Europe's Economic Boom

...Because of slowing population growth—now only a third of our own—Europe's labor force will increase more slowly in the future...

...Though not a full-fledged United States of Europe, this would represent a tremendous advance toward "the unity of Western Europe," which Sir Oliver Franks has described as "the one great creative political idea that has emerged since the Second World War...

...By 1955, after the Korean War had ended, aggregate output had reached the point it would have attained on the somewhat hypothetical assumption that neither war had occurred and that prewar growth trends had continued during the intervening years...

...Interestingly enough, this new point of view is more apparent among the large modern enterprises, which many American economists disparagingly label "oligopolies," than among the small but obedient members of the old-fashioned European cartel...

...or the Soviet Union...

...Since World War II, Europe has discovered, as the U.S...

...Fortunately, the experience of the past few years, as well as a continued heavy program of capital investment, indicate a further rise in productivity during the '60s, though probably at a more moderate rate than over the past decade...

...The projected levels of ownership indicate a ratio of one car to nine persons in Europe in 1970, compared with a one-to-three ratio in the United States today...

...By 1950, prewar per capita levels for the larger postwar population had been regained in most countries and surpassed in many...

...Whatever names we choose...

...In late 1959, the United Kingdom, Denmark, Norway, Sweden, Austria, Switzerland and Portugal, with Finland as an associate member, formed the European Free Trade Association (EFTA), with the aim of promoting a still wider base for European integration...

...In addition, "managerial capitalism," with an eye to the interests of consumers and workers as well as investors, is displacing traditional "ownership capitalism," with its single-minded devotion to immediate gain...

...With the entry of women into urban employment, family income has been supplemented as never before by earnings of the wife and older children, as well as by various benefits and subsidies paid by government and employers...

...By the end of the '50s, the average purchasing power of Western Europe's more than 300 million people was more than one-third higher than that of the 260 million living in the same territory on the eve of World War II...

...Today the state not only requires the individual to save—e.g., for old age retirement—and provides for mutual sharing of such risks as sickness and unemployment...

...those dying before retirement help to maintain those living to a ripe old age...

...In the Organization for European Economic Cooperation and its successor, the Organization for Economic Cooperation and Development, virtually all of the Western European nations, together with Canada and the United States, are attempting voluntary coordination of economic policies...

...percentage gain during the '50s...

...Taken together, they represent a revolution in the way Europeans are thinking about themselves and their national economies...

...Since only four of Western Europe's countries have a population of more than 45 million and 12 have less than 10 million each, the gradual merging of national markets will go far toward overcoming the traditional handicaps of European industries in mass production...

...it also brings about a substantial measure of income redistribution...

...Along with middle-class incomes, all classes in Europe are also acquiring a middle-class point of view...

...Even over a 15-year span these rates mean an increase of well over 50 per cent in total output and nearly 50 per cent in per capita spending for consumer goods and services...

...Investment spending by business and government will undoubtedly rise further as Europe's economy continues to expand, but it will probably account for a somewhat smaller share of GNP in 1970 than in 1955...

...Producers and distributors, in turn, are learning that low mark-ups on goods that are mass-produced and distributed to the mass market yield better and surer profits than the high prices and margins and small volumes of class markets...

...To be sure, these welfare measures involve a "horizontal" as well as a "vertical" redistribution of incomes: Bachelors help to support big families...

...But income is also redistributed from top to bottom through steeply progressive income and inheritance taxes...

...The heavy flow of refugees from east of the Iron Curtain, mainly to West Germany, has already ended...

...Household washing machines in use will probably increase from 13 million in 1955 to 56 million in 1970, and refrigerators from less than 9 million to nearly 50 million, with 1970 sales approaching 5 milhon...

...Labor organizations no longer seem eager for formal socialism, even as an ultimate goal...

...This rate of expansion can hardly be expected to continue indefinitely...

...Over 90 per cent of American families now own refrigerators and TV sets, whereas estimates show that only 50-55 per cent of European families will own them in 1970...

