Economic Recovery and European Unity

1. Economic Recovery and European Unity 1945-2001 Chapter 31-1

2. Post-War Economic Efforts • 1944 Bretton Woods Conference: Lay the foundations for the modern international monetary system • GATT: General Agreements of Tariff and Trade lowered tariffs and other trade restrictions to stimulate international trade

3. Economics 1945-2001 • Between 1958 and 1971 the value of national currencies was based on gold and the U.S. dollar • International Monetary Fund (IMF) • Was designed to provide short-term loans to struggling countries to prevent economic crisis and anarchy • Became important in the post-war economic boom

4. Post-War Economics • The World Bank: • Provided long-term loans to countries for economic growth

5. Post-War Political Efforts • The United Nations: (UN) 1945 • The framework of the UN was agreed upon by the allies at the Yalta Conference • The Security Council: Consisted of 12 nations (including 5 permanent members: U.S., Britain, France, Nationalist China, USSR) that had the authority to maintain world peace

6. The UN continued • The General Assembly: • Included every country in the world • Had the power to advise but could not enforce recommendations

7. Post-War Economic and Political Recovery • Great post-war economic hardship: • Scarcity of food, runaway inflation, black markets plagued the economy • Many of Europe’s important cities were in ruins • Many believed that Europe was a goner • Recovery seemed impossible • Suffering was the worst in Germany

8. Political Restructuring • Christian Democrats emerged as a dominant political movement in several countries • Saw a common Christian and European heritage • Rejected authoritarianism and narrow nationalism • Had faith in democracy and cooperation • Catholic parties were progressive in nature

9. Political Restructuring • Socialist and communist parties emerged with increasing power and prestige; especially in France and Italy • Pushed for social change and economic reform with some success • SO…social reform and political transformation created the foundation for a European Renaissance

10. Italy • Christian Democrats gained control in 1946 • Were led by De Gasperi • Much socialist influence: average worker’s wages included social benefits

11. France • General Charles de Gaulle (leader of the Free French movement) led the Fourth Republic from 1946-1958 • The real power in the legislature • President was mostly a ceremonial position • The Catholic Party big in France • Big socialist influence: Industries were nationalized • The 5th Republic gave the President more power

12. Britain • Clement Atlee led the Labour Party. • Defeated Churchill and the Conservatives in 1945 • Atlee moved to the establishment of a welfare state • Many industries were nationalized • All citizens had free medical. • Middle and Upper Classes taxed heavily

13. The Federal Republic of Germany (West Germany) • After 1949 led by Conrad Adenaur • Christian Democrats became the major party for a generation

14. Economic Recovery • Europe began a period of unprecedented economic growth that continued into the late 1960’s • By 1963 Western Europe produced more than 2.5 times more than before the war • In many countries workers were willing to work for low wages = expansion of industry • = lower prices & higher demand

15. Reasons for Economic Recovery: • The Marshall Plan: The U.S. sent substantial aid to Europe beginning in 1947 • Economic growth became a basic objective of most European governments • Governments accepted Keynesian economics to stimulate their economies • Governments more willing to use deficit spending to make more resources available to the people

16. Reasons for Economic Growth continued • The “Economic Miracle” was also due to the elimination of economic barriers (like tariffs) • Result: A large unified market emerged: The Common Market

17. Economics: West Germany • Ludwig Erhard Finance minister • Combined a free market economy and extensive social welfare (the latter inherited from the Nazi era)

18. Economics: France • Jean Monnet (architect of European Unity) • France used Marshall Plan aid and nationalized banks to funnel $ into key industries • Achieved the most rapid economic development in French history • Used a “mixed” state and private economy

19. The Welfare State • Western European countries worked to provide universal services to their citizens: • Employment • Unemployment and disability insurance • Social Security for the elderly • Free or subsidized health care • Paid for by wealthier citizens

20. The Welfare State • Benefits were universal; not just for the poor • As long as economies continued to expand, the cost of the welfare state were easily met by the government

21. Britain (Atlee) the Labour Party • Britain was the model for the Welfare State • Nationalized: The Bank of England, coal mines, electricity, gas, iron and steel industries • Increased unemployment insurance, old age pensions, universal health care, workers compensation • Increased a progressive income tax and inheritance taxes • 80% of industry was still private

