The Rehabilitation of Europe

The sheer scale of the European calamity opened new opportunities after the war changed
everything.
A return to the way things had been before 1939 was out of the question almost everywhere.
Resistance was thus everywhere implicitly revolutionary.
To reject a society that had produced Fascism led one naturally'to a dream of revolution.
For this new generation, politics was therefore about resistance—resistance to authority,
resistance to conventional social or economic arrangements, resistance to the past
For this new generation, politics was therefore about resistance—resistance to authority,
resistance to conventional social or economic arrangements, resistance to the past.
“Turned us all into contestataires” - Claude Bourdet hence, protesters.
 Optimistic mood emerged

The chief impediment to radical change in the aftermath of Hitler's defeat was not the
reactionaries or Fascists, but the legitimate governments-in-exile. They saw the local resistance
organizations as a problem rather than as allies: careless youngsters who would need to be
disarmed and returned to civilian life, leaving public affairs in the hands of a political class duly
cleansed of collaborators and traitors. Anything less would mean anarchy—or else an indefinite
occupation by Allied armies.

The wartime resistance groups, organized by 1944-45 into various political movements, were
just as suspicious in return. For them, the politicians, functionaries and courtiers who had
escaped the Occupation were doubly discredited: by their pre war errors and by their subsequent
absence.

The returning authorities were willing to compromise in policy—social and economic reforms.
They insisted was what De Gaulle perceived as an 'orderly transition'. Since this was also the
preference of the Allied occupying forces, West and East, the illusions of the Resistance were
soon shattered. In eastern Europe, the Soviets determined the shape of post-war governments and
directed their actions. In western Europe, provisional authorities took office pending new
elections. And in every case the resistance movements were forced to hand weapons and disband
their organizations.
 Resistance to restoration of the institutional status quo. (examples)
The demobilization of the resistance was greatly facilitated by Soviet strategy, which favoured
the restoration of parliamentary regimes in Europe.
Plans for a post-war 'Resistance Party' failed everywhere. (examples)

Europeans in the immediate post-war years found themselves ruled by coalitions of left and left-
centre politicians rather similar to the Popular Fronts of the 1930s. The only pre-war political
parties able to operate normally in these years were those with anti-Fascist credentials—or, in
Soviet-occupied eastern Europe, those to whom it suited the new authorities to ascribe such
credentials for the time being. In practice this meant Communists, Socialists and a handful of
liberal/radical groups together with Christian Democratic parties, constituted government in the
first post-war years and brought policies and men of the Popular Front era.

Experienced politicians & Resistance share common anti-Fascist ethos and a desire for change.
The existing parties of the Left had gained immensely by their engagement in the wartime
resistance.
If experienced party politicians had little difficulty displacing wartime activists after 1945 this
was because the Resistance were rather vague on specifics. Resistance units had been too
preoccupied fighting, or just surviving, to busy themselves with detailed plans for post-war
legislation But above all the resisters were handicapped by a lack of experience.

Resisters and politicians agreed on ‘planning’. The disasters of the inter-war decades—the
missed opportunities after 1918, the great depression of 1929, the inequalities, injustices and
inefficiencies of laissez-faire capitalism that led authoritarian temptation, the brazen indifference
of an arrogant ruling elite and the incompetence of political class—all connected by failure to
organize society better. If democracy was to work, it would have to be planned.

Many ended up as Fascists out of frustration at their Party's inadequate response to the Great
Depression.
In September 1943, Speer and Jean Bichelonne, worked out a system of tariff reductions based
on inter-war 'plan-isť ideas. In 'Jeune Europe', a club founded in 1933 for young thinkers and
politicians keen to set a new direction in policy making.
'Planning', in short, had a complicated history.

In Britain it was the war above all that placed the government at the heart of economic life.
What planning was really about was faith in the state.
The vision of Clement Attlee, the British Labour leader whose party defeated Churchill's
Conservatives in 1945, nicely captured the contemporary mood: what was needed now were
'well-planned, well- built cities and parks and playingfields,homes and schools, factories and
shops.' There was a great faith in the ability (and not just the duty) of government to solve large-
scale problems by mobilizing and directing people and resources to collectively useful ends. This
idea particularly attracted socialists but was accepted generally.
What was 'Planning'? The term is misleading. What all planners had in common was belief in an
enhanced role for the state in social and economic affairs. Beyond this there was great variation,
usually a consequence of distinctive national political traditions. The real issue was control—of
industries and social and economic service. (Between government and private enterprise)
Most countries of western Europe had rapidly growing public sectors.
One fifth of France's total industrial capacity was in state ownership by May 1946.