...Although its roots extend far into the past, the welfare state has come into full flower in Europe only during the postwar period...

...Children born during the short-lived postwar baby boom are now entering the labor market, but increased secondary school attendance will cause a further slackening in the growth of the labor force during the '60s...

...There is also a growing legislative tendency to regulate or prohibit price agreements and other cartel practices...

...Belying these dark prospects and demonstrating once again the hazards of economic forecasting, Europe's postwar economies entered a period of vigorous and uninterrupted growth unparalleled since the last decades of the 19th century...

...The boom in automobiles and household durables will undoubtedly continue...

...And, judging from American experience, the demand from original purchasers is not likely to approach exhaustion...

...About two-thirds of the 5-6 million cars to be produced in 1970 will be for replacement purposes...

...Redistribution òf income has not yet brought Europe within sight of our own "classless society," but it has gone far toward eliminating the "idle rich" at the top of the income pyramid and the "oppressed proletariat" at the bottom...

...These projections are "arithmetic opinions" on the economic results of basic changes that have been taking place since the War in government policies, both domestic and foreign, in the organization and operation of business enterprises, in the attitude of labor and in the economic position and psychology of consumers...

...EFTA seems destined for dissolution before long, however, since Britain and Denmark are already negotiating to join the EEC and other nations are moving in that direction...

...Country-by-country estimates of probable trends in labor productivity, employment and working time, suggest an annual growth rate of about 3 per cent in Western Europe's total Gross National Product (GNP), and of close to 2.5 per cent in per capita output over the 15-year period 1955-70...

...In the expanded European market of the future, both large and small firms will find it harder to avoid competition as a way of life...

...In 1970, the number of passenger cars on Europe's streets and roads will be more than three times the 12 million in use in 1955...

...The most impressive step toward economic, and eventually political, integration came in 1957 with the establishment of the European Economic Community (EEC), or Common Market, by the same six countries...

...The entry of Britain and Denmark would expand the population of the Common Market from 170 million to about 225 million...

...Consumers' goods and services will account for more than two-thirds of GNP in 1970, compared with slightly less than twothirds in 1955...

...Most of the factors responsible for the remarkable record of the '50s will continue to exert their influence in the years ahead, though in some cases with diminished force...

...Changes in business practices and consumer tastes, and especially the avidity with which Europeans are buying the comforts and gadgets of a materialistic civilization (including annual vacations on installment plans), are often ascribed by enthusiastic American observers and by critical Europeans to the Americanization—sometimes, by the latter, to the "cocacolonization"—of European life...

...Ownership of television sets is expected to rise from about 5.2 million in 1955 to more than 50 million in 1970, with estimated sales of 6.5 million in that year—or more than twice the 1955 total...

...did after World War I, what Frederick Lewis Allen called the "dynamic logic of mass production that the more goods you produce, the less it costs to produce them, and that the more people are well off, the more they can buy and that therefore one can make money by lowering class barriers...

...Government responsibility for the national economy is universally accepted and was formally recognized in the Treaty of Rome that established the EEC...

...J. Frederic Dewhurst, formerly Executive Director of the Twentieth Century Fund, was research director of the Fund's study, Europe's Needs and Resources...

...Consumer expenditures can be expected to expand more rapidly than either capital investment or government spending in the years ahead...

...The "reserve" of unemployed existing in the early postwar years has been fully absorbed in most of Western Europe, the chief exceptions being the Southern countries...

...The possibility of nationalization of individual enterprises and industries still exists, of course...

...Industrial production had more than doubled, and agricultural output, with fewer people on the farms, had increased by more than one third...

...Six years of the most devastating war in modern history left ports, bridges, factories and homes in the populous and highly industrialized parts of Europe damaged or destroyed...

...Indeed, the outlook after World War II was even more discouraging than after World War I. The first War, as any European who was over 40 years of age in 1945 well remembered, was followed by two decades of stagnation and depression which gained for Europe the name of "the tired continent...

