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Europe In Retrospect

by Raymond F. Betts

The Decade of European Recovery

In our task of reviving the glories and happiness of Europe, her culture and her prosperity, it can be said that we start at the bottom of her fortunes.

May 14, 1947

In the summer of 1945, with the citizens of Munich filing by the human remains laid out in front of Dachau's crematoria, and with American troops already returning home to the possibility of ownership of a 1946 Chevrolet, the postwar era began. The summer suggested new directions, but that season was stretched out over a setting of rubble and ruin.

Once again statistics simply tell a story of horrible magnitude. Twenty- five million Russians were homeless. All major German cities had about 80 percent of their prewar housing destroyed. Half of France's and Italy's railroad equipment was destroyed. England had used up one-quarter of its foreign investments to finance the war. Nine and one-half million Germans from other regions were resettled in Germany. Four million Poles and Soviet citizens moved into the new areas of Poland acquired from Germany. One million Russians migrated within the Soviet Union.

In every sense of the word European life was unsettled. But, retrospectively, one can see that the most significant of the unsettling effects came not from recovery, but from reconstruction. The ill effects of the war were quickly overcome as a new Europe took shape.

Economic Reorganization
All critics agree that the European economy had not been demolished by the war; rather, it was only severely impeded by it. That England had already returned to a prewar rate of production by the end of 1946 was proof of industrial resiliency; and by 1947 almost all of the European countries were approaching their prewar capacity, except Germany.

The crucial problem was not industrial know-how or raw materials. Nor was it basic plant - even though the war had devastated so much. What Europe needed most was capital, and this came in unusual quantity from a new source: the American government. After a series of emergency loans in 1946, the United States embarked on a different financial venture. In June of 1947, General George Marshall, then secretary of state, offered an unusual address to Harvard undergraduates. Instead of speaking about "pie-in-the- sky-by-and-by," the stock theme of recipients of honorary degrees, Marshall used the occasion to outline a new program of foreign aid for war-ravaged Europe. Authorized by the United States Congress in 1948, the Marshall Plan, which granted credit to individual European states, poured some $12 billion worth of aid into Europe in the first four-year period, the most crucial time and the span for which the Marshall Plan was officially to run.

As a result of this great financial infusion, the European economies made remarkable recoveries. Moreover, the plan was economically important for other reasons as well. It helped stimulate multilateral trade, which had so badly declined in the Depression period, and it brought the United States into the European economy as a major financial factor. Dollar reserves were rapidly built up; and the dollar became the basis for all currency negotiation. (The term "Eurodollar" became a popular one.) Although slowly and reluctantly at first, American investments grew by the second decade of recovery. By that time, also, European products started to find a major market in the United States: typewriters, automobiles (in the forefront, the VW Beetle), aircraft (the first medium-range jet prop in extensive use was British; the first medium-range jet in use was French), sewing machines—all such industrial products that might be called traditionally American in manufacture now also came from overseas.

Nonetheless, Europe developed its own distinctive economic organization as well. No doubt the most striking feature was the double- faceted one of state planning and nationalization of industries. The tendency toward state intervention had already begun in a marked way during the war. Now, in the immediate postwar era, pressing demands for economic rehabilitation, frequently joined with the confiscation of property, brought the state into the realm of entrepreneurship. For instance, two major European automobile manufacturing companies now came directly under state control. In France the Renault Company was taken over because of its wartime collaboration with the Nazis. The company was converted into a semi-public corporation, with a government-appointed board of directors. In Germany, the Volkswagen Company went through a comparable readjustment. During the first years of military occupation, Volkswagen was held "in trust" by the German federal government, but in 1960, its ownership was split three ways: the federal government held 20 percent of the stock; the state government of Lower Saxony (in which the company is located) held another 20 percent; and the public was allowed to buy the remaining 60 percent of company shares.

The nationalization of key energy and transportation industries was one of the most important measures taken in both France and Great Britain. Railroads, banking (both the Bank of England and the Bank of France), forms of domestic energy (coal in England, electricity in France) were all nationalized and placed under the jurisdiction of semi-public directorships, responsible to the government but also responsible for the efficient and economically profitable operation of these activities. In France, nationalization was accompanied by state planning. The Monnet Plan, named after its originator, Jean Monnet, who was one of France's most important technocrats, appeared in 1947, and was the first of a series of four-year plans designed to improve the nation's productivity. With a certain linguistic boldness, not hitherto characteristic of them, the French introduced the word planification into their governmental vocabulary, in order to properly term this new process of state planning.

