Postwar: A History of Europe Since 1945 (67 page)

In the course of the next thirty years vast numbers of Europeans abandoned the land and took up work in towns and cities, with the greatest changes taking place during the 1960s. By 1977, just 16 percent of employed Italians worked on the land; in the Emilia-Romagna region of the northeast, the share of the active population engaged in agriculture dropped precipitately, from 52 percent in 1951 to just 20 percent in 1971. In Austria the national figure had fallen to 12 percent, in France to 9.7 percent, in West Germany to 6.8 percent. Even in Spain only 20 percent were employed in agriculture by 1971. In Belgium (at 3.3 percent) and the UK (at 2.7 percent) farmers were becoming statistically (if not politically) insignificant. Farming and dairy production became more efficient and less labor-intensive—especially in countries like Denmark or the Netherlands, where butter, cheese and pork products were now profitable exports and mainstays of the domestic economy.

As a percentage of GDP, agriculture fell steadily: in Italy, its share of national production slipped from 27.5 percent to 13 percent between 1949 and 1960. The chief beneficiary was the tertiary sector (including government employment), where many of the former peasants—or their children—ended up. Some places—Italy, Ireland, parts of Scandinavia and France—moved directly from an agricultural to a service-based economy in a single generation, virtually bypassing the industrial stage in which Britain or Belgium had been caught for nearly a century.
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By the end of the 1970s, a clear majority of the employed population of Britain, Germany, France, the Benelux countries, Scandinavia and the Alpine countries worked in the service sector—communications, transport, banking, public administration and the like. Italy, Spain and Ireland were very close behind.

In Communist Eastern Europe, by contrast, the overwhelming majority of former peasants were directed into labour-intensive and technologically retarded mining and industrial manufacture; in Czechoslovakia, employment in the tertiary, service sector actually
declined
during the course of the 1950s. Just as the output of coal and iron-ore was tailing off in mid-1950s Belgium, France, West Germany and the UK, so it continued to increase in Poland, Czechoslovakia and the GDR. The Communists’ dogmatic emphasis on raw material extraction and primary goods production did generate rapid initial growth in gross output and
per capita
GDP. In the short run the industrial emphasis of the Communist command economies thus appeared impressive (not least to many Western observers). But it boded ill for the region’s future.

The decline of agriculture alone would have accounted for much of Europe’s growth, just as the shift from country to town, and farming to industry, had accompanied Britain’s rise to pre-eminence a century before. Indeed, the fact that there was no remaining surplus agricultural population in Britain to transfer into low-wage manufacturing or service employment, and therefore no gain in efficiency to be had from a rapid transition out of backwardness, helps explain the relatively poor performance of the UK in these years, with growth rates consistently lagging behind those of France or Italy (or Romania, come to that). For the same reason, the Netherlands outperformed its industrialized Belgian neighbor in these decades, benefiting from the ‘one-time’ transfer of a surplus rural workforce into hitherto undeveloped industrial and service sectors.

The role of government and planning in the European economic miracle is harder to gauge. In some places it appeared all but superfluous. The ‘new’ economy of northern Italy, for example, drew much of its energy from thousands of small firms—composed of family employees who often doubled as seasonal agricultural workers—with low overheads and investment costs, and paying little or no tax. By 1971, 80 percent of the country’s workforce was employed in establishments with fewer—often far fewer—than 100 employees. Beyond turning a blind eye to fiscal, zoning, construction and other infractions, the part played by the Italian central authorities in sustaining the economic efforts of these firms is unclear.

At the same time the role of the state was crucial in financing large-scale changes that would have been beyond the reach of individual initiative or private investment: non-governmental European capital funding remained scarce for a long time, and private investment from America did not begin to substitute for Marshall Aid or military assistance until the later fifties. In Italy, the
Cassa per il Mezzogiorno
, backed by a large loan from the World Bank, invested initially in infrastructure and agrarian improvements: land reclamation, road building, drainage, viaducts, etc. Later it turned to supporting new industrial plants. It offered incentives—loans, grants, tax concessions—for private firms willing to invest in the South; it served as the vehicle through which state holdings were directed to locate up to 60 percent of their new investment in the South; and in the decades after 1957 it established twelve ‘growth areas’ and thirty ‘growth nuclei’ spread throughout the southern third of the peninsula.

