02 - Economic Development (Germany and Japan)

Hwa Chong Institution (College): History Paper 1 Theme II: Understanding the Global Economy How did the Development of the Global Economy Impact the World? What were the reasons for the growth of the global economy after WWII? Objectives: Students would be able to: • Analyze the role of Europe and Japan’s contribution to the growth of the global economy • Analyze the impact of MNCs and economic events in shaping the growth of the global economy What role did Europe and Japan play? At first economic recovery was slow in Western Europe and Japan due to the destruction of WW2 which incurred substantial human losses, damaged physical infrastructure and caused the physical and mental exhaustion of the people. • In West Germany, the Allied powers initially implemented a policy to place greater emphasis on agriculture and reduce its industrial capacity, thus slowing economic recovery. • Japan’s recovery was fraught with greater problems and was much slower than Germany’s. It lacked Germany’s geographical advantage of being surrounded by rapidly recovering economies (the Western European countries), which provided the sales markets for Germany’s recovery. However, the recovery of Western Europe and Japan was expedited due to Marshall Aid from the USA, which provided the necessary physical and financial capital to jumpstart their devastated economies. Japan was given immense financial aid as USA wanted it to be the Far Eastern key political center of resistance to Communism. • Recent scholarship has found the positive impact of the Marshall Plan not so much in the scale of material assistance, but rather in the political strings attached to it. • Dollar aid enabled recipient nations to eliminate raw material shortages and invest in bottleneck industries, but only in exchange for trade liberalisation. The resources afforded by the counterpart funds allowed governments to finance public investment projects without the need to cut back on welfare spending, but they were compelled to reintroduce free markets and lift wartime controls and rationing, despite fierce opposition from labour unions. Many domestic factors also contributed to the rapid recovery of Western Europe and Japan, such as the high rates of literacy and specialised education, their industrial -social discipline, a competent government, effective markets, home-grown technology and a long tradition of savings and capital creation. • Their remarkable growth rate can be seen from their total share of world trade from the period between 1955-1971. The USA’s share dropped from 16.7% to 11.7%, while Western Europe’s increased from 30% to 41% and Japan’s from 2.1% to 6.4%. • By 1947, industrial production was back at pre-war levels in at least the victorious powers and the non-belligerent economies. Across Western Europe economic recovery was swift and dramatic. By 1952, production levels in the region exceeded pre-war levels. • Japan was now seen as a Newly Industrialised Economies (NIE). It was at the forefront of booming Asian economies that came to be known as the “East Asian Tigers.” Hong Kong, South Korea, Singapore and Taiwan were also eventually seen as similar rising economies. 1 Hwa Chong Institution (College): History Paper 1 Theme II: Understanding the Global Economy How did the Development of the Global Economy Impact the World? What impact did Europe and Japan have on the Global Economy? The recovery of Western Europe and Japan helped to sustain the economic growth and development started by the USA. Moreover, they supported the USA’s open -door policy and promoted trade through trading extensively with each other. • In fact, their rapid industrial expansion significantly affected economic growth in many parts of the world in the 1960s and 70s, because their expansion generated an ever-growing demand for foreign products. • Western Europe and Japan’s economic rebound played a role in reducing the economic dominance of the USA, especially through their contribution to the international financial institutions like the International Monetary Fund (IMF) and the World Bank. Countries Post-1945 recovery and contribution to the GE France U.S. aid flows through the Marshall Plan and, combined with the national plan and worldwide prosperity, brings an economic boom and annual growth of 5 percent. France invests heavily in infrastructure and in 1957 plays an active role in setting up the European Economic Community (EEC), or Common Market, an expansion of the 1950 European Coal and Steel Community. By the 1980s, France had become a leading world economic power and the world's fourth-largest exporter of manufactured products. It became Europe's largest agricultural producer and exporter, accounting for more t han 10 percent of world trade in such goods by the 1980s.1 Italy Prewar industrial production levels were regained by 1948, and production for the Korean War (1950–53) provided further stimulus to growth. Until 1964, the country enjoyed an “economic miracle,” with industrial growth rates of more than 8 percent per year. Its most prominent industries, still in the northwestern industrial triangle, produced fa shionable clothing (especially shoes), typewriters, refrigerators, washing machines, furniture, plastics, artificial fibers, sewing machines, inexpensive motor scooters and cars.

Germany Germany benefited enormously from the explosion of intracommunity trade that followed the gradual implementation of the customs union. Between 1958 and 1960 alone, trade between the six member countries grew by 50 percent. The 1960s was a decade of extraordinarily high and sustained rates of economic growth in Germany and throughout Western Europe. The 1960s epitomized a golden age in Germany's economic development. It was a decade of soaring growth rates, ample employment, and relatively low inflation. The German economy became the driving force within the Community. The West German revival was also aided by relatively good industrial relations. At a time when Germanys international competitors faced industrial militancy, with the British coal mining industry alone recording some 2400 strikes in 1954, industrial relations within the FRG remained positive. The simple idea of quick, amicable negotiations being established without much potential impact to a factories output. Such favorable relatio nships were helped by the aforementioned refugee 1 https://www.questia.com/read/1G1-79211324/economic-policy-in-france-and-italy-since-the-war2 Hwa Chong Institution (College): History Paper 1 Theme II: Understanding the Global Economy How did the Development of the Global Economy Impact the World? workforce, who put downward pressure on wages, thus weakening the bargaining power of trade unions. The people of the FRG embraced consumption, as shown by its continued increase throughout the period of economic recovery, with advertisements and radio broadcasts urging people to spend. Between 1960 -1975, West German consumption more than doubled that of Britain, emphasizing that there was high domestic demand for German goods, thus helping the continued expansion of firms and therefore economic recovery well into the 1960s. Britain Britain's desperate economic situation, however, forced the government to continue with rationing and controls throughout the late -1940s. The 1950s would be dominated, politically, by the Conservative Party. The 1950s was a time of full employment and r ationing was phased out by 1954. The UK economy benefited from the period of rapid global economic growth, especially in Western Europe. In fact, in this period, UK growth lagged behind many of our Western European neighbours. The boom was helped by: - Recovery of Germany and Japan - Low global inflation