Meanwhile, on December 4th 1945, Jean Monnet presented President De Gaulle with his Plan de
Modernisation et d'Équipement. Monnet set up Modernization Commissions for various indus
tries and these in turn delivered proposals and sectoral plans.
Under its auspices France became thefirstwestern country to commit itself wholeheartedly to
economic growth and modernization as public policy. (Success also due to France-German
relationship)
Monnet Plan (emergency measure on France's post-war crisis)  terms of Marshall Aid.
Providing government with a strategy/lever for actively fostering certain favoured objectives.
French planning was never more than 'indicative': it only ever set targets, not production quotas.
In this respect it was quite unlike Soviet planning, whose char acteristic feature (and prime
defect) was its insistence upon arbitrary and rigid out put figures by sector and by commodity.

The chief purpose of planning in post-war continental Europe was public investment. At a time
of acute capital shortage and with huge demand for investment in every sector, government
planning consisted of hard choices: where to place the limited resources of the state and at whose
expense. Eastern Europe: on roads, railways, factories, utilities (little for food and housing, much
less medical, educational, and other social services). Western Europe was not very different.
Deliberate neglect of the consumer goods sector and the diversion of scarce national resources to
a handful of key industrial sectors made long-term economic sense: but it was a high-risk
strategy. (France and Italy was threatened with strikes, demonstrations)

The economics of Planning drew on lessons of the 1930s—a successful strategy for post-war
recovery must preclude any return to economic stagnation, depression, protectionism and above
all unemployment.
But the 'welfare state'—social planning—was more than just a prophylactic against political
upheaval. Our present discomfort with notions of race, eugenics, 'degeneration' and the like
obscures the important part these played in European public thinking during the first half of the
twentieth century.
Rudimentary welfare provisions of one kind or another were already widespread before 1945,
national insurance and pension schemes + Compulsory unemployment insurance
None of these arrangements, not even those of the Nazis, represented com prehensive welfare
systems. (AD HOC and temporary)
Nowhere was there yet any recognition of an obligation upon the state to guarantee a given set of
services to all citizens, whether male or female, employed or workless, old or young.

It was the war that changed all this. Just as World War One had precipitated leg islation and
social provisions in its wake—if only to deal with the widows, or phans, invalids and
unemployed of the immediate post-war years—so the Second World War transformed both the
role of the modern state and the expectations placed upon it.
Every European state in the post-war years financed most of these resources (post-1945
European welfare states varied). The provision of social services chiefly concerned education,
housing and medical care, as well as urban recreation areas, subsidized public transport,
publicly-funded art and culture and other indirect benefits of the interventionary state. Social se
curity consisted chiefly of the state provision of insurance—against illness, unem ployment,
accident and the perils of old age.

The important differences lay in the schemes set in place to pay for the new public provisions.
Some countries collected revenue through taxation and provided free or heavily-subsidized care
and services, In other countries cash benefits were paid to citizens according to socially-
determined criteria of eligibility, or citizens would be expected to pay up front but could then
claim back expenses from the state.
Comprehensive welfare systems, however, are inherently re-distributive. Their universal
character and the sheer scale on which they operate require the transfer of resources—usually
through taxation—from the privileged to the less well off.

Beveridge made four assumptions about post-war welfare provision: that there should be a
national health service, an adequate state pension, family allowances and near- full employment.
 normal situation of a healthy post-war adult was to be in full-time paid work.
Generous provision could be made for unemployment insurance, pensions, family allowances,
medical and other services, since these would be paid for by levies on wage packets, as well as
by progressive taxation of the working population at large.
RESULT in Britain:
 Non-working women with no private health insurance of their own got coverage for the
first time.
 The humiliation and social dependency of the old Poor Law/Means Test system was
gone.
 Medical and dental services were provided free of charge at the point of service
 Pension provision was made universal
 Family allowances (at 5/- [25 p] per week for second and subsequent children) were
introduced.

*The same is true for the post-war generation across the European continent, although nowhere
outside Britain was comprehensive social coverage attempted on so generous a scale and all at
once. Thanks to the coming of welfare states Europeans ate more and (mostly) better, lived
longer and healthier lives, were better housed and clothed than ever before. Above all, they were
more secure. It is not by chance that most Europeans, when asked what they think of their public
services, nearly always speak first of the safety net of insurance and pension provisions which
the post-war state has provided for them.

