IB History Economic Changes Including European Economic Community Notes

Economic Changes and the EEC: Prosperity Through Integration

Economic recovery after the Second World War

1. Western Europe faced bombed cities, disrupted trade, food shortages, and weak currencies after 1945.
   • Industrial regions in France, Germany, Italy, Belgium, and the Netherlands needed coal, steel, transport links, and stable credit to recover.
   • Recovery was also political because poverty and inflation strengthened communist parties in France and Italy.
2. From 1948, American aid through the Marshall Plan helped Western governments import raw materials, rebuild production, and stabilise budgets.
   • The aid worked best where governments used it with planning, currency reform, and investment in export industries. Recovery was domestic as well as American-backed.
   • The OEEC coordinated aid distribution and gave Western governments practice in economic cooperation before the EEC existed.
3. Many Western states built mixed economies that combined private ownership, state planning, welfare systems, and high employment goals.
   • France used indicative planning through the Monnet Plan, while West Germany built a social market economy under Ludwig Erhard.
   • This model made growth politically useful because it linked capitalism to social security. Prosperity became a Cold War argument.

From coal and steel to the Treaty of Rome

1. The ECSC in 1951: France, West Germany, Italy, Belgium, the Netherlands, and Luxembourg pooled coal and steel production through the European Coal and Steel Community.
   • Coal and steel mattered because they were the basic materials of heavy industry and modern war. Franco-German rivalry was managed through shared institutions.
   • The ECSC helped make West German recovery acceptable to France by placing key industries under common supervision. Control and recovery moved together.
2. The Treaty of Rome in 1957: the same six states founded the European Economic Community and committed to building a common market.
   • The EEC aimed to remove tariffs between members and create a common external tariff against non-members. Trade liberalisation was central.
   • It also created institutions such as the Commission, the Council, the Parliamentary Assembly, and the Court of Justice.

1. The four freedoms: the common market was built around freer movement of goods, services, labour, and capital among member states.
   • This widened markets for firms and gave workers more chances to move where jobs were available. Labour mobility remained uneven but symbolically important.
   • The EEC did not abolish national economies overnight because taxation, welfare, industrial policy, and budgets remained mainly national. Sovereignty was pooled selectively.

Growth, trade, and the common market

1. Trade between EEC members grew rapidly in the 1960s, with intra-community trade rising several times over in the first decade.
   • Lower tariffs encouraged firms to sell across borders and reorganise production for larger markets. Scale helped industries become more competitive.
   • West German exports benefited strongly from access to neighbouring markets, while French agriculture gained through protected prices. Uneven gains were built into the bargain.
2. The Common Agricultural Policy: introduced from 1962, the CAP guaranteed prices and protected farmers inside the EEC.
   • France supported the CAP because its large farm sector gained subsidies and secure markets. French support helped balance West German industrial strength.
   • The policy raised food production and rural incomes, but it also created high budget costs and surplus production. Butter mountains and wine lakes became shorthand for waste.
3. The “golden age”: between the early 1950s and early 1970s, Western Europe experienced high growth, rising wages, and wider consumer ownership.
   • Households bought cars, televisions, washing machines, and refrigerators on a scale unknown before the war. Consumer society changed everyday expectations.
   • Growth came from reconstruction, productivity gains, cheap energy, American demand, and European trade integration. No single cause explains the boom.
4. Economic growth funded public housing, pensions, education, healthcare, and unemployment protection across much of Western Europe.
   • The British National Health Service, West German social insurance, and Scandinavian welfare systems reflected different national models.
   • The welfare state helped capitalism answer communist criticism by promising security as well as growth. Social legitimacy mattered in the Cold War.

Britain and the problem of entry

1. British leaders preferred Commonwealth trade, global finance, and a looser free-trade model over the supranational features of the EEC when it launched in 1957.
   • Britain helped create EFTA in 1960 with states including Sweden, Norway, Denmark, Austria, Switzerland, and Portugal.
   • EFTA reduced tariffs on industrial goods but lacked the EEC’s deeper political and agricultural structures. Loose cooperation could not match the EEC’s momentum.
2. By the early 1960s, the EEC economies were growing faster than Britain, and Commonwealth trade seemed less able to sustain British influence.
   • Prime Minister Harold Macmillan applied for membership because exclusion looked economically costly and diplomatically isolating.
   • British entry also raised questions about food prices, Commonwealth imports, farm policy, and relations with the United States.
3. De Gaulle’s vetoes: French President Charles de Gaulle blocked British applications in 1963 and 1967.
   • He argued that Britain’s economy, Commonwealth ties, and special relationship with Washington made it an awkward fit for the EEC.French leadership was also at stake.
   • The vetoes showed that the EEC was not an open economic club. It was a political project shaped by member-state power. Membership required consent from existing members.
4. The 1973 enlargement: Britain, Ireland, and Denmark joined the EEC after de Gaulle left office, creating the first major enlargement.
   • Norway negotiated entry but rejected membership in a 1972 referendum, showing that Northern European voters could resist integration.
   • Britain confirmed membership in a 1975 referendum by about 67 percent to 33 percent.

Challenges after the 1973 oil shock

1. The 1973 oil crisis raised energy prices, slowed growth, and increased inflation across Western Europe.
   • The post-war boom depended partly on cheap oil, expanding trade, and stable currencies. Stagflation exposed that the model was vulnerable.
   • Governments faced rising unemployment while also trying to protect welfare commitments built during the boom years. Fiscal pressure grew.
2. The collapse of the Bretton Woods fixed exchange-rate system in the early 1970s made European currency cooperation harder.
   • EEC states experimented with currency coordination because unstable exchange rates disrupted trade inside the common market. The Snake and later the European Monetary System tried to manage this.
   • Currency cooperation showed that economic integration created pressure for further coordination once trade barriers fell. Integration spillover was practical as well as theoretical.
3. Western Europe did not follow one economic path because Britain, France, West Germany, the Benelux states, and Scandinavia had different industrial structures.
   • West Germany relied on export manufacturing and price stability, while Britain struggled with inflation, labour conflict, and relative industrial decline. Divergence shaped political debate.
   • Scandinavian states combined open trade with strong welfare and labour-market institutions. Social democracy offered another Western model.

How to judge the EEC’s significance

1. EEC membership helped governments manage trade, agriculture, growth, and bargaining power more effectively than they could alone.
   • The EEC did not simply replace national governments. France, West Germany, and Italy used it to pursue national recovery and influence.
   • This is why integration could advance even when governments disagreed over sovereignty. Practical gains often mattered more than federalist ideals.
2. EEC members gained access to a growing common market, while Britain and other EFTA states had to reassess their position.
   • British entry in 1973 showed that the EEC had become too important for Britain to ignore.
   • Norway’s rejection showed that economic advantage did not automatically overcome concerns about sovereignty, fisheries, and national control. Democratic consent mattered.
3. The EEC belonged to a wider Western order with NATO, American aid, capitalist recovery, and democratic consolidation.
   • Economic success helped Western governments argue that liberal capitalism offered more prosperity than Soviet-style planning. Cold War legitimacy was economic as well as military.
   • Yet the EEC was not just an American Cold War instrument because its strongest bargains came from European national interests. European agency was central.