The “Thirty Glorious Years” after World War II were an exceptional phase in European history. For the USA, which dominated the world economy after World War II, the era was not all that revolutionary; it merely continued the expansion of the war years. The USA had suffered no damage, had increased its GNP by two thirds and ended the war with almost two thirds of the world’s industrial production. Because of the size and advance of the US economy its performance during the “Golden Years” was not as impressive as the growth rates of other countries which started from a much smaller base. Its economy grew more slowly than in any other industrial country except Britain. The gap in productivity per man-hour between the USA and other industrial countries diminished; also in respect to national wealth in terms of GDP the other countries were fast catching up. For the European countries and Japan the overwhelming priority after 1945 was recovering from the war. For non-communist states this also meant putting the fear of social revolution and communist advance, the heritage of war and resistance, behind them. Most countries were back to their pre-war levels by 1950. The material benefits of growth took some time to make themselves felt, even in a so spectacularly prosperous region as Italy’s Emilia-Romagna. The benefits of an affluent society did not become general until the 1960s in Europe; also full employment did not become general until the 1960s, when the average of Western Europe unemployment stood at 1.5%. By then observers began to assume that somehow everything in the economy would go onwards and upwards forever. In the 1950s the economic upsurge seemed quite world-wideand independent of economic regimes. The growth rate in the USSR in the 1950s was even higher than in Western Europe, but in the 1960s it became clear that capitalism was forging ahead. Nevertheless the “Golden Age” was a world-wide phenomenon, even though general affluence never came within sight of the majority of the world’s population.
In the 1970s the disparities between different parts of the poor world had grown tremendously. In the 1980s the poor world’s food production per capita did not grow at all outside South East Asia, in some regions it even continued to fall. Meanwhile the problem of the developed world was that it produced so much surplus food that in the 1980s the European Economic Community decided to grow substantially less or to dump its butter mountains and milk lakes below cost, thus undercutting producers in the poor countries. It became cheaper to buy Dutch cheese on Caribbean islands than in the Netherlands. The growing divergence between the rich and the poor world became increasingly evident in the 1960s. The industrial world was of course expanding everywhere. Dramatic examples of industrial revolution were Spain and Finland and even purely agrarian countries like Bulgaria and Romania acquired massive industrial sectors. The world economy was growing at an explosive rate, e.g. world trade grew tenfold between the early 1950s and the early 1970s. One by-product of this extraordinary explosion was pollution and ecological deterioration, which attracted little attention in the Golden Years. The dominant ideology of progress took it for granted that the growing domination of nature by man was the very measure of human advance. Industrialisation in the socialist countries was for this reason especially blind to the ecological consequences of its massive construction of a rather archaic industrial system based on iron and smoke. Even in the West the old 19th century businessman’s motto, “Where there is muck, there is brass” (pollution means money), was still convincing, especially for road-builders and real-estate developers. The impact of human activities on nature increased steeply from the middle of the century, largely due to the enormous increase in the use of fossil fuels. The total energy consumption tripled in the USA between 1950 and 1973. One of the reasons why the Golden Age was golden was that a barrel of Saudi oil cost less than 2$ on average in the entire period of 1950-1973, thus making energy ridiculously cheap. Ironically, it was only after 1973, when the oil-producers’ cartel finally decided to charge what the traffic would bear, that ecology-watchers took serious note of the consequences of the explosion of petrol-driven traffic. The rich Western countries naturally generated the lion’s share of this pollution, though the unusually filthy industrialisation of the USSR produced almost as much carbon dioxide as the USA. To some extent this astonishing economic explosion was a gigantic version of the continuing globalisation of the state of the pre-war USA, taking that country as the model of a capitalist industrial society. For instance the age of the automobile had long arrived in the USA, but after the war it came to Europe, e.g. Italy’s private cars counted in 1938 469 000 and in 1975 15 million. Cheap fuel made the truck and the bus the major means of transport over most of the globe’s land-mass. Much of the great world boom was thus a catching up, or in the USA a continuation of old trends. The model of Henry Ford’s mass production spread across the oceans to new auto industries. In the USA the Fordist principle was extended to new kinds of production, from house-building to junk food, e.g. McDonald’s was a post-war success story. Goods and services previously confined to minorities were now produced for a mass market, as in the field of mass travel to sunny beaches. Before the war never had more than 150,000 North Americans travelled to Central America or the Caribbean in any year, but between 1950 and 1970 their numbers grew to 7 million. The European figures were even more spectacular; Spain which had virtually no mass tourism before the late 1950s welcomed 54 million foreign visitors per year in the 1980s and Italy 55 million. What had once been a luxury became the expected standard of comfort in Western countries: the refrigerator, the washing machine, the telephone. It was now possible for the average citizen to live as only the wealthy had lived in their parents’ days, except of course that mechanisation had now replaced personal servants.
