Postwar

previous decades.[118] The chief beneficiary was West Germany, whose share of the world’s export of manufactured goods rose from 7.3 percent in 1950 to 19.3 percent just ten years later, bringing the German economy back to the place it had occupied in international exchange before the Crash of 1929.

In the forty-five years after 1950 worldwide exports by volume increased sixteen-fold. Even a country like France, whose share of world trade remained steady at around 10 percent throughout these years, benefited greatly from this huge overall increase in international commerce. Indeed, all industrialized countries gained in these years—the terms of trade moved markedly in their favor after World War Two, as the cost of raw materials and food imported from the non-Western world fell steadily, while the price of manufactured goods kept rising. In three decades of privileged, unequal exchange with the ‘Third World’, the West had something of a license to print money.[119]

What distinguished the western European economic boom, however, was the degree of de facto European integration in which it resulted. Even before the Treaty of Rome, the future member states of the European Economic Community were trading primarily with one another: in 1958, 29 percent of Germany’s exports (by value) were going to France, Italy and the Benelux countries, and a further 30 percent to other European states. On the eve of the signing of the Rome Treaty, 44 percent of Belgian exports were already going to its future EEC partners. Even countries like Austria, or Denmark, or Spain, which would not officially join the European Community until many years later, were already integrated into its trading networks: in 1971, twenty years before it joined the future European Union, Austria was taking more than 50 percent of its imports from the original six EEC member states. The European Community (later Union) did not lay the basis for an economically integrated Europe; rather, it represented an institutional expression of a process already under way.[120]

Another crucial element in the post-war economic revolution was the increased productivity of the European worker. Between 1950 and 1980 labor productivity in western Europe rose by three times the rate of the previous eighty years: GDP per hour worked grew even faster than GDP per head of the population. Considering how many more people were in work, this points to a marked increase in efficiency and, almost everywhere, much improved labour relations. This, too, was in some measure a consequence of catching-up: the political upheavals, mass unemployment,under-investment and physical destruction of the previous thirty years left most of Europe at a historically low starting point after 1945. Even without the contemporary interest in modernization and improved techniques, economic performance would probably have seen some improvement.

Behind the steady increase in productivity, however, lay a deeper, permanent shift in the nature of work. In 1945, most of Europe was still pre-industrial. The Mediterranean countries, Scandinavia, Ireland and Eastern Europe were still primarily rural and, by any measure, backward. In 1950, three out of four working adults in Yugoslavia and Romania were peasants. One working person in two was employed in agriculture in Spain, Portugal, Greece, Hungary and Poland; in Italy, two people in every five. One out of every three employed Austrians worked on farms; in France, nearly three out of every ten employed persons was a farmer of one kind or another. Even in West Germany, 23 percent of the working population was in agriculture. Only in the UK, where the figure was just 5 percent, and to a lesser extent in Belgium (13 percent), had the industrial revolution of the nineteenth century truly ushered in a post-agrarian society.[121]

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.[122] 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