What Explains Rapid Economic Growth In Europe, 1945-1973?

What explains rapid economic growth in Europe, 1945-1973?

After the Second World War ranging in the period of 1939-1945, countries involved were faced with large amounts of destroyed physical property, as well as numerous deaths of civilians and soldiers. However, the hardships of the previous years of war and depression were replaced by rising living standards and increased opportunities.(Bohanon, 2012) This is because countries could now grow rapidly simply by repairing wartime damage, rebuilding its capital stock, and redeploying men drafted into the wartime task of destroying output and productive capacity to the normal peacetime job of creating them. (EICHENGREEN, 2007) This growth during the initial part of post-war period is known
With world war II ending in 1945, the “catch-up growth” was responsible for rapid growth in the beginning but is an insufficient explanation for it to have sustained rapid growth till 1973. Therefore, it is in this context that I shall delve into the some of the explanation for rapid economic growth in Europe during the Golden Age of
There are 3 types of disequilibria in Temin’s model. Firstly, convergence Conditional convergence, that is, starting from a level of income low relative to the country’s equilibrium income. Secondly, wartime destruction that deranges production in the short run. Lastly, arrested development, that is, excessive labour in agriculture. (Temin, 2002) Temin considered arrested development to be the most important factor in the cause of rapid growth. Thus, delving into the arrested development disequilibria, there was excessive labour in agriculture in the first place because of the lack of international trade during world war II as tension was high in that period. When world war II ended, and countries started opening their markets, excessive labour in agriculture could slowly being transferred to manufacturing and servicing sector. This process was a reallocation of misallocated resources. Moreover, it is known that agriculture is a relatively low productivity sector, while manufacturing and services industries are of higher productivity. Implying that there were higher growth rates when there was a higher reallocation of resources. For example, Germany had a higher economic growth than Britain due to the more rapid sectoral shifts in the German economy. In 1950, around the beginning of the Golden age, Germany had 24% of its labour force in agriculture, compared to 5% for Britain. (Broadberry,