What strikes most about this period is the extent to which the economic surge was powered by technological revolution. Some new revolutionary products had been developed between the wars like nylon in 1935 and other “plastics”, some like television and recording on tape were then just in their experimental stage. The war with its demands on high technology prepared a number of revolutionary processes for later civilian use, though rather more on the British side, which were later taken up by the Americans, than among the more science-minded Germans with the radar, jet-engine and various techniques which prepared the ground for post-war electronics and information technology, like the transistor in 1947 and the first civilian digital computer in 1946. Fortunately nuclear energy remained largely outside the civilian economy except power generation with 5% in 1975. More than any previous period the Golden Age rested on the most advanced scientific research, which now found practical application within a few years. Even agriculture now moved decisively beyond the technology of the 19th century.
First, the technological upsurge utterly transformed everyday life in the rich world; second R&D “Research and Development” became central to economic growth and for this reason the already enormous advantage of developed market economies over the rest was reinforced. Technological innovation did not flourish in the socialist economies in the same way. Third, the new technologies were capital-intensive and labour-saving or even labour-replacing. The major characteristic of the Golden Age was that it needed constant and heavy investment and increasingly that it did not need people except as consumers. But the economy grew so fast that the industrial working class maintained or even increased its share of the occupied population. In all advanced countries except the USA the reserve lakes of labour were drained and new supplies of labour were sucked from the native countryside and from foreign immigration and married women, so far kept out of the labour market, entered it in growing numbers. All the problems which had haunted capitalism in its era of catastrophe appeared to dissolve. The terrible and inevitable cycle of boom and slump, so murderous between the wars became a succession of mild fluctuations. The Keynesian economists, who now advised governments, were convinced that it was their intelligent macro-economic management.
The Era of High Growth
The quarter century after World War II witnessed the longest period of uninterrupted growth among industrial countries in the world and the highest growth rates in history, from 2.2% in Great Britain to 7.3% in Japan. Growth was most rapid in countries with abundant supplies of labour; from reduction of the agrarian population in Japan, Italy and France or from influx of refugees as in Western Germany. Growth in US, Canada and Great Britain, which had had the highest per capita incomes at the end of the war, was slower than on the continent and in Japan, but more rapid than at any time before. Industrial countries with relatively low per capita incomes, such as Austria, Italy, Greece, Spain and Japan, grew more rapidly than the average. The term “economic miracle” was first used for the remarkable growth following the currency reform of 1948 in Western Germany, when high growth rates continued throughout the 1950s and 1960s. Later the term was used for the whole period, when Italy and Japan had as high or higher growth rates than Western Germany.
Reasons for these high growth rates:
- American aid initiated the recovery
- Europeans kept recovery going with high levels of savings and investment. Much of the investment went into equipment for new processes and products. A backlog of technological innovations had built up since the Great Depression. European economies had stagnated for an entire generation. So technological modernisation contributed to the miracle.
- Governments participated directly and indirectly in economic life on a much larger scale than before. They nationalised basic industries, drew up economic plans and provided social services. Between ¼ and 1/3 of national income in Western Europe originated from the government sector. So the private sector was responsible for the largest part of economic activity. In the mixed or welfare state economies of Western Europe governments assumed the tasks of providing overall stability, a climate of favourable growth and minimal protection for the economically underprivileged, but it left the main task of producing goods and services to private enterprise.
- At the international level a relatively high level of intergovernmental cooperation characterised the period.
- Europe’s wealth of human capital with high rates of literacy and specialised educational institutions was responsible for the quick recovery.
The Emergence of the Soviet Bloc
USSR suffered the greatest damage of every nation in the war. 10-20 million people were killed, 25 million were homeless and 30% of pre-war wealth was destroyed. Nevertheless USSR emerged as one of the two superpowers. It was poor on a per capita basis, but its vast territory and population allowed it to play this role. To restore the economy and boost output in 1946 the 4th Five-Year Plan emphasised heavy industry, atomic energy and made use of physical reparations and tributes from satellites. Stalin, who had initiated drastic purges of personnel in charge of industry and agriculture, died in 1953. In 1956 Khrushchev denounced Stalin as a ruthless insane tyrant and announced a return to Leninist principles. But the basic nature of the Soviet economic system did not change. High officials complained about widespread inefficiency; 1/3 of the industrial enterprises did not meet their production targets. The heavy industry continued to increase, but production of consumer goods continued to lag behind and agriculture remained in a condition of crisis. Collective farm systems did not offer enough incentive for the peasants, who concentrated their energies on the small plots of private land, where part of this produce they could sell on the market. Despite new programmes and threats the USSR could not overcome bad weather, bureaucratic mismanagement, fertiliser shortages and peasants’ lack of enthusiasm. In the 1960s it had to begin importing grain from the West in exchange for gold.