The Welfare State did not come cheap. Why were Europeans willing to pay so much for
insurance and welfare provisions, at a time when life was still truly hard and material shortages
endemic?
1. Because times were difficult, the post war welfare systems were a guarantee of a certain
minimum of justice, or fairness. This was not the spiritual and social revolution for which
 many in the wartime Resistance had dreamed, but it was a first step away from the
hopelessness and cynicism of the pre-war years.
2. Welfare states of western Europe were not politically divisive, they were socially
redistributive, but did not ‘soak’ the rich, greatest advantage was felt by the poor but real
long-term beneficiaries were middle class (professional/commercial). Both a better
quality of life and more disposable income. The European welfare state bound social
classes closer together than ever before, with a common interest in its preservation and
defense.
3. Corresponded to the proper tasks of government. The post-war state across Europe was a
'social' state, with implicit responsibility for the well-being of its citizens. In the aftermath
of depression, occupation and civil war, the state—as an agent of welfare, security and
fairness—was a vital source of community and social cohesion.

The post-1945 urge for change went well beyond the provision of welfare.
Agrarian reform, which many well-informed con temporaries saw as Europe's most pressing
dilemma (overwhelming majority of Europe's pre dominantly rural population lived in conditions
of indebted penury).
 Best arable were in the hands of a few wealthy landowners, often absent and adamantly
opposed to any improvement in the conditions of their land, their tenants or their workers
 Long decline in agricultural prices relative to industrial ones, a process since the 1870s
by the import of cheap grain and later meat from the Americas and the British
Dominions.

The agrarian problem was thus twofold: how to improve the economic prospects of the peasant
and thereby wean him from authoritarian temptation (fascism appealed easily to desperate
peasants).
First objective was attempted after WW1 through land reforms but failed due to disastrous
economic circumstances in interwar period. After WW2 agrarian reform was reattempted
(East Europe: whole classes of landed gentry and large farmers, in Poland, East Prussia,
Hungary, Romania and Yugoslavia simply disappeared. West: Italy …)
The political dimensions of the agrarian problem were indirectly addressed in the broader
package of political reforms introduced in the first post-war years.
 Christian Democrat parties securing power

The prospects for political stability and social reform in post-WW2 Europe all depended, in the
first place, on the recovery of the continent's economy. No amount of state planning or political
leadership could conjure away the immense task facing Europeans in 1945. The most obvious
economic impact of the war was on housing stock (examples)
The problem of homelessness was the most obvious consequence.
The second area of evident damage was in transport—merchant fleets, railway lines, rolling
stock, bridges, roads, canals, and tramways. So even if mines and factories could produce
necessary goods, they could not move them—many European coal mines were working again by
December 1945, but the city of Vienna was still without coal.
The visual impact was the worst: many countries looked battered and broken beyond any hope of
recovery. It was true that in almost every European country involved in the WW2 the national
economy shrunk when compared even with the mediocre performance of the inter-war years.
But war is not always an economic disaster—on the contrary, it can be a powerful stimulus to
rapid growth in certain sectors. Thanks to WW2 the US surged into an unassailable commercial
and technological lead, much as Britain had done during the Napoleonic wars.
The dramatically skewed nature of much of the damage, such that it was people and places that
suffered terribly while factories and goods were relatively spared, contributed to an unexpectedly
speedy recovery after 1945 of core economic sectors. Engineering industries flourished during
the war. The UK, the USSR, France, Italy and Germany (as well as Japan and the USA) all
emerged with a larger stock of machine tools than they started with.

WW2 ~ Before the war neither Switzerland nor Sweden (stayed “neutral” but provided Nazi
Germany materials for war) had been especially prosperous—indeed they contained significant
regions of rural poverty. But the lead they secured during the war has proved lasting: both are
now at the top of the European league and have been there steadily for four decades.

East and West Europe’s (Norway worse off due to fishery damage) material damage was
repaired with remarkable speed.
Over the following year, 1947, the rest of western and most of eastern Europe, fuel shortages and
inadequate communications were no longer an impediment to economic recovery.
Germanys recovered most efficiently.
Tribute to the efforts of the local population who worked with a striking singularity of purpose to
rebuild their shattered country.
One reason for the speed of Germany's initial recovery was that once the work ers' houses had
been rebuilt, and the transport networks put back in place, indus try was more than ready to
deliver the goods. (91% of Volkswagen machinery survived the war, Ford of Germany was
largely undamaged, wartime investment 9% →30% industrial equipment less than 5 years old in
1945).

