Postwar
Page 51
‘We’re going where the sun shines brightly,
We’re going where the sea is blue.
We’ve seen it in the movies—
Now let’s see if it’s true.’
Cliff Richard, from Summer Holiday (1959)
‘It’s pretty dreary living in the American age—
unless of course you’re American’.
Jimmy Porter, in Look Back in Anger (1956)
In 1979, the French writer Jean Fourastié published a study of the social and economic transformation of France in the thirty years following World War Two. Its title—Les trente glorieuses: ou, La Révolution invisible de 1946 à 1975—was well chosen. In Western Europe the three decades following Hitler’s defeat were indeed ‘glorious’. The remarkable acceleration of economic growth was accompanied by the onset of an era of unprecedented prosperity. In the space of a single generation, the economies of continental Western Europe made good the ground lost in forty years of war and Depression, and European economic performance and patterns of consumption began to resemble those of the US. Less than a decade after staggering uncertainly out of the rubble, Europeans entered, to their amazement and with some consternation, upon the age of affluence.
The economic history of post-war western Europe is best understood as an inversion of the story of the immediately preceding decades. The 1930s Malthusian emphasis on protection and retrenchment was abandoned in favor of liberalized trade. Instead of cutting their expenditure and budgets, governments increased them. Almost everywhere there was a sustained commitment to long-term public and private investment in infrastructure and machinery; older factories and equipment were updated or replaced, with attendant gains in efficiency and productivity; there was a marked increase in international trade; and an employed and youthful population demanded and could afford an expanding range of goods.
The post-war economic ‘boom’ differed slightly in its timing from place to place, coming first to Germany and Britain and only a little later to France and Italy; and it was experienced differently according to national variations in taxation, public expenditure or investment emphasis. The initial outlays of most post-war governments went above all on infrastructure modernization—the building or upgrading of roads, railways, houses and factories. Consumer spending in some countries was deliberately held back, with the result—as we have seen—that many people experienced the first post-war years as a time of continuing, if modified, penury. The degree of relative change also depended, of course, on the point of departure: the wealthier the country, the less immediate and dramatic it seemed.
Nevertheless, every European country saw steadily growing rates of per capita GDP and GNP—Gross Domestic Product and Gross National Product—the newly sanctified measures of national strength and well-being. In the course of the 1950s, the average annual rate at which per capita national output grew in West Germany was 6.5 percent; in Italy 5.3 percent; in France 3.5 percent. The significance of such high and sustained growth rates is best appreciated when they are compared with the same countries’ performance in earlier decades: in the years 1913-1950 the German growth rate per annum was just 0.4 percent, the Italian 0.6 percent, the French 0.7 percent. Even in the prosperous decades of the Wilhelminian Empire after 1870, the German economy had only managed an annual average of 1.8 percent.
By the 1960s the rate of increase began to slow down, but the western European economies still grew at historically unusual levels. Overall, between 1950 and 1973, German GDP per head of the population more than tripled in real terms. GDP per head in France grew by 150 percent. The Italian economy, starting from a lower base, did even better. Historically poor countries saw their economic performance improve spectacularly: between 1950 and 1973 per capita GDP in Austria rose from $3,731 to $11,308 (in 1990 dollars); in Spain from $2,397 to $8,739. The Dutch economy grew by 3.5 percent each year from 1950-1970—seven times the average annual growth rate for the preceding forty years.
A major contributory factor in this story was the sustained increase in overseas trade, which grew much faster than overall national output in most European countries. Merely by removing impediments to international commerce, the governments of the post-war West went a long way towards overcoming the stagnation of previous decades.116 The chief beneficiary was West Germany, whose share of the world’s export of manufactured goods rose from 7.3 percent in 1950 to 19.3 percent just ten years later, bringing the German economy back to the place it had occupied in international exchange before the Crash of 1929.
In the forty-five years after 1950 worldwide exports by volume increased sixteen-fold. Even a country like France, whose share of world trade remained steady at around 10 percent throughout these years, benefited greatly from this huge overall increase in international commerce. Indeed, all industrialized countries gained in these years—the terms of trade moved markedly in their favor after World War Two, as the cost of raw materials and food imported from the non-Western world fell steadily, while the price of manufactured goods kept rising. In three decades of privileged, unequal exchange with the ‘Third World’, the West had something of a license to print money.2
What distinguished the western European economic boom, however, was the degree of de facto European integration in which it resulted. Even before the Treaty of Rome, the future member states of the European Economic Community were trading primarily with one another: in 1958, 29 percent of Germany’s exports (by value) were going to France, Italy and the Benelux countries, and a further 30 percent to other European states. On the eve of the signing of the Rome Treaty, 44 percent of Belgian exports were already going to its future EEC partners. Even countries like Austria, or Denmark, or Spain, which would not officially join the European Community until many years later, were already integrated into its trading networks: in 1971, twenty years before it joined the future European Union, Austria was taking more than 50 percent of its imports from the original six EEC member states. The European Community (later Union) did not lay the basis for an economically integrated Europe; rather, it represented an institutional expression of a process already under way.3
Another crucial element in the post-war economic revolution was the increased productivity of the European worker. Between 1950 and 1980 labor productivity in western Europe rose by three times the rate of the previous eighty years: GDP per hour worked grew even faster than GDP per head of the population. Considering how many more people were in work, this points to a marked increase in efficiency and, almost everywhere, much improved labour relations. This, too, was in some measure a consequence of catching-up: the political upheavals, mass unemployment,under-investment and physical destruction of the previous thirty years left most of Europe at a historically low starting point after 1945. Even without the contemporary interest in modernization and improved techniques, economic performance would probably have seen some improvement.
