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European Economy Essay 1

Introduction

The development of the European economy since 1945 to the present day has been significant as much change has occurred during this period of time. The first and possibly most interesting development that occurred during this time that I will write about is ‘The Golden age’. The Golden age transpired post World War II in the time period 1950-1973 and was a period of great economic growth within Europe. There were several reasons for the growth and development of the European economy during this time period and I will discuss each in detail throughout my essay with the support of scholarly articles and book chapters relevant to the development of the European economy throughout these decades.

EU-Monetary policy

In the aftermath of World War II in 1951 ‘The European steel and coal community’ was set up to run heavy coal and steel industries within Europe under common management. Six founding countries, Belgium, France, Germany, Luxembourg, Italy, and the Netherlands were part of this treaty. In 1957 the treaty of Rome was signed as the six founding countries expanded to other economic sectors and as a result of this trade could move freely across the union. Many other European countries began to join the union and a common currency was introduced known as the Euro. This was a huge development in the Economy and aided Economic growth within Europe as the member countries freely traded with each other and shared infrastructure. The shared currency also ended currency speculation and created a much more stable currency zone which was essential for the evolvement of the European Economy post World War II and today the EU is the largest economic body in the world.(Smyth, 2012)

The Golden Age

The Golden age was a time when almost all countries experienced Economic growth regardless of their political regimes. One of the major reasons for the huge growth in the economy within Europe was the technology transfer from the US. Europe had fallen behind the US in terms of technology during the war and when World War II ended Europe began to catch up by using these large scale mass production technologies employed by the US. This close in the technology gap according to Moses Abramovitz was largely to do with the social capability within Europe and also the technological congruence (Caniels, 2000).Europe had all the characteristics to exploit this borrowed technology such as education labour and infrastructure and this caused huge economic growth within Europe as demand and supply was quite high for technology post World War II

Europe’s labour force was a key factor in ensuring this imported technology from the US was used effectively as an elastic labour supply supports high rates of investment (Kindleberger, 1967).The workers would moderate the wage demands on the understanding that capitalists would reinvest profits, which would mean that productivity and wages would rise in the medium term. These wage restraints introduced by Eichengreen were known as social contracts (Crafts and Toniolo, 1996).A prime example of the growth in Europe at this time was in Germany who had super growth from the early 1950s to the early 1960s.There was much immigration from East Germany as labour demands were high. Germany had great industrial relations, a good central bank in the ‘Bundesbank’ high levels of education and market friendly policies. Germany also had global open trade which was essential for exporting and importing goods and services which generated a lot of capital. Germany is an excellent example of Europe’s great use of the technology transfer from the US which was an instigator for the high growth in the European Economy during ‘The Golden age’.(Smyth, 2012)

The technology transfer from the US to Europe is not the only reason why there was such rapid growth in the Economy as Political reconstruction within European countries was another factor...
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