1947 crisis (fundamental decisions had to be made after war)

1. Fundamental food shortage problem (everywhere except Sweden and Switzerland)
a. Part of the problem was that western Europe could no longer turn to the gran arise
of eastern Europe on which it had traditionally depended.
b. Brutal winter and summer seasons shortened agricultural yields heavily and
railways were paralyzed making transport impossible
c. Although food and coal could be purchased from America it would have had to be
paid back in hard currency, $.
2. Two structural dilemmas
a. Disappearance of Germany from European economy (Before the war Germany
had been a major market for most of central and eastern Europe)
b. USA dollar crisis (Most other European countries did not have currencies in
which to trade, UK and France increased national debt in imports, running out of
cash).
i. In Germany there was no functioning currency. The black
marketflourishedand cigarettes were the accepted medium of exchange
Marshall's plan for a European Recovery Program (~1952)
1. To begin with, beyond certain framing conditions it was to be left to the Europeans to decide
whether to take American aid and how to use it (West agreed, East disagreed)
2. Secondly, the assistance spread across a period of years and start a strategic program of
recovery and growth rather than a disaster fund.
It laid upon a requirement to negotiate and confer with each other, since trading intended to
move from the bilateral to the multilateral as soon as possible. It constrained governments,
businesses and labour unions to collaborate in increased rates of output. And above all, it
blocked return of inter-war economy: under-production, mutually destructive protectionism, and
a collapse of trade.
3. Thirdly, the sums in question were very substantial indeed.

United States had already spent many billions of dollars in grants and loans to Europe
UK $4.4 billion
France $1.9 billion in
Italy exceeded $513 million by mid-1947
Poland $251 million
Denmark $272 million
Greece $161 million
& Many other countries were indebted to the US as well
(Loans served to fill in emergency economic situations (not long-term investment but essentials)

European Recovery Program (ERP), from July 1947 to June 1949

(Aided partly by the Marshall aid)
On July 2nd the Soviet foreign minister Vyacheslav Molotov walked out
Two days later Britain and France formally invited representatives of 22 European countries
(excluding only Spain and the Soviet Union) to discuss the proposals.
No future Communist state took part in the European Recovery Programme or received a dollar
in Marshall aid
Stalin and Molotov were suspicious of American motives—the terms Marshall was proposing
were incompatible with the closed Soviet economy
Czechoslovakia's exclusion from the Marshall Aid programme was an economic and political
catastrophe for the country. The same is true of the 'choice' imposed on every other country in
the region, and for the Soviet Union itself. His decision to stand aside from the European
Recovery Program was one of Stalin's greatest strategic mistakes.
∴ The aid was confined to the West and marked a parting of the ways between the two halves of
the continent.

'Productivity missions', funded by the Marshall Plan, brought to US thousands of managers,

technicians and trade unionists from Europe to study the American way of business.

Organization for European Economic Cooperation (OEEC) urged upon their European
colleagues the virtues of freer trade, international collaboration and inter-state integration.
Greatest achievement: European Payments Union, Obj: 'multi- lateralize' European trade by
establishing a clearinghouse for debits and credits in European currencies.

A more conventional American perspective, however, freetrade and its benefits were a sufficient
objective and justification for the ERP programme.
The Marshall Plan would benefit the USA by restoring her major trading partner, rather than by
reducing Europe to an imperial dependency. – Allen W. Dulles

Deeper question was whether Europe and Europeans had lost control of their destiny, whether
thirty years of murderous intra-European conflict had not passed the fate of the continent over to
the two great peripheral powers, the US and the Soviet Union.
Europe’s vulnerability was seen as an opportunity for accession into Communism by Stalin (this
was a problem for US)

The better-informed European recipients of Marshall Aid, notably Bevin and Georges Bidault,
his counterpart at the French Foreign Ministry on the Quai d'Orsay, understood this perfectly
well.
But European domestic interest in the European Recovery Program itself, of course, and the uses
to which it was put, varied considerably from country to country (examples)

How successful was the European Recovery Program? Western Europe indu bitably recovered,
and precisely over the period (1948-1951) of the Marshall Plan.
Between 1947 and 1951the combined GNP of western Europe rose by 30%.
The real benefits were psychological. Indeed, one might almost say that the Marshall Plan helped
Europeans feel better about themselves. It helped them break decisively with a legacy of
chauvinism, depression and authoritarian solutions.

As the British diplomat Oliver Franks put it: 'The Marshall Plan was about putting American
dollars in the hands of Europeans to buy the tools of re covery.' The rest—convertible currencies,
good labour relations, balanced budgets and liberalized trade—would depend on Europeans
themselves.

Similar situation both times, After World War One the US gave only loans, not grants; and these
were nearly always supplied through the private capital market. As a result they carried a price
tag and were usually short-term → during economic depression, the effect was ‘disastrous’