Sheri Berman: No economic model fits all countries all the time

[Sheri Berman, who teaches political science at Barnard College, is the author of “The Primacy of Politics: Social Democracy and the Making of Europe’s Twentieth Century.”]

Postwar European history falls neatly into two periods. From 1945 to 1973, the countries of Western Europe recovered rapidly from the almost unimaginable devastation caused by World War II and then took off, growing faster than the United States and more than twice as fast as their own historical trends. From 1973 to the present, however, their economies have struggled with low growth and high unemployment, lagging behind both international competitors and their own earlier success.

As a result of this divided history, the so-called European model has both cheerleaders and naysayers. Social democrats and others on the left focus on the first period, applauding the continent’s ability to generate high living standards while cushioning individuals and societies from the ravages of unfettered markets. Right-wing critics and free marketeers focus on Europe’s contemporary problems, arguing that the continent’s generous welfare benefits and heavy regulation condemn it to continuing decline.

Both views contain some truth. But since the same conditions that led to success in one era have produced problems in the next, neither interpretation fully explains the story. In “The European Economy Since 1945,” Barry Eichengreen, a professor of economics and political science at the University of California, Berkeley, presents not only a comprehensive account of Europe’s postwar economic experience but also an important analysis of capitalist development more generally.

Drawing on his credentials as both an economist and a political scientist, Eichengreen argues that the key to understanding Europe’s initial triumphs and later troubles lies in recognizing that the recipe for growth varies, depending on one’s position in the economic race. In the years after 1945, Europe needed to recover from the war and catch up with the United States. This involved what economists call “extensive growth” — essentially, increasing the number of workers doing familiar kinds of jobs. Extensive growth requires adopting existing technology, using labor more efficiently and generating high levels of investment. After the war, Europe developed a variety of institutions well suited to these tasks....

comments powered by Disqus