Economic Recovery and European Unity Chapter 31-1

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

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

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

Post-War Political Efforts The United Nations: (UN) 1945 The United Nations: (UN) 1945 The framework of the UN was agreed upon by the allies at the Yalta Conference 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 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 The General Assembly: The General Assembly: Included every country in the world Included every country in the world Had the power to advise but could not enforce recommendations Had the power to advise but could not enforce recommendations

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

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

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

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

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

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

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

Economic Recovery Europe began a period of unprecedented economic growth that continued into the late 1960’s 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 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 In many countries workers were willing to work for low wages = expansion of industry = lower prices & higher demand = lower prices & higher demand

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

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

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

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

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

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

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

Britain Conservatives took power and privatized more industries but kept the welfare state Conservatives took power and privatized more industries but kept the welfare state

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

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

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

European Unity Attempts to unify Europe in 3 areas Attempts to unify Europe in 3 areas 1. Political: The Council of Europe: did represent nearly every European nation but had little influence 2. Military: Never really happened 3. Economic: Most successful with the EU and its precursors: ECSC, EEC, EC

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

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

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

The EEC The Treaty of Rome 1957 created the European Economic Community…signed by The Six 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 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 Treaty also created Euratom: The European Atomic Energy Agency: to develop and regulate nuclear energy

COMECOM Above was the Soviet version of Euratom Above was the Soviet version of Euratom

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

The Rise of Nationalism The Rise of Nationalism in the 1960’s frustrated the hopes for European unity 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 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 He believed that the U.S. had too much influence in NATO

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

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 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 British PM Margaret Thatcher had been opposed to joining the EU but was replaced in 1990 by John Major

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

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

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

The Energy Crisis The post-war economic boom was partially due to availability of cheap oil 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 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 Raised the price of oil again in 1979 during the Iranian Revolution 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 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 = increasing unemployment during increased inflationary period…unusual = increasing unemployment during increased inflationary period…unusual USUALLY unemployment and inflation have the opposite relationship USUALLY unemployment and inflation have the opposite relationship 1970’s and 1980’s: debts and deficits increased dramatically 1970’s and 1980’s: debts and deficits increased dramatically