Results of War
World War 2 involved mass destruction of
physical resources, productive capacities and
human resources of both the victors and
vanquished. The estimated deaths in the World
War II were between 3-5 times the estimated
figures for the World War I. It included about
5.1 million Jews. About 20% of total population
of the USSR, Poland and Yugoslavia was wiped
out in the second war.
The loss of productive capacities was also
enormous. About 20% pre-war capital assets of
USSR 13% pre-war assets in Germany, 8% in
Italy, 7% in France and 3% in Britain were
destroyed during the World War II. The night of
9 November 1938, the night of broke glass
(Kristallnacht in German) inaugurated the
Holocaust (or the mass murder of about 5.1
million European Jews by the Nazis). On the
night of 9 November 1938, a number of Jews
were killed and about 20-30,000 were sent to
concentration camps.
In the World War II, the number of stateless,
the uprooted people in Europe were 40.5 million,
excluding non-German forced labourers in
Germany and Germans who fled before the
advancing Soviet armies. About 13 million
Germans were expelled from the parts of
Germany annexed by Poland and the USSR, from
Czechoslovakia and parts of South-Eastern
Europe. Other major byproduct of war, partition
of India and the Korean War produced 15 million
and 5 million displaced persons. The Establishment
of Israel-another war-effect, uprooted about
1.3 million Palestinians.
World: Post World War 2
In the decisive phase of the war the forces of
liberal democracy and socialism got together to
defeat and eliminate the third force, fascism. But
sooner, the world was split between a
Communist bloc, an anti-Communist bloc, and a
small number of neutral states. In February 1945,
Churchill (British Prime Minister), Roosevelt
(American President) and Stalin, leader of Soviet
Union met at Yalta in the Crimea. It was easy
for the Allies to agree in their objective of
defeating Germany and Japan. But differences
of interests, opinion and ideas surfaced when
the question of future opened up.
Britain and America disliked communism and
feared its spread in the devastated countries of
Europe. The display of Russian strength during
the war also alarmed them. The allies had agreed
to free elections in the East European Countries
liberated by the Red Army such as Poland,
Hungary, Czechoslovakia, Romania, Bulgaria,
Yugoslavia, and Albania. But Stalin imposed
communist governments of these countries.
Eastern Poland was exchanged with German
Silesia by Stalin, thus moving the Russian frontier
further west. Britain intervened in Greece and
toppled a Communist government there.
Germany was initially divided into four
zones. Berlin, the capital city under Russiancontrolled
zone was also similarly divided. In
1948, three western zones introduced a new
currency, without consulting the eastern zone,
resulting in rail and road traffic blockade by
Soviet Union for eight month during which the
British and Americans air-lifted all supplies to
Berlin. The Soviet on the one side and US, Britain
and France on other side, opposed each other in
every sphere. The Eastern European countries
under Soviet hegemony refused to accept
American aid under the Marshall Plan, for
reconstruction of their economies. The Soviet
Union made the atomic bomb in 1949 and the
situation of hostility further intensified which
was called the Cold War. Peace remained elusive
in this open ideological war.
Certain non-European forces were of great
significance within European from World War
2-end to until the end of the 1980s. These were,
for example, the preponderance of American
influence in European affairs, the dominance of
the dollar in the global financial system, and the
sustained hostility between the two militarized
politico-economic blocs that emerged after the
war. The West European powers, especially the
United Kingdom, had been financially depleted
by the war and been displaced from their great
power eminence; they now opted, with varying
degrees of reluctance or enthusiasm, for a subordinate
relationship with capital-surplus USA.
In Yugoslavia, the situation was complicated
by the presence of two distinct pressure groups,
the communist National Liberation Front led by
Josip Broz Tito on the one hand, and on the
other, the nationalist and royalist Chetniks under
Draza Mihailovich. Yugoslavia was exceptional
for the communists having seized power without
the assistance of the Red Army; it was therefore
able to join the Soviet Bloc and leave it
subsequently of its own volition.
