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.
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
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
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
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