This volume re-examines the topic of economic growth in Europe after the Second World War. The contributors approach the subject armed not only with new theoretical ideas, but also with the experience of the 1980s on which to draw. The analysis is based on both applied economics and economic history. Thus, while the volume is greatly informed by insights from growth theory, emphasis is given to the presentation of chronological and institutional detail. The case study approach and the adoption of a longer-run perspective than is normal for economists, allow new insights to be obtained. Individual chapters cover Belgium, Denmark, Germany, Spain, France, Ireland, Italy, the Netherlands, Portugal, Sweden and the UK. Further chapters explore general European institutional arrangements and historical circumstances. The result is a genuinely comparative picture of postwar growth, with insights that do not emerge from standard cross-section regressions based on the post-1960 period. Economic growth in Europe since 1945 Centre for Economic Policy Research The Centre for Economic Policy Research is a network of over 250 Research Fellows, based primarily in European universities. The Centre coordinates its Fellows' research activities and communicates their results to the public and private sectors. CEPR is an entrepreneur, developing research initiatives with the producers, consumers and sponsors of research. Established in 1983, CEPR is a European economics research organization with uniquely wide-ranging scope and activities. CEPR is a registered educational charity. Institutional (core) finance for the Centre is provided by major grants from the Economic and Social Research Council, under which an ESRC Resource Centre operates within CEPR; the Esmee Fairbairn Charitable Trust; the Bank of England; 17 other central banks and 40 companies. None of these organizations gives prior review to the Centre's publications, nor do they necessarily endorse the views expressed therein. The Centre is pluralist and non-partisan, bringing economic research to bear on the analysis of medium- and long-run policy questions. CEPR research may include views on policy, but the Executive Committee of the Centre does not give prior review to its publications, and the Centre takes no institutional policy positions. The opinions expressed in this volume are those of the authors and not those of the Centre for Economic Policy Research. Executive Committee Chairman Anthony Loehnis Vice-Chairman Guillermo de la Dehesa Jan Bielecki Philippe Lagayette Honor Chapman Peter Middleton Quentin Davies David Miliband Sheila Drew Smith Mario Sarcinelli Otmar Issing Catherine Sweet Officers Director Richard Portes Deputy Director Stephen Yeo 1 November 1995 Economic growth in Europe since 1945 Edited by NICHOLAS CRAFTS and GIANNI TONIOLO CAMBRIDGE UNIVERSITY PRESS PUBLISHED BY THE PRESS SYNDICATE OF THE UNIVERSITY OF CAMBRIDGE The Pitt Building, Trumpington Street, Cambridge, United Kingdom CAMBRIDGE UNIVERSITY PRESS The Edinburgh Building, Cambridge CB2 2RU, UK 40 West 20th Street, New York, NY 10011-4211, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia Ruiz de Alarcon 13, 28014 Madrid, Spain Dock House, The Waterfront, Cape Town 8001, South Africa http: //www. Cambridge. org © Centre for Economic Policy Research 1996 This book is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 1996 Reprinted 1999, 2002 A catalogue record for this book is available from the British Library Library of Congress Cataloguing in Publication data applied for ISBN 0 521 49627 6 hardback ISBN 0 521 49964 X paperback Transferred to digital printing 2003 Contents List of figures page xii List of tables xv Preface xxi List of contributors xxiii Postwar growth: an overview 1 Nicholas Crafts and Gianni Toniolo 1 Introduction 1 2 Main trends in postwar European growth 2 3 Previous interpretations of European postwar growth 8 4 Recent developments in growth theory 14 5 Europe's postwar growth in a long-run perspective: some quantitative aspects 16 6 The years of high growth 20 7 Slowdown and instability 25 8 Factors in the performance of individual countries 27 9 Concluding comments 31 Institutions and economic growth: Europe after World War II 38 Barry Eichengreen 1 Introduction 38 2 The model 43 3 The structure of domestic institutions 45 4 The evolution of domestic institutions 50 5 The structure of international institutions 53 6 The decline of the postwar settlement 58 7 Conclusion 65 vn viii Contents 3 The varieties of Eurosclerosis: the rise and decline of nations since 1982 73 Mancur Olson 1 Introduction 73 2 A recapitulation of the theory 74 3 Economic growth since Rise and Decline 78 4 Distinctive institutions and common processes 81 5 Distinctive institutions and inescapable logic 91 4 Why the 1950s and not the 1920s? Olsonian and non-Olsonian interpretations of two decades of German economic history 95 Karl-Heinz Paque 1 Introduction 95 2 An Olsonian interpretation of the two postwar records 96 3 A non-Olsonian mode of interpretation 100 5 Convergence, competitiveness and the exchange rate 107 Andrea Boltho 1 Introduction 107 2 Competitiveness and the exchange rate 108 3 Western Europe in the 'Golden Age' 110 4 Country experience 116 5 Conclusions 124 Statistical appendix 126 6 British economic growth since 1945: relative economic decline ... and renaissance? 131 Charles Bean and Nicholas Crafts 1 Introduction 131 2 The legacy of the 1930s and World War II 138 3 Reconstruction 140 4 The Golden Age 142 5 Shocks and stagflation 147 6 Recovery in the 1980s and its legacy 149 7 Bargaining models and productivity change 153 8 Human capital formation 158 9 Deindustrialization 159 10 Conclusions 160 Appendix 162 7 Economic growth in postwar Belgium 173 Isabelle Cassiers, Philippe De Ville and Peter M. Solar 1 Introduction 173 2 Postwar economic growth: main features, structures and institutions, initial conditions 174 3 The phases of postwar economic growth 180 4 Structural change and the control of industry 198 5 Conclusion 201 Contents ix 8 France, 1945-92 210 Pierre Sicsic and Charles Wyplosz 1 Introduction 210 2 Aggregate performance 211 3 The legacy of the 1930s and reconstruction 217 4 The 'vingt glorieuses' (1954-76) 219 5 Shocks and stagflation in the 1970s 223 6 A partial recovery 226 7 Human capital 229 8 Institutions 232 9 Conclusion 236 9 Economic growth and the Swedish model 240 Magnus Henrekson, Lars Jonung and Joakim Stymne 1 Introduction 240 2 Aggregate performance 242 3 A review of macroeconomic policies 252 4 Ultimate causes of Swedish economic performance 256 5 Conclusions 280 10 Characteristics of economic growth in the Netherlands during the postwar period 290 Bart van Ark, Jakob de Haan and Herman J. de Jong 1 Introduction 290 2 The major facts 292 3 The legacy of the 1930s 301 4 World War II and the reconstruction years 302 5 The 'golden years' from 1950 to 1973 305 6 Shocks and sluggish growth during the 1970s 309 7 Continuity and change during the 1980s 311 8 Labour market and wage policies 312 9 The performance of the export sector and exchange rate policy 315 10 The public sector and economic growth 317 11 Conclusions 322 11 Portuguese postwar growth: a global approach 329 Jodo L. Cesar das Neves 1 Introduction 329 2 Postwar growth: the setting 329 3 Postwar growth: the phases 335 4 Some particular themes 346 5 Conclusions 352 12 Growth and macroeconomic performance in Spain, 1939-93 355 Leandro Prados de la Escosura and Jorge C. Sanz 1 Introduction 355 2 Spain's economic performance in the long run 355