Poland had been bifurcated during the war
and occupied by both Germany and the Soviet
Union: The nationalist Home Army worked in
co-operation with the exiled government in
London. But it was decimated by the Germans
after the failure of the Warsaw Uprising in 1944.
In Soviet occupied Poland, the communist-led
Polish Committee of National Liberation managed
to seize the initiative with the help of the
advancing Soviet Red army. Given the
destruction of the home Army, it was able to
dominate the Provisional Government of National
Unity that was formed by the merger of the two
rival provisional governments based in London
and Soviet-held Poland.
However, not all of Europe followed this
pattern. Unlike so many other cases, the resistance
movements in Denmark, the Netherlands, and
Norway were relatively unified. They posed little
difficulty for post-War national political revival.
Of the major European countries outside the Soviet
bloc, Spain, Portugal, and Greece witnessed
prolonged dictatorships: it was not until the
1970s that electoral democracy was restored.
Stable multi-party coalition arrangements
emerged the most significant and perhaps the
most peculiar of such supra-national projects was
the making of the two Germanies. "Race for
Berlin" led to the partition of Germany into four
zones, one under each occupying power. The
initial Franco-US agenda, overriding British
objections, proposed to de-industrialize Germany.
But later, US shifted perspective from the
relatively isolationist "America First" stance to
the pursuit of an unambiguously interventionist
one described as the "leadership of the Free World."
From this now flowed the Truman Doctrine
and the Marshall Plan. The Truman Doctrine
announced its support for "free people who are
resisting attempted subjugation by armed
minorities or by outside pressure"; and the
Marshall Plan, known officially as the European
Recovery Programme, set out to revive and
reconstruct Europe, including West Germany, The
Marshall plan was set within the framework of
the new monetary and trading system based on
the supremacy of the US dollar and the
dismantling of trade barriers. The latter were
envisaged by the Bretton Woods institutions
(World Bank and International Monetary Fund
or IMF) and the General Agreement on Tariffs
and Trade (GATT).
The French, British, and American zones were
merged in 1949 to create the Federal Republic of
Germany (West Germany). However, sovereignty
was granted to the Federal Republic only in 1955
after its defences were secured by a limited
remilitarization and its induction into NATO. The
zone of Soviet occupation, or East Germany, went
through the same process of being restructured
to ensure integration with the Soviet power
structure. The new state was established in 1949;
Berlin, the capital of undivided Germany, having
been likewise divided, continued to remain the
focus of hostilities, from the Blockade of 1948 to
the building of the wall in 1961.
Economic Recovery Continues
The Council of Mutual Economic Assistance
(COMECON) was established in 1949 as a transcontinental
military body, and the European Coal
and Steel Community appeared in 1951 with
the specific economic concerns. The European
Economic Community of 1957 and the European
Community of 1957 had larger objectives that
prompted apprehensions of loss of national
sovereignty, notably in Britain. In response,
Britain initiated in 1959 the European Free Trade
Association (EFTA).
The first phase of economic recovery, from
1945 to 1947, was effected though bilaterally
negotiated US loans and grants and the food aid
disbursed through the United Nations Relief and
Rehabilitation Agency (UNRRA). These sufficed
to avert the general collapse of the economy that
industrial dislocation and poor harvest
threatened; they were adequate even to raise
industrial output to pre-war levels.
During the next phase of recovery, 1948-1951,
European countries willing to participate in the
US-sponsored recovery program received 13
billion dollars. This was supplemented by a 1
billion dollar loan from the International
Monetary Fund (IMF) and the International Bank
for Reconstruction and Development (World
Bank). The largest beneficiaries of this program
were Britain, France, Italy, and West Germany.
It established an international body of
recipient nations, the organization for European
Economic Co-operation, to which each nation
submitted a national plan every four years. These
aid-receiving nations were required, under the
"counterpart" clause, to make available a fund
of domestic currency equal to the aid received
and to be spent in ways approved by the US.
