The main economic factor to contribute to the recovery of war-torn Western Europe was, however the Marshall plan. George Marshall was the US secretary of state after the war and proposed aid totalling approximately one percent of American GDP from 1948 – 1952. Western Europe accepted the Marshall plan; most of the East declined it. An organisation was needed to allocate the funds correctly. Originally it was thought that this could be done under the ECE, however the USSR did not want this, probably because they feared that if this were to happen then some of her surrounding countries would fall under Western influence. It was because of this that the office responsible for allocating funds became the Organisation for European Economic Co-operation (OEEC). Overturf states that the three basic reasons for the Marshall plan are “(1) to rebuild what is called Western Europe, (2) to make the program of European design (hence the OEEC), and (3) to have the plan designed jointly (in order to foster unification)”.
This split between East and Western Europe was further evident when the Brussels treaty organisation was formed in 1948. The organisation was formed to establish a system of mutual military assistance if one of the members was attacked. In 1949 this was further expanded to other European nations, Canada and the United States of America and became the North Atlantic Treaty organisation (NATO). The Warsaw Pact was a military alliance of the Eastern European Soviet Bloc countries responding against the perceived threat from NATO. The treaty was signed in 1955. The members of the Warsaw Pact pledged to defend each other if one or more of the members were attacked. This furthers the split between Eastern and Western Europe and escalates the cold war.
The consequence of the efforts of the German people and the financial aid of the Marshall plan was that the West German economy was well on its way to recovery. However many people were still weary of the Germans and although they could see the importance of a German recovery did not want to put West Germany in a position that they would be capable of war. This meant that a way would have to be found for West Germany to put its coal, steel and iron (all basic materials for war) industries back on track without endangering the rest of Europe. The solution was a French plan put forward by Jean Monnet and Robert Schuman. The Schuman plan sought to “end the historic rivalry of France and Germany and to do this by making a war between France and West Germany not only ‘unthinkable but materially impossible”. The idea was to create a common market for coal, steel and iron through the removal of customs duties, quotas and tariffs. All members of this new market would have equal access to coal, steel and iron from other members wherever they may be located. Discrimination or bias on the grounds of nationality was not allowed. This new body was to be called the European Coal and Steel Commission (ECSC).
Political and economical dependence upon fellow European nations took a big leap forward with the forming of the ECSC in 1951 by the six; the UK was invited to join but declined. The trust in the commission was born out of the links that were established by the OEEC.
In 1952 the six signed the European Defence Community Treaty. This treaty envisaged that there would be a European army and an administrative body that would include a council of ministers, a parliamentary assembly and a court of justice that would parallel those in connection with the ECSC. There would then be a transition period, but after that the institutes of the ECSC and defence community be put under one framework. This would mean forming a “community for the purpose of securing political unity”. Five of the six nations approved these plans, however France refused to ratify them. This effectively killed the proposed European political community.
In 1955 the Benelux states produced a paper, which called for a common market and for action regarding energy and transport. The Benelux states believed that political integration was unlikely to happen, at least not in the foreseeable future and should instead be a long-term plan. They believed for the short and medium term the objective should be economic integration. The paper called for the creation of a European Economic Community (EEC) and institutes to support that goal. The six governments decided that a general common market and an atomic energy pool should be created. To create a common market is to eliminate trade barriers between member states of that market, much like between different states in the USA. With no trade barriers it would allow countries to pursue larger markets and to be able to take advantage of greater economies of scale and therefore benefit their economies.
Politically and economically Europe needed to be strong. To do this Europe needed to come together. This would create a third superpower sitting in between the USA and the USSR, which would give Europe more muscle in trade negotiations. The six could see this and so in 1957 signed the treaty of Rome which established the EEC, which at this point deals very specifically with manufacturing and agriculture.
In 1960 another trade bloc is introduced in Europe, the European Free Trade Area (EFTA). The UK did not like the political aspirations of the EEC and so formed this trade bloc. There was also some doubt if France and Germany would be able to agree in the long term and the Italian government was thought too weak, both politically and economically. The UK also had obligations to the commonwealth. Ireland and Denmark at this point were heavily dependent on the UK and so did not see the point of joining the EEC if the UK was not. Both Sweden and Finland wished to remain politically neutral. Portugal did wish to join the EEC however was not democratic and so its only choice left was the EFTA.
The other trade bloc was the council of mutual economic assistance (COMECON). This organisation coordinated the central planning of the Soviet Union and socialist eastern European countries such as Romania. It also sought to promote greater trade and production amongst them.
The long-term economic consequences of the actions of COMECON were not good. Communism collapsed at the end of the 1980s and start of the 1990s. This meant that many economies changed from command to market economies. However after a period of readjustment many are already starting to recover, indeed later this year some of these countries are joining the EU.
The long-term economic consequences of the actions of the EEC were that they enjoyed a period of immense economic growth and are enjoying stability and prosperity. It has grown to include the UK, Ireland, Denmark, Portugal, Spain, Greece, Austria, Finland and Sweden. The EEC became the European Union and is on its way to becoming an economic union.
Appendix One
Bibliography
Stephen Frank Overturf – The Economic Principles of European Integration – 1986
Dennis Swann – The Economics of the Common Market – Eighth edition 1995
G. N. Minshull – The New Europe – 1978
Nicholas Moussis – Access to Europe – Third edition 1993
Theo Hitiris – European Union Economics – Fourth edition 1998
C. Pass, B. Lowes & L. Davies – Collins Dictionary Economics – Third edition 2000
References
Dennis Swann – The Economics of the Common Market – eighth edition 1995 – pg 2
Stephen Frank Overturf – The Economic Principles of European Integration – 1986 – pg 10
The members were the UK, France, Belgium, the Netherlands and Luxembourg
Its members were the Soviet Union, Albania, Bulgaria, Romania, East Germany, Hungary, Poland, and Czechoslovakia, all the Communist countries of Eastern Europe except Yugoslavia
Dennis Swann – The Economics of the Common Market – eighth edition 1995 – pg 7
Italy, France, Belgium, Luxemburg, Germany and the Netherlands
Dennis Swann – The Economics of the Common Market – eighth edition 1995 – pg 9
Its members are initially Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the UK however Finland, Iceland and Liechtenstein join later.