Behind the steady increase in productivity, however, lay a deeper, permanent shift in the nature of work. In 1945, most of Europe was still pre-industrial. The Mediterranean countries, Scandinavia, Ireland and Eastern Europe were still primarily rural and, by any measure, backward. In 1950, three out of four working adults in Yugoslavia and Romania were peasants. One working person in two was employed in agriculture in Spain, Portugal, Greece, Hungary and Poland; in Italy, two people in every five. One out of every three employed Austrians worked on farms; in France, nearly three out of every ten employed persons was a farmer of one kind or another. Even in West Germany, 23 percent of the working population was in agriculture. Only in the UK, where the figure was just 5 percent, and to a lesser extent in Belgium (13 percent), had the industrial revolution of the nineteenth century truly ushered in a post-agrarian society.117
In the course of the next thirty years vast numbers of Europeans abandoned the land and took up work in towns and cities, with the greatest changes taking place during the 1960s. By 1977, just 16 percent of employed Italians worked on the land; in the Emilia-Romagna reg
ion of the northeast, the share of the active population engaged in agriculture dropped precipitately, from 52 percent in 1951 to just 20 percent in 1971. In Austria the national figure had fallen to 12 percent, in France to 9.7 percent, in West Germany to 6.8 percent. Even in Spain only 20 percent were employed in agriculture by 1971. In Belgium (at 3.3 percent) and the UK (at 2.7 percent) farmers were becoming statistically (if not politically) insignificant. Farming and dairy production became more efficient and less labor-intensive—especially in countries like Denmark or the Netherlands, where butter, cheese and pork products were now profitable exports and mainstays of the domestic economy.
As a percentage of GDP, agriculture fell steadily: in Italy, its share of national production slipped from 27.5 percent to 13 percent between 1949 and 1960. The chief beneficiary was the tertiary sector (including government employment), where many of the former peasants—or their children—ended up. Some places—Italy, Ireland, parts of Scandinavia and France—moved directly from an agricultural to a service-based economy in a single generation, virtually bypassing the industrial stage in which Britain or Belgium had been caught for nearly a century.118 By the end of the 1970s, a clear majority of the employed population of Britain, Germany, France, the Benelux countries, Scandinavia and the Alpine countries worked in the service sector—communications, transport, banking, public administration and the like. Italy, Spain and Ireland were very close behind.
In Communist Eastern Europe, by contrast, the overwhelming majority of former peasants were directed into labour-intensive and technologically retarded mining and industrial manufacture; in Czechoslovakia, employment in the tertiary, service sector actually declined during the course of the 1950s. Just as the output of coal and iron-ore was tailing off in mid-1950s Belgium, France, West Germany and the UK, so it continued to increase in Poland, Czechoslovakia and the GDR. The Communists’ dogmatic emphasis on raw material extraction and primary goods production did generate rapid initial growth in gross output and per capita GDP. In the short run the industrial emphasis of the Communist command economies thus appeared impressive (not least to many Western observers). But it boded ill for the region’s future.
The decline of agriculture alone would have accounted for much of Europe’s growth, just as the shift from country to town, and farming to industry, had accompanied Britain’s rise to pre-eminence a century before. Indeed, the fact that there was no remaining surplus agricultural population in Britain to transfer into low-wage manufacturing or service employment, and therefore no gain in efficiency to be had from a rapid transition out of backwardness, helps explain the relatively poor performance of the UK in these years, with growth rates consistently lagging behind those of France or Italy (or Romania, come to that). For the same reason, the Netherlands outperformed its industrialized Belgian neighbor in these decades, benefiting from the ‘one-time’ transfer of a surplus rural workforce into hitherto undeveloped industrial and service sectors.
The role of government and planning in the European economic miracle is harder to gauge. In some places it appeared all but superfluous. The ‘new’ economy of northern Italy, for example, drew much of its energy from thousands of small firms—composed of family employees who often doubled as seasonal agricultural workers—with low overheads and investment costs, and paying little or no tax. By 1971, 80 percent of the country’s workforce was employed in establishments with fewer—often far fewer—than 100 employees. Beyond turning a blind eye to fiscal, zoning, construction and other infractions, the part played by the Italian central authorities in sustaining the economic efforts of these firms is unclear.
