The European Economy since 1945

The Princeton Economic History of the Western World

Book 19
Princeton University Press
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In 1945, many Europeans still heated with coal, cooled their food with ice, and lacked indoor plumbing. Today, things could hardly be more different. Over the second half of the twentieth century, the average European's buying power tripled, while working hours fell by a third. The European Economy since 1945 is a broad, accessible, forthright account of the extraordinary development of Europe's economy since the end of World War II. Barry Eichengreen argues that the continent's history has been critical to its economic performance, and that it will continue to be so going forward.

Challenging standard views that basic economic forces were behind postwar Europe's success, Eichengreen shows how Western Europe in particular inherited a set of institutions singularly well suited to the economic circumstances that reigned for almost three decades. Economic growth was facilitated by solidarity-centered trade unions, cohesive employers' associations, and growth-minded governments--all legacies of Europe's earlier history. For example, these institutions worked together to mobilize savings, finance investment, and stabilize wages.


However, this inheritance of economic and social institutions that was the solution until around 1973--when Europe had to switch from growth based on brute-force investment and the acquisition of known technologies to growth based on increased efficiency and innovation--then became the problem.


Thus, the key questions for the future are whether Europe and its constituent nations can now adapt their institutions to the needs of a globalized knowledge economy, and whether in doing so, the continent's distinctive history will be an obstacle or an asset.

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Populism of the right and left has spread like wildfire throughout the world. The impulse reached its apogee in the United States with the election of Trump, but it was a force in Europe ever since the Great Recession sent the European economy into a prolonged tailspin. In the simplest terms, populism is a political ideology that vilifies economic and political elites and instead lionizes 'the people.' The people, populists of all stripes contend, need to retake power from the unaccountable elites who have left them powerless. And typically, populists' distrust of elites shades into a catchall distrust of trained experts because of their perceived distance from and contempt for 'the people.' Another signature element of populist movements is faith in a savior who can not only speak directly to the people, but also serve as a vessel for the plain people's hopes and dreams. Going back to the 1890s, a series of such saviors have come and gone in the US alone, from William Jennings Bryan to Huey Long to--finally--Donald Trump. In The Populist Temptation, the eminent economic historian Barry Eichengreen focuses on the global resurgence of populism today and places it in a deep context. Alternating between the present and earlier populist waves from modern history, he argues that populists tend to thrive most in the wake of economic downturns, when it is easy to convince the masses of elite malfeasance. Yet while there is more than a grain of truth that bankers, financiers, and 'bought' politicians are responsible for the mess, populists' own solutions tend to be simplistic and economically counterproductive. Moreover, by arguing that the ordinary people are at the mercy of extra-national forces beyond their control--international capital, immigrants, cosmopolitan globalists--populists often degenerate into demagoguery and xenophobia. There is no one solution to addressing the concerns that populists raise, but Eichengreen argues that there is an obvious place to start: shoring up and improving the welfare state so that it is better able to act as a buffer for those who suffer most during economic slumps. For example, America's patchwork welfare state was not well equipped to deal with the economic fallout that attended globalization and the decline of manufacturing in America, and that played no small part in Trump's victory. Lucidly explaining both the appeals and dangers of populism across history, this book is essential reading for anyone seeking to understand not just the populist phenomenon, but more generally the lasting political fallout that follows in the wake of major economic crises.
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Publisher
Princeton University Press
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Published on
Jul 1, 2008
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Pages
520
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ISBN
9781400829545
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Language
English
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Genres
Business & Economics / Economic History
Business & Economics / Government & Business
History / Europe / General
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Content Protection
This content is DRM protected.
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Why are some parts of the world so rich and others so poor? Why did the Industrial Revolution--and the unprecedented economic growth that came with it--occur in eighteenth-century England, and not at some other time, or in some other place? Why didn't industrialization make the whole world rich--and why did it make large parts of the world even poorer? In A Farewell to Alms, Gregory Clark tackles these profound questions and suggests a new and provocative way in which culture--not exploitation, geography, or resources--explains the wealth, and the poverty, of nations.

Countering the prevailing theory that the Industrial Revolution was sparked by the sudden development of stable political, legal, and economic institutions in seventeenth-century Europe, Clark shows that such institutions existed long before industrialization. He argues instead that these institutions gradually led to deep cultural changes by encouraging people to abandon hunter-gatherer instincts-violence, impatience, and economy of effort-and adopt economic habits-hard work, rationality, and education.