The terms of the East European political settlement were already laid at the conference in Yalta 1945 which envisaged a major role of the USSR via the occupation by Soviet troops. Stalin had promised to allow free elections, which turned out to be meaningless. After negotiations treaties were signed in 1947 with Romania, Hungary, Bulgaria and Finland. The resurrection of Czechoslovakia and Albania was taken for granted, as they had never been at war with the Allies and among the first victims of the fascist Axis. But as they were liberated by the Soviets they remained within the Soviet sphere of influence. In Czechoslovakia the communists seized power in 1948. In Yugoslavia Tito liberated the country with very little help from Russia and Britain, thus allowing the country a measure of independence. Elections of 1945 gave Tito the majority, who proclaimed the Federal People’s Republic and broke with the USSR in 1948. In Poland the communists ousted their coalition partners in 1947 and assumed complete control. The territorial settlement of Potsdam moved Poland 300 miles to the west with an enormous transfer of population. The defeated East European satellites of Germany, Hungary, Romania and Bulgaria, had to pay reparations, mostly to the USSR. Under the protection of the Soviet troops the communists established people’s republics in the Soviet pattern. Finland escaped this fate on Soviet borders and maintained a precarious neutrality. The Baltic States had disappeared, incorporated in the USSR in 1939, and were quietly annexed by the Soviets in 1945.
1949 USSR created the COMECON, following the successes of the ERP, in order to shape the Eastern European economies into a more cohesive union by coordinating economic development, promoting a more efficient division of labour, but in fact the COMECON was used by the USSR to make its satellites more dependent on it, as most trade remained bilateral. When Stalin died in 1953, the Soviet bloc in Eastern Europe appeared to be a monolithic unity with all satellites being small-scale replicas of the USSR. But divisive tendencies were hid behind this façade and became visible in the unsuccessful uprisings in Eastern Germany in 1953, in Hungary in 1956 and in Czechoslovakia in 1968.
The Economics of Decolonisation
World War II dealt a death blow to European imperialism. Some areas fell under the temporary control of Japan, the mother countries’ defeat or preoccupation with the war left the colonies largely on their own. Some areas declared independence, in others growing independence parties agitated against colonial rule. The war time slogans of the Western Allies, “liberty and democracy throughout the world”, strengthened the independence movements and revealed the contrasts between Western ideals and the realities of colonialism. Additionally, an decreasing willingness of Europeans could be seen to be taxed in order to dominate others. After the war the imperial powers temporarily regained control over their colonies, but a few colonial areas fought successful wars of independence. So increasingly imperial powers relinquished dominion voluntarily to save costs and avoid war, e.g. in 1947 Great Britain granted independence to the Indian subcontinent, India, Pakistan, later Ceylon (Sri Lanka) and Bangladesh in 1971. French North Africa engaged in a long struggle for independence. France eventually granted full independence to Tunisia and Morocco, but tightened controls on Algeria, which resulted in a war of independence until 1962.
Until the 1960s many new nations had arisen from British, French and Belgian empires in Africa. Responsible for this development was not only the strength of the independence movement, but domestic difficulties of the imperial powers. They were no longer willing to bear the high costs, economic, political and moral, of continuing to rule alien people against their will. The process of emancipation continued like a chain reaction. After World War I Great Britain had realized it had to prepare the colonies for self-government, if it did not want to lose the economic benefits of the empire completely. It began to establish more schools, universities and opened the civil service to Africans. But paradoxically the first British colonies in Africa to become fully independent, Ghana and Nigeria, were the least advanced, because there was no problem of white minorities. In East Africa, e.g. Kenya, and the “Rhodesias”, Zambia and Rhodesia / Zimbabwe, British settlers had acquired vast tracts of property and substantial local self-government. They deprived the African majority of their political rights and economic opportunities. In 1965 the white government of Rhodesia declared independence from Great Britain, which had before refused to accord equal status to the black population, and only in 1979 after free elections the black majority triumphed. By the mid-1960s the former European colonial powers, except Portugal – only in 1975, had granted independence to almost all Asian and African dependencies.
This left the rueful legacy of colonialism in these areas. Except for a few areas of European settlement the new nations were desperately poor. Europe had extracted vast fortunes in minerals and commodities in ¾ of a century, but had shared little of their wealth with the natives. Only very late had they made an effort to educate and prepare the people for independence. Nevertheless most nations tried to follow democratic rules in the beginning, but the social and economic bases for stable viable democracies did not exist. Most ended up in one-party governments, sometimes influenced by Russian or Chinese communists or supported by the West. Some fell victim to anarchy and civil war. The governments were plagued by inefficiency and corruption. Few had the resources to carry out economic reforms and none had the human capital.
Cameron, Rondo, & Neal, Larry, A Concise Economic History of the World, Oxford University Press 2002
Hobsbawn, Eric, Age of Extremes. The Short History of the 20th Century, Abacus 1997