Post World War 2, Economic Recovery Continues, Economic Recovery in Soviet Block, World after world war 2, world history, ww2, world war 2
World: Post World War 2
In the decisive phase of the war the forces of liberal democracy and socialism got together to defeat and eliminate the third force, fascism. But sooner, the world was split between a Communist bloc, an anti-Communist bloc, and a small number of neutral states. In February 1945, Churchill (British Prime Minister), Roosevelt (American President) and Stalin, leader of Soviet Union met at Yalta in the Crimea. It was easy for the Allies to agree in their objective of defeating Germany and Japan. But differences of interests, opinion and ideas surfaced when the question of future opened up.
Britain and America disliked communism and feared its spread in the devastated countries of Europe. The display of Russian strength during the war also alarmed them. The allies had agreed to free elections in the East European Countries liberated by the Red Army such as Poland, Hungary, Czechoslovakia, Romania, Bulgaria, Yugoslavia, and Albania. But Stalin imposed communist governments of these countries. Eastern Poland was exchanged with German Silesia by Stalin, thus moving the Russian frontier further west. Britain intervened in Greece and toppled a Communist government there.
Germany was initially divided into four zones. Berlin, the capital city under Russian- controlled zone was also similarly divided. In 1948, three western zones introduced a new currency, without consulting the eastern zone, resulting in rail and road traffic blockade by Soviet Union for eight month during which the British and Americans air-lifted all supplies to Berlin. The Soviet on the one side and US, Britain and France on other side, opposed each other in every sphere. The Eastern European countries under Soviet hegemony refused to accept American aid under the Marshall Plan, for reconstruction of their economies. The Soviet Union made the atomic bomb in 1949 and the situation of hostility further intensified which was called the Cold War. Peace remained elusive in this open ideological war.
Certain non-European forces were of great significance within European from World War 2-end to until the end of the 1980s. These were, for example, the preponderance of American influence in European affairs, the dominance of the dollar in the global financial system, and the sustained hostility between the two militarized politico-economic blocs that emerged after the war. The West European powers, especially the United Kingdom, had been financially depleted by the war and been displaced from their great power eminence; they now opted, with varying degrees of reluctance or enthusiasm, for a subor- dinate relationship with capital-surplus USA.
In Yugoslavia, the situation was complicated by the presence of two distinct pressure groups, the communist National Liberation Front led by Josip Broz Tito on the one hand, and on the other, the nationalist and royalist Chetniks under Draza Mihailovich. Yugoslavia was exceptional for the communists having seized power without the assistance of the Red Army; it was therefore able to join the Soviet Bloc and leave it subsequently of its own volition.
Poland had been bifurcated during the war and occupied by both Germany and the Soviet Union: The nationalist Home Army worked in co-operation with the exiled government in London. But it was decimated by the Germans after the failure of the Warsaw Uprising in 1944. In Soviet occupied Poland, the communist-led Polish Committee of National Liberation managed to seize the initiative with the help of the advancing Soviet Red army. Given the destruction of the home Army, it was able to dominate the Provisional Government of National Unity that was formed by the merger of the two rival provisional governments based in London and Soviet-held Poland.
However, not all of Europe followed this pattern. Unlike so many other cases, the resistance movements in Denmark, the Netherlands, and Norway were relatively unified. They posed little difficulty for post-War national political revival. Of the major European countries outside the Soviet bloc, Spain, Portugal, and Greece witnessed prolonged dictatorships: it was not until the 1970s that electoral democracy was restored.
Stable multi-party coalition arrangements emerged the most significant and perhaps the most peculiar of such supra-national projects was the making of the two Germanies. “Race for Berlin” led to the partition of Germany into four zones, one under each occupying power. The initial Franco-US agenda, overriding British objections, proposed to de-industrialize Germany. But later, US shifted perspective from the relatively isolationist “America First” stance to the pursuit of an unambiguously interventionist one described as the “leadership of the Free World.”
From this now flowed the Truman Doctrine and the Marshall Plan. The Truman Doctrine announced its support for “free people who are resisting attempted subjugation by armed minorities or by outside pressure”; and the Marshall Plan, known officially as the European Recovery Programme, set out to revive and reconstruct Europe, including West Germany, The Marshall plan was set within the framework of the new monetary and trading system based on the supremacy of the US dollar and the dismantling of trade barriers. The latter were envisaged by the Bretton Woods institutions (World Bank and International Monetary Fund or IMF) and the General Agreement on Tariffs and Trade (GATT).
The French, British, and American zones were merged in 1949 to create the Federal Republic of Germany (West Germany). However, sovereignty was granted to the Federal Republic only in 1955 after its defences were secured by a limited remilitarization and its induction into NATO. The zone of Soviet occupation, or East Germany, went through the same process of being restructured to ensure integration with the Soviet power structure. The new state was established in 1949; Berlin, the capital of undivided Germany, having been likewise divided, continued to remain the focus of hostilities, from the Blockade of 1948 to the building of the wall in 1961.