Like large-scale state projects elsewhere, the
Cassa
was inefficient, and more than a little corrupt. Most of its benefits went to the favored coastal regions; much of the new industry that it brought in was capital-intensive and thus created few jobs. Many of the smaller, ‘independent’ farms formed in the wake of agrarian reform in the region remained dependent on the state, making of Italy’s
Mezzogiorno
a sort of semi-permanent welfare region. Nevertheless, by the mid-1970s
per capita
consumption in the South had doubled, local incomes had risen by an average of 4 percent per annum, infant mortality had halved and electrification was well on the way to completion—in what had been, within the memory of a generation, one of the most forlorn and backward regions of Europe. Given the speed at which the industrial North was taking off—in some measure, as we shall see, thanks to Southern workers—what is striking is not the failure of the
Cassa
to work an economic miracle south of Rome, but the fact that the region was able to keep up at all. For this, the authorities in Rome deserve some credit.

Elsewhere, the role of government varied; but it was never negligible. In France, the state confined itself to what became known as ‘indicative planning’—using the levers of power to direct resources into selected regions, industries and even products, and consciously compensating for the crippling Malthusian under-investment of the pre-war decades. Government officials were able to exercise fairly effective control over domestic investment especially because, throughout these initial postwar decades, currency laws and the limited mobility of international capital held back foreign competition. Restricted in their freedom to seek out more profitable short-term returns abroad, bankers and private lenders in France and elsewhere invested at home.
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In West Germany, where the abiding inter-war memory was of conflict and instability (political and monetary alike), the authorities in Bonn were much less active than their French or Italian counterparts in designing or directing economic behavior, but paid far closer attention to arrangements aimed at preventing or mitigating social conflict, notably between employers and workers. In particular, they encouraged and underwrote negotiations and ‘social contracts’ designed to reduce the risk of strikes or wage inflation. As a consequence, private industries (and the banks with whom they worked or who owned them) were more disposed to invest for their future because they could count on long-term wage restraint from their workers. Shop-floor workers in West Germany, as in Scandinavia, were compensated for this comparative docility by the assurance of employment, low inflation and, above all, comprehensive public welfare services and benefits financed out of sharply progressive rates of taxation.

In Britain, the government intervened more directly in the economy. Most of the nationalizations undertaken by the Labour government of 1945-51 were left in place by the Conservative governments that succeeded it. But both parties foreswore long-term economic planning or aggressive intervention in labour-management relations. Such active involvement as there was took the form of demand-management—manipulating interest rates and marginal tax bands to encourage saving or spending. These were short-term tactics. The main
strategic
objective of British governments of all colors in these years was to prevent a return to the traumatic levels of unemployment of the 1930s.

Throughout Western Europe, then, governments, employers and workers conspired to forge a virtuous circle: high government spending, progressive taxation and limited wage increases. As we have seen, these goals were already inscribed in the widespread consensus, forged during and after the war, on the need for planned economies and some form of ‘welfare state’. They were thus the product of government policies and collective intention. But the facilitating condition for their unprecedented success lay beyond the direct reach of government action. The trigger for the European economic miracle, and the social and cultural upheaval that followed in its wake, was the rapid and sustained increase in Europe’s population.

Europe had seen demographic growth spurts in the past—most recently in the mid-nineteenth century. But these had not typically ushered in sustained population increases: either because traditional agriculture could not support too many mouths, or because of wars and disease, or else because the newly excess population, especially the young adults, emigrated overseas in search of a better life. And in the twentieth century, war and emigration had kept population growth in Europe well below what might have been expected from the increased birth rate of earlier decades.

