A Restructed Economy

Question 1

How much did the population of Western Europe grow by and how much did the GDP of Western Europe grow by?

Answer 1

Population = 20% 
GDP = 286%

Question 2

What were the features of the prosperous consumer society that grew?

Answer 2

Comfortable housing, cars and vacations abroad

Question 3

How high was labour productivity in the 1960s and 1970s?

Answer 3

Increased 2.8 fold - die to high wages

Question 4

What happened in mid October 1973?

Answer 4

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

Question 5

What were the characteristics of the economic crises that followed the oil embargo?

Answer 5

High inflation e.g. average of 10% in Western Europe

High unemployment e.g. reached 12% in FRG in 1980s

Question 6

What were the caused of the first and second oil crisis?

Answer 6

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

Question 7

What was a consequence of the economic crisis?

Answer 7

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

Question 8

What rose during the economic crisis and what effect did this have?

Answer 8

Prices (due to rise in wages) - required the introduction of rigorous fiscal measures to regain control

Question 9

Which historians believes that the economic success of the 1950s and 1960s laid the groundwork for the failures of the 1970s and why?

Answer 9

Andrea Boltho - high prosperity led to over investment and over production

Question 10

What evidence shows that over production was become unattainable for Western European economies?

Answer 10

Price of energy and raw materials increased by 63%
Consumer good market oversaturated
Exports slowed as it became more difficult to sell them

Question 11

How did economic stability end?

Answer 11

Bretton Woods Agreement collapsed in 1971 - created stability by fixing exchange rates between Western Europe and USA
Happened die to USA devaluing the dollar

Question 12

What political crisis hit France coinciding with economic decline?

Answer 12

March 1968 - riots began at French Universities - culminating in May with stokes and mass demonstrations (2 million workers occupied factories and striked)

Question 13

What did the events in Paris trigger?

Answer 13

Political violence in West Germany and Italy e.g. Brigate Rosso in Italy occupying fist factory in Milan and bombing monuments

Question 14

How did Western European authorities try to handle the initial economic crisis?

Answer 14

Phillips curve - asserts that increasing inflation decreases unemployment but failed as they both began to rise together

Question 15

What was unemployment in 1950 and 1973?

Answer 15

1950: 2-4%
1973: 12%

Question 16

Why was the cause of the economic decline according to Harvard economist Joseph Schumpeter?

Answer 16

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

Question 17

What happens during the period of readjustment during the structural crisis?

Answer 17

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

Question 18

What signs are their that the economic crisis of the 1970s and 1980s was part of a structural crisis?

Answer 18

Old postwar leading sectors collapsed e.g. in Western Europe employment in the iron industry dropped to 59% of its pre recession level

Question 19

What were the two new technologies that helped trigger the structural crisis postwar?

Answer 19

Computer technology - first demonstrate in decoding at Bletchley Park with a mainframe computer
Invention of the atomic bomb and nuclear energy

Question 20

What were the foundations of the new trend in computer technology?

Answer 20

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

Question 21

Why was Europe hit so hard by the structural crisis?

Answer 21

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)

Question 22

What was the significance of the ‘extensive development model’ in Europe’s economic decline?

Answer 22

The sources of the institutional framework of extensive development (and the exporters of new technology) withdrew form Europe by the mid 1970s

Question 23

What economic trend increased in the 1960s and 1970s and what was it comprised of?

Answer 23

Globalisation
Jobs outsourced
Investments shifted to low wage countries
Major change in cultural and ideological environment

Question 24

What political changes resulted from the recession?

Answer 24

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

Question 25

How did traditional conservatives gain relevance?

Answer 25

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

Question 26

What theoretical impact did the economic crisis and rise of conservatism have?

Answer 26

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

Question 27

What was the effect of the crisis on socialist and left leaning movements?

Answer 27

Lost before in their previous ideals - their identity crisis undermined their organisations and they fragmented (loosing support)

Question 28

What economic model did neo-liberal criticise?

Answer 28

Keysian economics which argued for increasing the purchasing power of the population through job creation and state investment

Question 29

What was the new ideological political base offered by new-liberalism?

Answer 29

Milton Friedman and others believed that self-regulating markets guarantee social and individual freedom and therefor championed deregulation, privatisation and free markets

Question 30

What was the real cause of economic trouble according to Milton Freidman?

Answer 30

State intervention - as it undermines freedom and market efficiency (believes privatising government functions would make them more efficient)

Question 31

What else did Friedman advocate for?

Answer 31

Ending welfare institutions and making individuals responsible
Radical tax cuts and taxing everyone at 16%

Question 32

What arouse with the rise of new-liberalism?

Answer 32

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

Question 33

How did neo-conservatism redefine social justice?

Answer 33

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

Question 34

What distinguishable (only to Europe) postwar institution did neo-liberals attack?

Answer 34

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

Question 35

Why did neo-liberals attack the mixed economy principle?

Answer 35

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)

Question 36

What other economic reforms, apart from the abolishment of the mixed economy, did net-liberals pushed?

Answer 36

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

Question 37

What was the consequence of the USA’s deregulation?

Answer 37

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

Question 38

How did the financial industry change?

Answer 38

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

Question 39

Was the deregulated economy successful in the 1980s?

Answer 39

Yes - helped deal with financial crisis - neoliberals believed there would be no consequences as the market would correct itself if any issues came up

Question 40

What was the character of globalisation?

Answer 40

New policy that replaced colonialism for leading powers - new base in the technological and corporative world

Question 41

Why was the end of the Cold War beneficial to globalisation?

Answer 41

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

Question 42

What does the outsourcing of labour allow?

Answer 42

Allow advanced countries to concentrate on service and high-tech industries (research and development)