EU306 lecture slides-2 - European Economic and Monetary...

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European Economic and Monetary Integration EXAM DATE Exam: week of April 6 Time to be discussed Presentation Topics and Dates to be Announced
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EUROPE’S ECONOMY SINCE 1945 INTRODUCTION 2nd half of the 20th century was a period of unparalleled growth in Europe: Real GDP per capita more than tripled in the Western countries and more than doubled in the Eastern countries Quality of life improved – hours worked per year declined by more than one-third giving way to leisure time and lengthening life expectantcy - However – unemployment rose over the period and taxes also soared - BUT, by any standard, Europeans are better off today than their parents and grandparents
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Introduction (cont.) Southern Europe grew faster than Northern Europe Western Europe grew faster than Eastern Europe Growth was faster in the 2 decades before 1973 than the 2 decades after HOWEVER, the postwar period is regarded as the golden age of economic growth
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Introduction (cont.) 2 exogenous conditions stimulated growth in the second half of the 20th century: 1. Backlog of unexploited technological and organizational knowledge with which Europe entered the period Military had to innovate to survive the world wars (for ex. İt had to invent jet engines, radar and computing) 1. The great power conflict between the USA and Soviet Union forcing countries to conform to the form of economic organization as their dominant partner Their choice determined their subsequent economic performance Western Europe – Market Capitalism Eastern Europe – State Socialism
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Introduction (cont.) Principal Features of the International Economic Environment of the Postwar Period: - Marshall Plan - Bretton Woods International Monetary System - General Agreement on Tariffs and Trade These were all molded by the US – Soviet conflict
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Exogenous Actions – Endogenous Processes To the 2 exogenous actions there were 2 reactions – 2 endogenous processes 1. Transition from extensive to intensive growth Extensive growth : growing on the basis of known technologies – raising output by putting more people to work at familiar tasks and raising labor productivity by building more factories along the lines of existing ones Rising capital/labor ration = extensive growth Intensive growth : growth through innovation Europe relied more on extensive growth before 1973 and more on intensive growth thereafter
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Extensive Growth Facilitated by the backlog of technology Less important to innovate so long as there were known technologies still to be acquired and commercialized Easy as long as there were elastic supplies of labor (refugees from the east; repatriates from the colonies; underemployed workers from the agricultural perihery) who could be added to the industrial labor force without putting upward pressure on wages
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Extensive Growth (cont.) Extensive growth was what planned economies organized on Soviet lines did best
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EU306 lecture slides-2 - European Economic and Monetary...

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