The reconstruction of the international economy, the beginning of which was based on the almost complete cessation of functioning international economic relations, was one of the greatest achievements of the post-World War II era. However, after the Second World War, there were fears that the international economy would not be rebuilt, and the prevailing expectation after the war was not about the golden age of economic growth, but about a severe collapse inflicting the world. Thus, the success of the post-War period was predicated on a number of policy initiatives to meet these fears and possible dangers.
The most known of these initiatives was the creation of the Bretton Woods Agreement, which led to the establishment of International Monetary Fund, the World Bank, and the International Trade Organization. Another important initiative was the Marshall Plan, implemented in the 1948-1951 period, in which the United States provided assistance to the war-torn economies of Western Europe.Although these post-War endeavours were combined to make economic growth fruitful, the reconstruction of Europe after 1945 was based on the self-interest of the nations of the European state system, rather than the idealism of statesmen. So, for instance, it cannot be argued that the Marshall Aid saved Western Europe from economic collapse simply because of idealism, but rather it was designed to defending America’s own strategic interests.
This article consists of three parts. In the first part, the post-War situation in Europe will be briefly discussed with a view to elaborating the rationale why the reconstruction of Europe after the Second World War was much more successful than the first one. Following that, the attempts toward the recovery of the post-War Europe will be succinctly articulated. Finally, by emphasizing how each European state has its own interests, the view that this reconstruction of Europe is based on the self-interest of European nations will be addressed.
I. The Situation in Europe after the Second World War
First of all, it should be stressed that the 1930s were very gloomy years for Europe. The most important reasons for this were the economic depression experienced at the beginning of the period and the WW2 that occurred at the end of the period (Alganer & Çetin, 2007: 302).
After the War, Europe, especially Germany, turned into a complete ruin and Britain, France, the Soviet Union and the United States emerged as the four major powers.
In 1945, significant changes took place all over Europe. Many regions in Central and Eastern Europe were subjected to German occupation, and these regions witnessed the battles of the German and Soviet armies in early 1944-45. Although the German occupation was not as effective in Western Europe as it was in Eastern Europe, Western Europe faced poverty due to the war. The Soviet armies fought against the German armies from 1941 onwards, and eventually, when the German armies completely retreated, the Soviet Union began to be considered as one of the great powers of Europe.The United States came out of the war powerful and strong. The purpose of the United States was to establish an international economic system so that it could ensure freedom of trade and investment.Therefore, the World Bank and the International Monetary Fund had been established (Alganer & Çetin, 2007: 303).
Thus, the main post-war goal was to create conditions that would prevent Europeans from going to war with each other again. The main problem for many was to build a Germany under control not to threaten the European peace and security.
Moreover, escalating hostile relations between the US and the Soviet Union led many Europeans to worry that they would become captives of the Cold War. Obviously, the common belief was that Western Europe should not be left at the mercy of the Soviet threat, but there were doubts about the extent to which Europeans and Americans could find a common ground how to achieve it, and how much western Europe could rely on the protection of the United States (McCormick: 2002, 63).
Why was Reshaping of Europe after WWII much more Successful than the First One?
According to Milward (2005: 357), the reconstruction of Europe after the Second World War was much more successful than the first one because in the reconstruction period, instead of a comprehensive political peace solution, there was the development of an institutionalized model of economic independence in Western Europe that provided a better basis for the economic and political existence of Western Europe than the comprehensive arrangement of peacefully managing the main political disputes that existed among the European powers at the timeending in failure after 1918. Therefore, it could be argued that the politico-economic set-up after WW2 was more successful (Milward, 2005: 357).
However, the process could not have been successful had there been an adequate area of common economic ground, and that common economic ground was mostly due to the similar international situation comprising the national economies in 1945. They all had similar characteristics.All of them had experienced a huge decline in foreign trade, faced with the threat of inflation, wanted to achieve a higher standard of living for their populace, and for this they had to raise their export levels well beyond 1938. Finally, all of them faced a huge trade deficit with the dollar zone and a shortage of the most important trading currency in the world (Milward, 2005: 357).
II. Initiatives for the Recovery of post-War Europe (Institutional Developments towards the Establishment of the Union in Europe)
a. Bretton Woods Agreement
Since the collapse of the gold standard and the subsequent manipulation of exchange rates, the economic problems of the 1930s had become quite severe. The contention wasfocused on the Fund, which is the entity that would oversee the international monetary system.The creation of this Fund was, in a sense, was a singular achievement, and this was the first time that the nations of the world were designing an international monetary system from scratch (Eichengreen, 1993: 2-3).