At the same time the role of the state was crucial in financing large-scale changes that would have been beyond the reach of individual initiative or private investment: non-governmental European capital funding remained scarce for a long time, and private investment from America did not begin to substitute for Marshall Aid or military assistance until the later fifties. In Italy, the Cassa per il Mezzogiorno , backed by a large loan from the World Bank, invested initially in infrastructure and agrarian improvements: land reclamation, road building, drainage, viaducts, etc. Later it turned to supporting new industrial plants. It offered incentives—loans, grants, tax concessions—for private firms willing to invest in the South; it served as the vehicle through which state holdings were directed to locate up to 60 percent of their new investment in the South; and in the decades after 1957 it established twelve ‘growth areas’ and thirty ‘growth nuclei’ spread throughout the southern third of the peninsula.
Like large-scale state projects elsewhere, the Cassa was inefficient, and more than a little corrupt. Most of its benefits went to the favored coastal regions; much of the new industry that it brought in was capital-intensive and thus created few jobs. Many of the smaller, ‘independent’ farms formed in the wake of agrarian reform in the region remained dependent on the state, making of Italy’s Mezzogiorno a sort of semi-permanent welfare region. Nevertheless, by the mid-1970s per capita consumption in the South had doubled, local incomes had risen by an average of 4 percent per annum, infant mortality had halved and electrification was well on the way to completion—in what had been, within the memory of a generation, one of the most forlorn and backward regions of Europe. Given the speed at which the industrial North was taking off—in some measure, as we shall see, thanks to Southern workers—what is striking is not the failure of the Cassa to work an economic miracle south of Rome, but the fact that the region was able to keep up at all. For this, the authorities in Rome deserve some credit.
Elsewhere, the role of government varied; but it was never negligible. In France, the state confined itself to what became known as ‘indicative planning’—using the levers of power to direct resources into selected regions, industries and even products, and consciously compensating for the crippling Malthusian under-investment of the pre-war decades. Government officials were able to exercise fairly effective control over domestic investment especially because, throughout these initial postwar decades, currency laws and the limited mobility of international capital held back foreign competition. Restricted in their freedom to seek out more profitable short-term returns abroad, bankers and private lenders in France and elsewhere invested at home.119
In West Germany, where the abiding inter-war memory was of conflict and instability (political and monetary alike), the authorities in Bonn were much less active than their French or Italian counterparts in designing or directing economic behavior, but paid far closer attention to arrangements aimed at preventing or mitigating social conflict, notably between employers and workers. In particular, they encouraged and underwrote negotiations and ‘social contracts’ designed to reduce the risk of strikes or wage inflation. As a consequence, private industries (and the banks with whom they worked or who owned them) were more disposed to invest for their future because they could count on long-term wage restraint from their workers. Shop-floor workers in West Germany, as in Scandinavia, were compensated for this comparative docility by the assurance of employment, low inflation and, above all, comprehensive public welfare services and benefits financed out of sharply progressive rates of taxation.
In Britain, the government intervened more directly in the economy. Most of the nationalizations undertaken by the Labour government of 1945-51 were left in place by the Conservative governments that succeeded it. But both parties foreswore long-term economic planning or aggressive intervention in labour-management relations. Such active involvement as there was took the form of demand-management—manipulating interest rates and marginal tax bands to encourage saving or spending. These were short-term tactics. The main strategic objective of British governments of all colors in these years was to prevent a return to the traumatic levels of unemployment of the 1930s.
Throughout Western Europe, then, governments, employers and workers conspired to forge a virtuous circle: high government spending, progressive taxation and limited wage increases. As we have seen, these goals we
re already inscribed in the widespread consensus, forged during and after the war, on the need for planned economies and some form of ‘welfare state’. They were thus the product of government policies and collective intention. But the facilitating condition for their unprecedented success lay beyond the direct reach of government action. The trigger for the European economic miracle, and the social and cultural upheaval that followed in its wake, was the rapid and sustained increase in Europe’s population.
Europe had seen demographic growth spurts in the past—most recently in the mid-nineteenth century. But these had not typically ushered in sustained population increases: either because traditional agriculture could not support too many mouths, or because of wars and disease, or else because the newly excess population, especially the young adults, emigrated overseas in search of a better life. And in the twentieth century, war and emigration had kept population growth in Europe well below what might have been expected from the increased birth rate of earlier decades.
By the eve of World War Two, the knock-on effects of the loss of a generation of young men in World War One, together with the economic Depression and the civil wars and political uncertainty of the 1930s, had reduced the birth rate in parts of Western Europe to historic lows. In the UK there were just 15.3 live births per thousand people; in Belgium 15.4; in Austria 12.8. In France, where the birth rate in 1939 stood at 14.6 per thousand, deaths exceeded births not only during World War One and in 1919 and again in 1929, but also for every year from 1935 to 1944. There, as in civil war-era Spain, the national population was steadily falling. In the rest of Mediterranean Europe and east of Vienna the birth rate was higher, sometimes double the rate of the West. But elevated levels of infant mortality and higher death rates in all age groups meant that even there population growth was unremarkable.