1 - Mainsprings of economic recovery in post-war Europe

Summary

Introduction

With production stagnating, trade collapsing, and commodity hoarding widespread, the economy teetered on the brink of disaster. Shortages were pervasive, and the overhang of liquid assets threatened runaway inflation. Public officials desperately attempted to consolidate the budget and to shift workers between the public and private sectors without aggravating unemployment and provoking large-scale migration.

Readers might think that this was a description of the crisis in the Soviet Union and its successor states in the 1990s. In fact it could as easily be a portrait of Western Europe in the aftermath of World War II. In 1947, two years after the cessation of hostilities, Europe's recovery was in doubt. The rise of output to prewar levels appeared to be losing momentum. The major economies were suffering open and repressed inflation, disruptive food and raw material shortages, and a binding foreign exchange constraint. Government budgets were in deficit. Trade was collapsing. A large-scale westward movement of economic and political refugees was underway.

Yet by 1948 recovery and adjustment had miraculously resumed. For the next four years the Western European economy expanded at a rate of more than 10 percent per annum. By 1951 production was fully 55 percent above levels reached four years before. Western Europe then embarked on two decades of rapid growth unmatched in its prior or subsequent history.

It is tempting to consider the sources of Western Europe's post-World War II recovery in an effort to identify a recipe that might be applied in post-Cold War Eastern Europe today. While the contributors to this volume search out parallels, they also point to important differences in the two settings.