Economic Recovery Continues
The Council of Mutual Economic Assistance (COMECON) was established in 1949 as a trans- continental military body, and the European Coal and Steel Community appeared in 1951 with the specific economic concerns. The European Economic Community of 1957 and the European Community of 1957 had larger objectives that prompted apprehensions of loss of national sovereignty, notably in Britain. In response, Britain initiated in 1959 the European Free Trade Association (EFTA).
The first phase of economic recovery, from 1945 to 1947, was effected though bilaterally negotiated US loans and grants and the food aid disbursed through the United Nations Relief and Rehabilitation Agency (UNRRA). These sufficed to avert the general collapse of the economy that industrial dislocation and poor harvest threatened; they were adequate even to raise industrial output to pre-war levels.
During the next phase of recovery, 1948-1951, European countries willing to participate in the US-sponsored recovery program received 13 billion dollars. This was supplemented by a 1 billion dollar loan from the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank). The largest beneficiaries of this program were Britain, France, Italy, and West Germany.
It established an international body of recipient nations, the organization for European Economic Co-operation, to which each nation submitted a national plan every four years. These aid-receiving nations were required, under the “counterpart” clause, to make available a fund of domestic currency equal to the aid received and to be spent in ways approved by the US. They had to agree to use the aid to finance food imports only from the US whether or not cheaper alternative sources were available. They had to also employ the service of US shipping and insurance for 50% of aid financed purchases, besides also ensuring preferential treatment to American oil interests.
It led on to a long economic boom that lasted until the mid-1970s. Although the deflationary policies created some employment, they also led to the economic boom. As a result the period after the 1970s witnessed a near full employment. It yielded a “new capitalism” of near full employment, high productivity, high wages, and extensive social welfare. All these combined to blunt class antagonism and to generate consensual politics. However, the results were uneven across West Europe. Less developed countries like Ireland, Spain, and Portugal were less affected by the quantitative and qualitative transfor- mations achieved by the more advanced economies. However, the long boom came to an end in 1973 with the first oil shock, when oil- producing countries unilaterally and dramatically raised the prices of oil. European economies suffered inflationary pressures, output decelerated, and unemployment rose. They immediately led to restrictive policies within the parameters of the existing system of economic management, and more gradually, to a change of economic perspective.
From the late 1970s, in country after country, the social democratic consensus broke down. New political program proposed to restrict social welfare to the minimum necessary. They repudiated government intervention and demand management. All these led to the privatization of nationalized industries, extensive deregulation, and the adoption of monetarist and supply side policies.
The idea of the “social democratic consensus” itself is valid only in post-war terms. It was based on a substantial and pragmatic dilution of the pre-war program of social democracy to accommodate fundamental tenets of conservatism (the sanctity of private property) and of liberalism (the limited state). Social Democracy thus conceded the possibility of the gradualist reform of capitalism.
This consensus allowed stable coalitions of right-centre and left-centre groupings: occasionally, in the immediate aftermath of bitter electoral conflict, even “grand coalitions” of the left and the right were possible. Except for Britain in West Europe, the predominant tendency was towards the formation of coalition governments even where the electoral system was not based on proportional representation.
Economic Recovery in Soviet Block
In the Soviet bloc, reconstruction was hindered by the relatively lower capacity of the leading power, the Soviet Union. External capital was in short supply, except on terms that were unacceptable to the Soviet system. Capital for the industrialization program therefore had to be internally generated. In the newly Soviet countries, nationalization permitted rapid expansion in heavy industrial capacity. Radical agrarian programs of farm collectivization and nationalization on the Soviet model soon plunged the agricultural sector into turmoil and led to food shortages.
East Europe was thus preoccupied with the problem of adjusting to a new system of production and stagnation in the very sectors whose boom was the basis of West European prosperity. The plan-driven economies of the eastern bloc, with the exception of the USSR, began with a very low industrial base. Since investment priorities were largely determined by the state, national plans focused excessively on developing heavy industry. The resulting imbalance led to chronic shortages of consumer goods.
In the initial stages, trade and economic relations were confined to the region, that is, the eastern bloc. However, the shortage of capital and of agricultural products, especially wheat, led to a parallel dependence on western countries. Poland and Romania borrowed extensively from the West in the 1970s to finance their industrialization programs; By the early 1970s, the USSR was compelled to import grain from the USA.
Imports of food grain and light industrial from the hard currency areas (West), without corresponding exports resulted in a combined balance of payments deficit of 10 billion dollars by 1975. These were financed by borrowings from western banks. Imports were cut back and the deficit was eliminated; but, by 1982, East bloc debts stood at 81 billion dollars and its debt service ratio stood at 100 percent, that is it was borrowing money solely in order to pay back debts. Soviet export earnings deteriorated with the collapse of world oil prices in the mid 1980s.