22. Britain • 1951-1964 Conservatives took power and privatized more industries but kept the welfare state

23. Economic Downturn and High inflation in the 1970’s • Caused larger deficits, increased national debts and pressure from conservatives to lower taxes • Conservatives argued that the welfare state had become too large and the taxes were excessive • High taxes were stunting economic growth • So all over Europe, the welfare state was modified and more privatization

24. Immigration of Guest Workers • Western Europe’s dramatic economic revival and low birth rate led to a shortage of workers • The need was filled by immigrants from Turkey, Greece, the Balkans, and North Africa…also from Spain, Portugal, Italy • Many did not return home

25. Immigrants • Great Britain had many immigrants from India, Pakistan, Africa and the Caribbean • France had large numbers from Algeria • The Netherlands had many from Indonesia • Eventually, nationalists became concerned over the impact of immigrants on national cultures and put pressure on their governments to restrict immigration

26. European Unity • Attempts to unify Europe in 3 areas • Political: The Council of Europe: did represent nearly every European nation but had little influence • Military: Never really happened • Economic: Most successful with the EU and its precursors: ECSC, EEC, EC

27. The Council of Europe • European federalists hoped that the Council would evolve into a true European Parliament with sovereignty • But Britain was opposed to giving the Council any real power due to its “special relationship” with the United States

28. 1950 The Schuman Plan • Organized by French (Monnet) and German (Schuman) • Created the ECSC: the European Coal and Steel Community • Was an international organization to control and integrate European coal and steel production • Members: West Germany, Italy, Belgium, the Netherlands and Luxembourg

29. The ECSC continued • The Goal: a single competitive market without national tariffs or quotas • “The Six” (by 1958) • Long-term Goal: To bind the members so closely economically that war between them would be unthinkable

30. The EEC • The Treaty of Rome 1957 created the EuropeanEconomic Community…signed by The Six • Goal to create a single market by gradually reducing tariffs among The Six • Treaty also created Euratom: The European Atomic Energy Agency: to develop and regulate nuclear energy

31. COMECOM • Above was the Soviet version of Euratom

32. Other goals of the EEC • Free movement of capital and labor across borders • Common economic policies and institutions • Reduced tariffs • All above encouraged hopes of political and economic union

33. The Rise of Nationalism • The Rise of Nationalism in the 1960’s frustrated the hopes for European unity • Charles de Gaulle returned to power with the Fifth Republic and withdrew France from NATO • He believed that the U.S. had too much influence in NATO

34. De Gaulle • De Gaulle also twice vetoed the entrance of Great Britain into the European Union • He believed Britain too pro-American • Britain entered the EU in 1973

35. 1992 The EU • German Chancellor Kohl and French President Mitterand wanted to extend the EU to include a single European currency and a common defense and foreign policy • British PM Margaret Thatcher had been opposed to joining the EU but was replaced in 1990 by John Major

36. The Maastricht Treaty 1991 • The Eurodollar was introduced • Became the single currency of the EU in 2002 • Integrated the currency of 12 European nations • Was organized by the EMU (European Monetary Union) • Britain refused to join the EMU

37. The EU • By 1995 had 15 members (Britain WAS a member but refused to use the euro) • By 2005 10 more members • In 2007 2 more members ( Actually its formal name was the EC until 1996 when its name changed to the EU)

38. The Economic Crisis of the 1970’s • 1971 The U.S. (under Nixon) went off of the gold standard • This ended the Bretton Woods system of international currency stabilization • Fixed rates of exchange were abandoned • Led to a great uncertainty

39. The Energy Crisis • The post-war economic boom was partially due to availability of cheap oil • 1973 OPEC (Organization of Petroleum Exporting Countries) dramatically increased the price of oil in the U.S. and in Europe due to their support of Israel in the Yom Kippur War of that same year

40. OPEC • Raised the price of oil again in 1979 during the Iranian Revolution • The increase in the price of oil, coupled with the upheaval in the international monetary system plunged the world into the worst economic decline since the 1930’s

41. Stagflation in the mid 1970’s • = increasing unemployment during increased inflationary period…unusual • USUALLY unemployment and inflation have the opposite relationship • 1970’s and 1980’s: debts and deficits increased dramatically