...Partly as a result of this trend, and partly because of continuing full employment and prosperity, there has been a considerable lessening of the extreme class consciousness which colored worker attitudes toward employers in the past...

...Today Europeans are seeking a "European solution" to common problems, economic as well as military and political...

...The relative level of government spending for current operations will probably change little over the 15year period, an expected decline in defense spending being offset by heavier expenditures for education, health and other welfare purposes...

...A large and growing replacement market will be needed for these and other costly household appliances, such as gas and electric stoves, vacuum cleaners, oil burners and the like...

...For the entire decade, gross product expanded at an average rate of more than 4 per cent a year— well over half again as large as the U.S...

...After the initial period of making good wartime losses and destruction and replenishing inventories, the postwar boom has been characterized by heavy investment in buildings and equipment to modernize and expand Europe's industrial plant, and extensive programs of government-subsidized residential construction for lower-income groups...

...The leveling process has greatly narrowed the income disparity between rich and poor— in countries such as Sweden, Norway, Denmark and Britain, to a much greater extent than in either the U.S...

...The European Coal and Steel Community, established in 1952 by the three Benelux countries and Germany, France and Italy, provides a single market for these basic products...

...Thus, any substantial gain in Europe's total output of goods and services will have to result from higher labor productivity...

...These developments, coupled with a moderate shortening of the work week and longer annual vacation, mean that "labor input," measured by total man-hours worked, will be only 3-4 per cent greater in 1970 than in 1955...

...By 1948, with Marshall Plan aid beginning, the physical volume of production was back at the level of 1938, the last year of peace before the War...

...In the field of consumer goods and services, the postwar boom has involved vast demands for motor vehicles and household durable goods of all kinds, as well as for other "discretionary purchases," such as vacation travel and recreational activities...

...Since 1955, expansion has continued at a rate roughly comparable to that of the first half of the decade, despite a slowdown in the 1958 "recession year...

...The standard of living at the end of the War, though varying widely from one country to another, probably averaged no more than half the prewar level...

...Many expected widespread nationalization of basic industries and outright socialism, or even Communism...

...healthy people contribute to the care of the ill...

...This midyear of the decade, with Western Europe's economy enjoying virtually full employment and capacity operation, thus provides a satisfactory base from which to attempt projection of future growth...

...Both factors are helping to create a more widespread acceptance by business of the necessity of competition...

...Benelux, a customs union of Belgium, Luxembourg and the Netherlands, has been functioning successfully for several years...

...On V-E Day, the most optimistic observers expected no more than a slow and halting recovery, accompanied by long-continued government controls...

...In striking contrast to the interwar years, the past decade has seen a gratifying rate of economic growth, full employment in the industrial countries at steadily rising wages and widespread adoption of comprehensive social insurance and welfare programs...

...Viewed in the perspective of a single year these seem modest advances, but over the working lifetime of a typical member of the labor force they would result in a four-fold rise in total output and more than a three-fold gain in standard of living...

...They are willing to accept the existing mixture of private capitalism and public enterprise, so long as it continues to "deliver the goods...

...With the association on a basis of other EFTA countries and eventually of the remaining unaffiliated countries (Spain, Iceland and Ireland, which has already applied for membership in the EEC), a decade hence there may be a unified European market with a population of 325 million...

...What both Napoleon and Hitler failed to accomplish by force of arms may be coming into existence as a voluntary association of free countries...

...to bestow, however, most economic indicators now point to the future path of Western European development as resolutely forward and upward...

...Europeans are spending their money more and more in the way Americans do...

...Faced with the necessity of exporting in order to survive and of importing in order to export, the great trading nations found themselves with a large part of their merchant fleets at the bottom of the sea and their foreign exchange reserves nearing exhaustion...

...During the interwar period, especially in the 1930s, European countries turned toward autarchy in what proved to be self-defeating efforts to protect their industries and labor from foreign competition by trying to produce everything within their own borders...

...Transition toward final integration is still in the early stages, but producers and distributors are already planning in terms of a completely free market by 1970, or very soon thereafter...