Although France and England were in the forefront of Western European state intervention in the social realm - Sweden was the most advanced of such countries - most of the European nations now introduced health programs and engaged in the construction of badly needed public housing. Furthermore, by revision of the laws for both income and inheritance, they forced the redistribution of wealth so that the gross inequities of the prewar era were toned down.

Thus the "welfare state" replaced the laissez-faire state. If there was a prevailing political philosophy behind such alterations, it was socialism, not liberalism. Bentham's older notion of "utilitarianism" acquired a new social connotation. "From the womb to the tomb" was the way one English politician explained the range of new health services in his country. Even though this sloganlike phrase was quickly dropped because it disturbed English sensibilities of the era, it clearly defined the new governmental norm. The state had become responsible for the citizen, not the citizen responsible for the state.

Yet the nation was no longer seen as being a self-sufficient economic unit.

New Economic Dimensions
Even before World War II there were some outspoken Europeans who urged a "United States of Europe." Immediately after the war, some eminent statesmen, "Eurocrats" of sorts, thought that the future of the Continent lay not in nation-state organization, but in political federation. Two world wars had weakened the enthusiasm for nineteenth-century nationalism, and now economic recovery clearly exceeded the abilities of individual states. The technocrats and the visionaries imagined at least an economically integrated Europe.

Several steps were taken immediately after the war for the purpose of consultation and cooperation. Indeed, the Marshall Plan in 1948 spawned the Organization for European Economic Cooperation (OEEC), which sought ways to enhance commercial cooperation as well as the most efficient means to utilize American aid. However, the major step forward came in 1950 with the announcement of the European Coal and Steel Community, initially formed by France and Germany, but later joined by several other continental states.

The Coal and Steel Community was an administrative device created to assure a free or common market within participating states for these basic commodities. Efficiency of development and distribution was the key concept, and the result was success. Moreover, this success was measured in the extent of interstate cooperation as well as in financial statistics. The guiding genius of the Coal and Steel Community was Jean Monnet, who was sufficiently convinced of its results to urge a large sort of economic community.

Approved by the Treaty of Rome in 1957, the European Economic Community - better known now under the title "The Common Market" - extended the scope of economic integration. Within the boundaries of the participating states (soon to be called "The Inner Six") there was to be a common market, with no restrictions on the flow of goods. Conversely, the Common Market would establish an external tariff with respect to all goods entering its trade area. The evolution of this program took place over a ten- year period and was, as might be imagined, one of demanding, close negotiation. Vested interests in each country, but particularly agriculture, did not wish to be placed at a disadvantage.

The defining noun of the official title, "community," also acquired a real significance. As the Common Market developed, other restrictions relating to economic activities were removed. There was a free flow of labor from one region to another. This, in turn, caused the removal of passport restrictions and reduced the policing of state frontiers. Medical facilities approached continental scope as foreigners were allowed to use the services of the country in which they were living. Even such a minor but daily problem in the industrial world as traffic citations were now handled on an international basis. Finally, there was a hope - but one not realized - that a common European currency would be introduced by 1976.

Raymond Aron, one of the most renowned of contemporary French social commentators, coined the phrase "continental monolith" to describe the superpowers of the postwar era. He contended that the United States and the Soviet Union were the two principal states that had the resources, the market, the tax base, and the productive capacity to succeed handsomely in what has now come to be called the "Second Industrial Revolution." Jet aircraft production, atomic research, and computer technology all require enormous sums for development and large markets for viable production. This second Industrial Revolution, that of electronics and nuclear physics, seemed most likely to occur in Europe if the Continent were organized as a productive and trade unit.

Behind the plans for such economic integration, therefore, was the thought that Europe could be a third industrial force, rivaling both the United States and the Soviet Union. The Common Market acquired a political and cultural objective: the assurance of Europe's place in an altered world. And that world was characterized in the 1950s as bipolar: nations and international affairs gravitating around Washington or Moscow.

NEXT:  The Cold War and Bipolarization

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