A Restructed Economy Flashcards
How much did the population of Western Europe grow by and how much did the GDP of Western Europe grow by?
Population = 20% GDP = 286%
What were the features of the prosperous consumer society that grew?
Comfortable housing, cars and vacations abroad
How high was labour productivity in the 1960s and 1970s?
Increased 2.8 fold - die to high wages
What happened in mid October 1973?
Arab oil exporting countries increased the prices by issuing an embargo and happened again 6 years later - between 1973-80 oil prices increased ten fold
What were the characteristics of the economic crises that followed the oil embargo?
High inflation e.g. average of 10% in Western Europe
High unemployment e.g. reached 12% in FRG in 1980s
What were the caused of the first and second oil crisis?
Both due to local or regional politics
First = Arab-Israeli war (Egypt and Syria attacked and punished Israel friendly West)
Second = consequence of 1979 Iranian Revolution
What was a consequence of the economic crisis?
Labours position made strong by lack of a reserve that entered and left the market place - unions stronger and stroked for higher wages Postwar social partnership between employees and employers ended and class confrontation reappeared
What rose during the economic crisis and what effect did this have?
Prices (due to rise in wages) - required the introduction of rigorous fiscal measures to regain control
Which historians believes that the economic success of the 1950s and 1960s laid the groundwork for the failures of the 1970s and why?
Andrea Boltho - high prosperity led to over investment and over production
What evidence shows that over production was become unattainable for Western European economies?
Price of energy and raw materials increased by 63%
Consumer good market oversaturated
Exports slowed as it became more difficult to sell them
How did economic stability end?
Bretton Woods Agreement collapsed in 1971 - created stability by fixing exchange rates between Western Europe and USA
Happened die to USA devaluing the dollar
What political crisis hit France coinciding with economic decline?
March 1968 - riots began at French Universities - culminating in May with stokes and mass demonstrations (2 million workers occupied factories and striked)
What did the events in Paris trigger?
Political violence in West Germany and Italy e.g. Brigate Rosso in Italy occupying fist factory in Milan and bombing monuments
How did Western European authorities try to handle the initial economic crisis?
Phillips curve - asserts that increasing inflation decreases unemployment but failed as they both began to rise together
What was unemployment in 1950 and 1973?
1950: 2-4%
1973: 12%
Why was the cause of the economic decline according to Harvard economist Joseph Schumpeter?
Structural crisis - old technologies will eventually no longer be able to keep up with a growing economic demand - this will lead to a period of readjustment which will be difficult economically
What happens during the period of readjustment during the structural crisis?
It’s creative as the way is cleared for new technologies and methods - new sectors emerge that restructure the economy - followed by a new wave of prosperity
What signs are their that the economic crisis of the 1970s and 1980s was part of a structural crisis?
Old postwar leading sectors collapsed e.g. in Western Europe employment in the iron industry dropped to 59% of its pre recession level
What were the two new technologies that helped trigger the structural crisis postwar?
Computer technology - first demonstrate in decoding at Bletchley Park with a mainframe computer
Invention of the atomic bomb and nuclear energy
What were the foundations of the new trend in computer technology?
The invention of the transistor and chip - led to a new age in communication culminating in the personal computer in 1974 and the Web in 1991
Why was Europe hit so hard by the structural crisis?
Since it’s rapid postwar development based on the ‘extensive development model’ - increases in labour input (immigrant workers from North Africa and Yugoslavia) and the importation of existing technical knowledge (from the USA)
What was the significance of the ‘extensive development model’ in Europe’s economic decline?
The sources of the institutional framework of extensive development (and the exporters of new technology) withdrew form Europe by the mid 1970s
What economic trend increased in the 1960s and 1970s and what was it comprised of?
Globalisation
Jobs outsourced
Investments shifted to low wage countries
Major change in cultural and ideological environment
What political changes resulted from the recession?
New critiques of postwar policies and institutions Many left wing intellectuals turned against their old ideas Traditional conservatives (sideline in aftermath of WW2) re-emerges and became influential again
How did traditional conservatives gain relevance?
In the context of global competition and declining income they challenged redistributive welfare systems and the achievement of social harmony via state intervention as unaffordable - found social base in post industrial economy
What theoretical impact did the economic crisis and rise of conservatism have?
Key aspects of the enlightenment e.g. belief in historical progress and the power of human actions to influence lost ground and was replaced by scepticism
What was the effect of the crisis on socialist and left leaning movements?
Lost before in their previous ideals - their identity crisis undermined their organisations and they fragmented (loosing support)
What economic model did neo-liberal criticise?
Keysian economics which argued for increasing the purchasing power of the population through job creation and state investment
What was the new ideological political base offered by new-liberalism?
Milton Friedman and others believed that self-regulating markets guarantee social and individual freedom and therefor championed deregulation, privatisation and free markets
What was the real cause of economic trouble according to Milton Freidman?
State intervention - as it undermines freedom and market efficiency (believes privatising government functions would make them more efficient)
What else did Friedman advocate for?
Ending welfare institutions and making individuals responsible
Radical tax cuts and taxing everyone at 16%
What arouse with the rise of new-liberalism?
Neo-conservatism - believed post war values of modernity were corrupt and led to ‘the inflation of expectations’ about what could be expected from the state - religion and a culture of obedience should be installed to achieve social cohesion
How did neo-conservatism redefine social justice?
Redefine equality as a beneficial outcome of individual freedom and initiative - the type of equality present undermined self-assurance of private ownership and created a fear of ownership
What distinguishable (only to Europe) postwar institution did neo-liberals attack?
Mixed economy - created a 20% state owned sectors in many Western European economies which played a strategic role within market economies to champion postwar modernisation and growth
Why did neo-liberals attack the mixed economy principle?
Called it a parasite and inappropriate in the new global environment
Pursued privatisation e.g. Margaret Thatcher contracted several services covered by the NHS and MoD to private companies (£5 billion and 400, 000 workers)
What other economic reforms, apart from the abolishment of the mixed economy, did net-liberals pushed?
Abolished economic regulations and embraced an American style laissez-faire (started by the collapse of the Bretton Woods agreement) - led to deregulation of the banking system
What was the consequence of the USA’s deregulation?
Increased flexibility for relocating resources from crisis ridden areas to emerging sectors of the economy - how they dealt better with the recession with a system that offered incentives and helps employ new tech
How did the financial industry change?
Separation of commercial and investment banking abolished
Banks increased their loans beyond their deposits - wouldn’t be able to pay back in a financial crisis
Hedge funds played a crucial role in investment
Was the deregulated economy successful in the 1980s?
Yes - helped deal with financial crisis - neoliberals believed there would be no consequences as the market would correct itself if any issues came up
What was the character of globalisation?
New policy that replaced colonialism for leading powers - new base in the technological and corporative world
Why was the end of the Cold War beneficial to globalisation?
Opened up new markets and resources e.g. international trade increased for, $1.7 trillion in 1973 to $5.8 trillion at the end of the century
What does the outsourcing of labour allow?
Allow advanced countries to concentrate on service and high-tech industries (research and development)