Thus, the lessons learned from the 1930s demonstrated the need for a well-functioning payments system. When Britain started receiving aid from the United States during the war and the policies followed by the US after the war progressed in line with its views, it decided to launch a financial union with the US and lay the foundations for it (Başer, 2017: 62). Therefore, throughout the war, Britain and the US developed ideas on the immediate implementation of the international financial & monetary system. In the new system to be created, two issues were highlighted: firstly, ensuring long-term international financing of sectors that may need financing, and secondly, establishing a well-functioning monetary system. These issues were addressed at Bretton Woods in 1944. The committee dealing with the long-term capital supply, of which J.M. Keynes was the chairman, decided to establish the World Bank. It was also decided to establish the International Monetary Fund in connection with the establishment of a well-functioning monetary system (Alganer & Çetin, 2007: 303).
b. The Marshall Plan
After the Second World War, especially when European countries were experiencing an economic collapse, the United States decided to help Europe (Uzunkaya, 2019: 179). So, the USA, emerging as a world power right after the War, took on the task of reviving Europe, which was in ruins, and opened the credit taps for re-developing Europe. Accordingly, G. Marshall announced the European Recovery Plan in 1947, known as the Marshall Plan (Alganer & Çetin, 2007: 304).
The main purpose of this assistance was the redevelopment of the European economies, which experienced great shocks after the war. With this assistance, the United States had created a new market to trade with.
The developing European economies had become amenable for international trade, enablingthe United States to trade more with these countries. In addition to this economic goal, there were also political reasons for the assistance provided by the United States. During this period, the Soviet Union, which adopted the communist system, was gaining strength, and the United States felt uncomfortable with this situation. Therefore, it tried to prevent the systempenetrating powerful European countries such as France, Italy and Germany (Uzunkaya, 2019: 179-180). So, Western states had to initiate recovery and growth at the expense of some previously shared destinies with a view to restoring political stability in Europe and stop the spread of communism to the west (Eichengreen: 1993, 6).
With this plan, the United States emphasized the idea of an “integrated Europe” and made it clear that it would be more beneficial for the European countries to act as a whole. It thought both economic and political stability could have been achieved in Europe by following such an ideal (Uzunkaya, 2019: 180).
c. OEEC & OECD
This organization was founded in 1948 by Austria, Belgium, Denmark, France, Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey, England and West Germany. Its purpose was to coordinate the assistance provided under the Marshall Plan and ensure the development of Europe. Therefore, the establishment of the
OEEC (Organisation for European Economic Co-operation) was launched to play an important role in the integration of Europe. In 1960, with the participation of the USA and Canada, it became OECD (Organisation for Economic Cooperation and Development) (Alganer & Yılmaz, 2007: 304).
d. NATO and the Council of Europe
The North Atlantic Treaty Organization and the Council of Europe, established in 1949, were the first and most important institutional organizations of the European states. The Council of Europe, which was established in 1949 in London, headquartered in Strasbourg, with the membership of England, Belgium, France, Italy, Netherlands, Luxembourg, Denmark, Norway, Sweden and Ireland, was another initiative of the European states (Alganer & Yılmaz, 2016: 108). In 1942-43 Churchill came up with the idea of developing a “United States of Europe” operating under the “Council of Europe” by lowering trade barriers, free movement of people, a common army and a Supreme Court to adjudicate on disputes. Here, the need for a ‘closer union’ among all like-minded European countries was emphasized and the Council’s objectives were listed, including joint action on economic, social, cultural, scientific, legal and administrative matters, excluding defence. Although it made progress on human rights, cultural issues, and even limited economic cooperation, it was not the kind of body that European federalists wanted. While the OEEC and the
Council of Europe encourage Europeans to think and work together, antifederalists in Britain, Scandinavia and other countries had advocated that neither would promote significant regional integration (McCormick: 2002, 63-64).
e. The Schuman Declaration (May 9, 1950)
The establishment of a permanent partnership in Europe could only have beenachieved through the cooperation of Germany and France. The disputes between these two countries continued even after the Second World War, and the main contention was the control of the Ruhr region, the heart of German industry. Two French politicians (Foreign Minister R. Schuman and the head of the State Planning Organization J. Monnet) predicted that this problem could turn into a serious crisis, and they drafted an agreement on establishing an international organization tasked with controlling the production of coal & steel, which were the main materials of the war industry until that time: This declaration, called the “Schuman Declaration”, envisaged the joint management of the coal & steel industries of France and West Germany (Alganer & Çetin, 2007: 305).
Schuman offered solutions to the following two issues: The proposal for a supranational coal & steel organization for the Ruhr region and the inclusion of Germany in the framework of European integration without discrimination. This plan was formed within a structure identifying economic, political and social goals. The primary objective was to improve working conditions and living standards in these two sectors by modernizing the coal & steel industries. This declaration marked a turning point both in Franco-German relations and in European history (Alganer & Çetin, 2007: 305). Hence the desire to use economic and ultimately political integration as a tool to make war between France and Germany unthinkable (Eichengreen: 1993, 11).
