The European Economy since 1945: Coordinated Capitalism and Beyond

Article excerpt

* The European Economy since 1945: Coordinated Capitalism and Beyond By Barry Eichengreen Princeton, N.J.: Princeton University Press, 2006. Pp. xvii, 495. $35.00 cloth.

Barry Eichengreen's book The European Economy since 1945 presents a detailed introduction to the economic history of western Europe since World War II, plus a chapter on the history of central planning in eastern Europe and another on the process of transition from the economic environment typical of the Soviet Empire to a free-market environment and the European Union. Those who read it all will not be disappointed. They will find comprehensive information on the postwar situation and the reconstruction, as well as a thorough description of the integration process that led to the Treaty of Rome (1957) and the European Union, with particular emphasis on the monetary aspects. The hurried reader will be satisfied, too, because each of Eichengreen's chapters can also be approached as a self-contained, well-researched, and thought-provoking essay in its own right, dealing clearly yet comprehensively with periods and episodes in recent western European history.

Not surprisingly, the author had to make several choices: whether to insist on quantitative technicalities or to discuss the extent to which political contingencies played a role and affected economic events, whether to make an effort to represent the European phenomenon as one general picture or to emphasize the national peculiarities, and so on. The author seems to have made his decisions by identifying the typical reader for whom he was writing the book: someone curious to know what really happened in Europe during the past sixty years, eager to have a broad representation before diving into more rigorous economic and political investigations or developing his own thoughts.

Of course, the author does not offer simply a list of events and comments. The introduction serves readers who seek a wide-ranging, encompassing theoretical framework. Eichengreen's organization is simple and effective: western Europe's economic history may be divided into three economic stages and two institutional periods.

Stage one covers the first fifteen post-World War II years. The central idea is that during this period western Europe took advantage of its human capital and its prewar institutional traditions to absorb technologies previously developed in the United States. As a result, it transformed its rather antiquated production structure, and productivity increased at impressive speed. This development was not a miracle because (incomplete) catching up can hardly be defined in such terms. After all, as the author recalls toward the end of the book, there was no need to invent much; in the late 1940s and in the 1950s, Europeans had only to follow the American lead. Nevertheless, their catch-up effort was a big success, and things might easily have gone wrong, especially if the political and institutional conditions had been different. For example, soon after the end of World War II, the Communists might have taken over the government in Italy; without the Cold War, Germany might have been forced into permanent deindustrialization; and at the end of Franco's regime, Spain might have fallen into stalemate or institutional instability.

Stage two covers the 1960s and part of the 1970s, when the opportunities for technological catch-up became almost exhausted, and western Europe came close to its potential production capacity. This stage's distinctive feature was the gradual opening up to international trade. In particular, the Common Market was established and came into operation, and the acceptance of an increasing degree of currency convertibility created new incentives to sustain investment and to engage in riskier ventures.

Finally, stage three includes the years when European producers had to find new sources to promote (intensive) growth. Eichengreen maintains that this search continues to be the main European challenge today, when the rules of the game that promoted success in the past (cooperation among the social classes, encouraged and guaranteed by the politicians) have become a handicap to entrepreneurship, autonomous technological progress, and hence ultimately faster growth in living standards. …