The problem, Clark says, is that only societies that have long histories of settlement and security seem to develop the cultural characteristics and effective workforces that enable economic growth. For the many societies that have not enjoyed long periods of stability, industrialization has not been a blessing. Clark also dissects the notion, championed by Jared Diamond in Guns, Germs, and Steel, that natural endowments such as geography account for differences in the wealth of nations.


A brilliant and sobering challenge to the idea that poor societies can be economically developed through outside intervention, A Farewell to Alms may change the way global economic history is understood.

International trade has shaped the modern world, yet until now no single book has been available for both economists and general readers that traces the history of the international economy from its earliest beginnings to the present day. Power and Plenty fills this gap, providing the first full account of world trade and development over the course of the last millennium.

Ronald Findlay and Kevin O'Rourke examine the successive waves of globalization and "deglobalization" that have occurred during the past thousand years, looking closely at the technological and political causes behind these long-term trends. They show how the expansion and contraction of the world economy has been directly tied to the two-way interplay of trade and geopolitics, and how war and peace have been critical determinants of international trade over the very long run. The story they tell is sweeping in scope, one that links the emergence of the Western economies with economic and political developments throughout Eurasia centuries ago. Drawing extensively upon empirical evidence and informing their systematic analysis with insights from contemporary economic theory, Findlay and O'Rourke demonstrate the close interrelationships of trade and warfare, the mutual interdependence of the world's different regions, and the crucial role these factors have played in explaining modern economic growth.



Power and Plenty is a must-read for anyone seeking to understand the origins of today's international economy, the forces that continue to shape it, and the economic and political challenges confronting policymakers in the twenty-first century.

Why are some parts of the world so rich and others so poor? Why did the Industrial Revolution--and the unprecedented economic growth that came with it--occur in eighteenth-century England, and not at some other time, or in some other place? Why didn't industrialization make the whole world rich--and why did it make large parts of the world even poorer? In A Farewell to Alms, Gregory Clark tackles these profound questions and suggests a new and provocative way in which culture--not exploitation, geography, or resources--explains the wealth, and the poverty, of nations.

Countering the prevailing theory that the Industrial Revolution was sparked by the sudden development of stable political, legal, and economic institutions in seventeenth-century Europe, Clark shows that such institutions existed long before industrialization. He argues instead that these institutions gradually led to deep cultural changes by encouraging people to abandon hunter-gatherer instincts-violence, impatience, and economy of effort-and adopt economic habits-hard work, rationality, and education.


The problem, Clark says, is that only societies that have long histories of settlement and security seem to develop the cultural characteristics and effective workforces that enable economic growth. For the many societies that have not enjoyed long periods of stability, industrialization has not been a blessing. Clark also dissects the notion, championed by Jared Diamond in Guns, Germs, and Steel, that natural endowments such as geography account for differences in the wealth of nations.


A brilliant and sobering challenge to the idea that poor societies can be economically developed through outside intervention, A Farewell to Alms may change the way global economic history is understood.

This comprehensive account of the management of the international monetary system from the 1944 Bretton Woods conference to the present day documents the structure and movements of the world economy during a period of dramatic change. Commissioned by the International Monetary Fund to mark its fiftieth anniversary, the work is nevertheless a fully independent one: written by an outside historian with full access to IMF archives and staff, and reviewed by an independent editorial committee. An objective study of issues and events that are often controversial, the book skillfully interweaves the history of the IMF with that of world economic developments after the Second World War.

The International Monetary Fund was created at Bretton Woods, but almost immediately the rivalry between the Soviet Union and the West split the industrialized world into two economic camps. As a result the IMF's role underwent significant changes in the immediate post-war years. Harold James analyzes the system during a period of relative stability until 1971, when the United States abandoned fixed exchange rates. Since that time countries have experienced radical fluctuations in the values of their currencies and the IMF has contended with the consequences.

James brings to this history a unique breadth of knowledge and mastery of both economic theory and archival sources. In a well-paced and smoothly flowing narrative, key themes emerge, including the IMF's increasing surveillance role in global capital markets and its responsivenes in ensuring international monetary stability. Recent political changes make it possible to bring to light the Fund's work promoting liberalization in planned economies. James also reveals how intellectual changes have led to increasing consensus in the world about what constitutes good economic policy. The gold standard and the dollar standard, he concludes, have been replaced by a new "information standard" under which acccurate economic information is crucial to continuing properity.

A story of continuity as well as change, International Monetary Cooperation Since Bretton Woods offers enduring lessons about international economic coordination. It will be of strong interest to all those concerned with the future, as well as the past, of the world economy.
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