lec_11_110B - Economics 110B World Economic History II...

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    Economics 110B  World Economic  History II Spring 2008  University of California, Davis Lecture 11 Recovery from World War II:  The Marshall Plan and Post-War European  Economic Growth 
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    Today’s Program Democracy and free-markets between 1919-1940 The US comes to the Rescue: The Marshall Plan as a Structural Adjustment Program How the Marshall Plan helped What the Marshall Plan did  not  do The Economics of Rapid Growth in Post-War Europe The “Game” between labor and capital Institutional and political foundations of the miracle Explanations for the end of the golden age
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    Readings Cameron and Neal Ch.14, pp, 362-371
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    The Interwar Period  It was not clear that free-markets and liberal politics would  survive Politics: Interwar period was a short-lived experiment in democracy Struggle of “parliamentarism” vs. Bolshevism and later Fascism. On the left, labor votes took > 1/3 of votes after WWI Is democracy suited to Europe? Proportional representation increasingly current in those days…was  blamed for instability while the majoritarian system of Britain was held  up Italy falls to Mussolini in mid-1920s They suggested “discipline must  be accepted” Communists in Germany, France were strong, many coalitions in W.  Europe September 1930 NAZIs and communists come in 2 nd  and 3 rd  in  Germany…  “The positive argument for being a liberal was very weak” JM Keynes  1925
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    Source: Matthew White http://users.erols.com/mwhite28/govt1930.htm
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    The Interwar Period Economics : Post WWI saw a desire to return to normalcy, free- market investment,  free trade, fixed exchange rates International investment desired stability (In Eastern Europe there was  none).  The peace was a fragile one. Return to normal implied conflicts between  liberal policies and labor movements Treaty of Versailles was onerous and fraught with nationalistic  animosities all around. Great Depression: economic orthodoxy i.e., tighter fiscal and monetary  policy, pegged exchange rates, free moving capital were not compatible  with representative democracy USSR had reportedly remarkable successes
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    The Legacy of World War II Devastation was vast 40m people dead 1 in 20 dead in western Europe German coal production was at half its pre-war level Massive breakdown of the European economy The Truman Doctrine emerged: a policy of  containment which urged economic recovery.
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    1946 GDP as a Percentage of 1938 Levels Source: Delong and Eichengreen
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    Long-Run Economic Growth, 1880-1980 Source: Delong and Eichengreen
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