Transcript Economic Recovery and European Unity

Economic Recovery
and European Unity
1945-2001
Chapter 31-1
Post-War Economic Efforts
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1944 Bretton Woods Conference: Lay the
foundations for the modern international
monetary system
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GATT: General Agreements of Tariff and
Trade lowered tariffs and other trade restrictions
to stimulate international trade
Economics 1945-2001
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Between 1958 and 1971 the value of national
currencies was based on gold and the U.S. dollar
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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
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Post-War Economics
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The World Bank:
Provided long-term loans to countries for
economic growth
Post-War Political Efforts
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The United Nations: (UN) 1945
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The framework of the UN was agreed upon by
the allies at the Yalta Conference
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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
The UN
continued
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The General Assembly:
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Included every country in the world
Had the power to advise but could not enforce
recommendations
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Post-War Economic and Political
Recovery
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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
Political Restructuring
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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
Political Restructuring
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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
Italy
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Christian Democrats gained control in 1946
Were led by De Gasperi
Much socialist influence: average worker’s
wages included social benefits
France
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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
Britain
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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
The Federal Republic of Germany
(West Germany)
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After 1949 led by Conrad Adenaur
Christian Democrats became the major party for
a generation
Economic Recovery
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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
Reasons for Economic Recovery:
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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
Reasons for Economic Growth
continued
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The “Economic Miracle” was also due to the
elimination of economic barriers (like tariffs)
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Result: A large unified market emerged: The
Common Market
Economics: West Germany
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Ludwig Erhard Finance minister
Combined a free market economy and extensive
social welfare (the latter inherited from the Nazi
era)
Economics: France
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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
The Welfare State
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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
The Welfare State
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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
Britain (Atlee) the Labour Party
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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
Britain
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1951-1964 Conservatives took power and
privatized more industries but kept the welfare
state
Economic Downturn and High
inflation in the 1970’s
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Caused larger deficits, increased national debts
and pressure from conservatives to lower taxes
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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
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Immigration of Guest Workers
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Western Europe’s dramatic economic revival and
low birth rate led to a shortage of workers
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The need was filled by immigrants from Turkey,
Greece, the Balkans, and North Africa…also
from Spain, Portugal, Italy
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Many did not return home
Immigrants
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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
European Unity
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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
The Council of Europe
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European federalists hoped that the Council
would evolve into a true European Parliament
with sovereignty
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But Britain was opposed to giving the Council
any real power due to its “special relationship”
with the United States
1950 The Schuman Plan
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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
The ECSC
continued
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The Goal: a single competitive market without
national tariffs or quotas
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“The Six” (by 1958)
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Long-term Goal: To bind the members so
closely economically that war between them
would be unthinkable
The EEC
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The Treaty of Rome 1957 created the
European Economic 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
COMECOM
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Above was the Soviet version of Euratom
Other goals of the EEC
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Free movement of capital and labor across
borders
Common economic policies and institutions
Reduced tariffs
All above encouraged hopes of political and
economic union
The Rise of Nationalism
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The Rise of Nationalism in the 1960’s frustrated
the hopes for European unity
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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
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De Gaulle
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De Gaulle also twice vetoed the entrance of
Great Britain into the European Union
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He believed Britain too pro-American
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Britain entered the EU in 1973
1992 The EU
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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
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British PM Margaret Thatcher had been
opposed to joining the EU but was replaced in
1990 by John Major
The Maastricht Treaty 1991
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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
The EU
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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)
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The Economic Crisis of the
1970’s
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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
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Led to a great uncertainty
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The Energy Crisis
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The post-war economic boom was partially due
to availability of cheap oil
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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
OPEC
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Raised the price of oil again in 1979 during the
Iranian Revolution
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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
Stagflation in the mid 1970’s
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= increasing unemployment during increased
inflationary period…unusual
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USUALLY unemployment and inflation have
the opposite relationship
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1970’s and 1980’s: debts and deficits increased
dramatically