Schuman noted that integration in Europe would not happen expeditiously based on a single plan, and stressed that the planned organization would be a serious step towards achieving unification in Europe. He also stressed that in order for its continuity, it wasnecessary to achieve greater and more visible achievements (McCormick, 2002: 15).
f. The Common Market- The European Coal and Steel Community
When Europe welcomed 1945, it was under difficult conditions in all respects. In addition to the threat emanating from the competition between the US and Soviet Unionprevalent during the Cold War, resistance and rebellion reached its peak in the colonies of some European states in different parts of the world. Moreover, neither the economic order nor the political system was stable on the continent. Additionally, the doubts of European states against each other were added to this equation. The unrest was on the increase. On the other hand, as European peoples were wary of wars, conflicts and tensions, there was a longing for an environment of cooperation & solidarity in the European community (Alganer & Yılmaz, 2016: 109-110). However, deep disagreements between governments and elite groups continued (McCormick, 2002: 58). The growing tensions and threats ushered by the Cold War, the need to restore the economy, and most importantly, the desire to prevent the revival of European nationalism and the outbreak of another war convinced both European nations andtheir peoples to explore the grounds for integration (McCormick, 2002: 56). During this period, the ideas of unity, which gained momentum after the Schuman Declaration, came to life with the European Coal and Steel Community (ECSC) established by the Paris Treaty of 1951 thatprovided for the unification of French-German coal and steel production. The reason behind the creation of this union was not only economic, but also political. The two mentioned commodities, coal and steel, formed the basis of the industry of France and Germany, and it was foreseen that the way for European integration could have been opened through bringing Franco-German competition for these two items to closure. Germany, France, Italy, Belgium, the Netherlands and Luxembourg had joined the treaty, and this treaty stipulated that this integration in the coal and steel sectors be governed by a body called the “High Authority”.This body consisted of representatives of the member states, but had supranational authority, and its task was to direct and oversee the sector (Alganer & Çetin, 2007: 305).
Although the membership was open to all European countries, it was started only with the country group called “six” (McCormick, 2002: 65). Each of the other European countries had different reasons for not participating. Great Britain was pursuing its interests outside the continent and had just nationalized the coal and steel industries, so it did not welcome the transfer of powers here to a supranational entity. Ireland, which has an agrarian-intensive economy was exporting its products to the English market. Therefore, it has calibrated its attitude accordingly. The distrust of Denmark and Norway against Germany had not yet subsided, and they kept their distance from that organization in the first place. Austria, Sweden and Finland had planned to prevent a possible hot conflict by taking a neutral position in the Cold War and adopted a lukewarm attitude toward the coal and steel community.Considering Portugal and Spain were under dictatorial regimes, what remained was Eastern Europe where there was Soviet domination in this region (McCormick, 2002: 66).
Political economy of Europe after 1945 started to reconfigure itself when the United States introduced new initiatives and institutions. In the aftermath of the war, each Western European nation-state had a separate goal for reconstruction. For example, although the objectives inherent in the Marshall Plan were almost entirely economic in nature , the ultimate goal was almost entirely political. This plan provided economic and political leverage to the United States in Western Europe. It is in this sense that the Marshall Plan, designed mainly for political purposes, represented a return to a position of superiority in the formulation of the U.S. national policy. In this respect, it cannot be claimed that the Marshall Aid saved Western Europe from economic collapse because it was in the main designed to safeguarding America’s own strategic interests. In other words, the US saw integration as a way to help western Europe recover from the ravages of war and to contribute to strengthening European (and American) security vis-á-vis the Soviet threat.
All conflicting states had been driven by the experience of the 1930s and the need to physically reconstruct the damage that World War II had inflicted on themselves. This had urged them to fight for an international trade & payments system that would better accommodate these goals than had been the case since 1930.
Although the Bretton Woods Agreements represented an attempt to solve this problem by combining the fixed exchange rate system with various institutional innovations, the policies pursued by theEuropean governments to achieve those goals showed that such arrangements did not solve anything and had no considerable practical value as the basis for post-war reconstruction. Because, while there were convergences in terms of their international stances, the objectives of economic policiesdomestically pursued in those countries were very divergent (as between England and Italy).
In short, Western Europe was able to build a successful reconstruction and institutionalized model of economic interdependence that served their separate national interests. However, the limited integration achieved still hinges on the pursuit of narrow self-interests by powerful nation-states. Thus, this integration was primarily a product of national bureaucracies rather than what the great statesmenhad in their minds. The integration process succumbed in many instances to domestically driven economic concerns and interests. For example, the Schuman Plan was based on the evolution of French politics over two and a half years. Therefore, although many attempts were made to create a common economic ground, each European state ultimately pursued its own national interests.
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*Semanur Işıksoy is a senior student at Hacettepe University, Department of International Relations. She is also doing a minor in the Department of Psychology. She is generally interested in International Law, European Union, International Security Studies, International Relations Theories and Foreign Policy.