By the eve of World War Two, the knock-on effects of the loss of a generation of young men in World War One, together with the economic Depression and the civil wars and political uncertainty of the 1930s, had reduced the birth rate in parts of Western Europe to historic lows. In the UK there were just 15.3 live births per thousand people; in Belgium 15.4; in Austria 12.8. In France, where the birth rate in 1939 stood at 14.6 per thousand, deaths exceeded births not only during World War One and in 1919 and again in 1929, but also for every year from 1935 to 1944. There, as in civil war-era Spain, the national population was steadily falling. In the rest of Mediterranean Europe and east of Vienna the birth rate was higher, sometimes double the rate of the West. But elevated levels of infant mortality and higher death rates in all age groups meant that even there population growth was unremarkable.

It is against this background, and that of the additional demographic calamity of the Second World War itself, that the post-war baby boom has to be understood. Between 1950 and 1970 the population of the UK rose by 13 percent; that of Italy by 17 percent. In West Germany the population grew in these years by 28 percent; in Sweden by 29 percent; in the Netherlands by 35 percent. In some of these cases the indigenous increase was boosted by immigration (of returning colonials to the Netherlands, of East German and other refugees to the Federal Republic). But exogenous factors played only a small role in France: between the first post-war census of 1946 and the end of the sixties, the French population grew by almost 30 percent—the fastest rate of increase ever recorded there.

The striking feature of Europe in the nineteen fifties and sixties—it can immediately be gleaned from any contemporary street scene—was thus the number of children and youths. After a forty-year hiatus, Europe was becoming young again. The peak years for post-war births in most countries were 1947-1949—in 1949 869,000 babies were born in France, compared to just 612,000 in 1939. By 1960, in the Netherlands, Ireland and Finland, 30 percent of the population was under fifteen years old. By 1967, in France, one person in three was under twenty. It was not just that millions of children had been born after the war: an unprecedented number of them had survived.

Thanks to improved nutrition, housing and medical care, the infant mortality rate—the number of children per thousand live births who died before reaching their first birthday—fell sharply in Western Europe in these decades. In Belgium it dropped from 53.4 in 1950 to 21.1 in 1970, with most of the change coming in the first decade. In Italy it fell from 63.8 to 29.6, in France from 52.0 to 18.2. Old people lived longer too—at least in Western Europe, where the death rate fell steadily over the same period. The survival rate of infants in Eastern Europe also improved, admittedly from a far worse starting figure: in Yugoslavia, child mortality rates fell from 118.6 per thousand in 1950 to 55.2 twenty years later.
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In the Soviet Union itself, rates fell from 81 per thousand in 1950 to 25 in 1970, though with wide variations among the different republics. But fertility rates in Communist states tailed off rather sooner than in the West, and from the mid-sixties they were more than matched by steadily worsening death rates (especially among men).

There are many explanations for the recovery of European fertility after World War Two, but most of them reduce to a combination of optimism plus free milk. During the long demographic trough of 1913-1945, governments had sought in vain to foster procreation: compensating through patriotic urging, family ‘codes’ and other legislation for the chronic shortage of men, housing, jobs and security. Now—even before post-war growth had translated into secure employment and a consumer economy—the coincidence of peace, security and a measure of state encouragement sufficed to achieve what no amount of pro-natal propaganda before 1940 had been able to bring about.

Demobilized soldiers, returning prisoners of war and political deportees, encouraged by rationing and allocation schemes that favored married couples with children, as well as cash allowances for each child, took the first opportunity to marry and start a family. And there was something else. By the early nineteen-fifties, the countries of western Europe could offer their citizens more than just hope and a social safety net: they also provided an abundance of jobs. Through the course of the 1930s the average unemployment rate in western Europe had been 7.5 percent (11.5 percent in the UK). By the 1950s it had fallen below 3 percent everywhere except Italy. By the mid-1960s the European average was just 1.5 percent. For the first time since records were kept, western Europe was experiencing full employment. In many sectors there were now endemic labor shortages.