They had to agree to use the aid to finance food
imports only from the US whether or not
cheaper alternative sources were available. They
had to also employ the service of US shipping
and insurance for 50% of aid financed purchases,
besides also ensuring preferential treatment to
American oil interests.
It led on to a long economic boom that lasted
until the mid-1970s. Although the deflationary
policies created some employment, they also led
to the economic boom. As a result the period
after the 1970s witnessed a near full employment.
It yielded a "new capitalism" of near full
employment, high productivity, high wages, and
extensive social welfare. All these combined to
blunt class antagonism and to generate
consensual politics.
However, the results were uneven across
West Europe. Less developed countries like
Ireland, Spain, and Portugal were less affected
by the quantitative and qualitative transformations
achieved by the more advancedeconomies. However, the long boom came to an
end in 1973 with the first oil shock, when oilproducing
countries unilaterally and dramatically
raised the prices of oil. European economies
suffered inflationary pressures, output decelerated,
and unemployment rose. They immediately led
to restrictive policies within the parameters of
the existing system of economic management,
and more gradually, to a change of economic
perspective.
From the late 1970s, in country after country,
the social democratic consensus broke down.
New political program proposed to restrict social
welfare to the minimum necessary. They
repudiated government intervention and demand
management. All these led to the privatization
of nationalized industries, extensive deregulation,
and the adoption of monetarist and supply side
policies.
The idea of the "social democratic consensus"
itself is valid only in post-war terms. It was based
on a substantial and pragmatic dilution of the
pre-war program of social democracy to
accommodate fundamental tenets of conservatism
(the sanctity of private property) and of liberalism
(the limited state). Social Democracy thus
conceded the possibility of the gradualist reform
of capitalism.
This consensus allowed stable coalitions of
right-centre and left-centre groupings:
occasionally, in the immediate aftermath of bitter
electoral conflict, even "grand coalitions" of the
left and the right were possible. Except for Britain
in West Europe, the predominant tendency was
towards the formation of coalition governments
even where the electoral system was not based
on proportional representation.
Economic Recovery in Soviet Block
In the Soviet bloc, reconstruction was
hindered by the relatively lower capacity of the
leading power, the Soviet Union. External capital
was in short supply, except on terms that were
unacceptable to the Soviet system. Capital for
the industrialization program therefore had to
be internally generated. In the newly Soviet
countries, nationalization permitted rapid
expansion in heavy industrial capacity. Radical
agrarian programs of farm collectivization and
nationalization on the Soviet model soon plunged
the agricultural sector into turmoil and led to
food shortages.
East Europe was thus preoccupied with the
problem of adjusting to a new system of
production and stagnation in the very sectors
whose boom was the basis of West European
prosperity. The plan-driven economies of the
eastern bloc, with the exception of the USSR, began
with a very low industrial base. Since investment
priorities were largely determined by the state,
national plans focused excessively on developing
heavy industry. The resulting imbalance led to
chronic shortages of consumer goods.
In the initial stages, trade and economic
relations were confined to the region, that is, the
eastern bloc. However, the shortage of capital
and of agricultural products, especially wheat,
led to a parallel dependence on western countries.
Poland and Romania borrowed extensively from
the West in the 1970s to finance their
industrialization programs; By the early 1970s,
the USSR was compelled to import grain from
the USA.
Imports of food grain and light industrial
from the hard currency areas (West), without
corresponding exports resulted in a combined
balance of payments deficit of 10 billion dollars
by 1975. These were financed by borrowings from
western banks. Imports were cut back and the
deficit was eliminated; but, by 1982, East bloc
debts stood at 81 billion dollars and its debt
service ratio stood at 100 percent, that is it was
borrowing money solely in order to pay back
debts. Soviet export earnings deteriorated with
the collapse of world oil prices in the mid 1980s.
