses were selective, being greatest amongst young men. Beyond these savage losses, Europe’s labour supply had been further disrupted with some 30 million workers having been forcibly dispersed, mainly to serve Germany’s war needs.

Disruption of the economy did not end with the hostilities. Instead the ‘Cold War’ division of Europe into East and West was to disrupt many traditional trading links. Germany was affected most: until 1948 it was divided into four occupation zones which operated as separate economies (Milward 1984), and that occupied by the USSR was subject to heavy requisitioning of equipment (Owen-Smith 1983). With the Cold War the divide between East and West Germany became permanent. Furthermore, Europe’s southern flank continued to be troubled, and a civil war proved as damaging to Greece as had the German occupation.

There were other shocks in store for the European powers, for the Second World War further loosened the already weakening hold of colonialism in A...

Table of contents

• Cover Page
• Half Title Page
• Title Page
• Copyright Page
• Title Page
• Copyright Page
• Contents
• Figures
• Tables
• Preface
• Part One: The International Context
• Part Two: The Sectors
• Part Three: The Regional Dimension
• Bibliography
• Place index
• Subject index