Download Economics of conflict

World War II:
Economics of conflict
THE GLOBAL ECONOMY POST-WWII
1. BRETTON WOODS
3. EU AND EUROZONE
In July 1944, 44 Allied nations met in Bretton Woods to discuss how to
rebuild the international economic system.
Huge human and economic cost of WWII led European leaders to seek a way
to “make war unthinkable and materially impossible”.
Agreement to set up the International Monetary Fund (IMF) and an
organisation for reconstruction and development – part of today’s World
Bank Group.
French leaders Jean Monnet and Robert Schuman first came up with the
principle that developing economic ties would be the best way to ensure
European unity.
Start of pegged currency system under which other countries would peg
their currencies to the US dollar.
1951: Treaty of Paris set up the European Coal and Steel Community with six
countries: France, Germany, Italy, the Netherlands, Belgium and Luxembourg.
 War necessitated huge government spending. Many economists say that
ramp-up in government spending helped the US economy, in particular,
escape the lingering grip of the Great Depression.
US agreed to link the dollar to gold at US$35 per ounce of gold – a system
which ended in 1971. The US dollar became the world’s key currency.
1958: The six also founded the European Economic Community and the
European Atomic Energy Community.
2. THE MARSHALL PLAN
 17 million civilian jobs created in the US and industrial productivity
rose 96 per cent.
US launched the Marshall Plan in 1948, under which it gave US$17 billion to
help rebuild the European economies.
1967: The three communities are merged to form
the European Communities.
The 70th anniversary of the end of World War II was commemorated by countries across Europe
on May 8, Victory in Europe (V-E) Day. This comes as talk of Greece exiting the eurozone is rife,
Greece demands war reparations from Germany, and several countries question their European Union
membership. BT takes a look at the economic impact of WWII on Europe and the global economy.
PRELUDE TO WAR
3. WAR ECONOMY & WAR PRODUCTION
The Great Depression, 1929 - late 1930s
Global GDP fell
15%
(1929 to 1932)
Steep
unemployment.
Severe
deflation
US real
GDP fell
30%
from
peak.
Germany
unemployment
rises to
30% by1932.
Banking system
nears
collapse.
Rise of
German
extremism.
Nazis,
communists
gain
ground.
18 nations received plan benefits.
The largest recipients were the
United Kingdom (26%), France (18%)
and West Germany (11%).
The military burden, 1939 - 1944: Military outlay as % of national income
80
Germany
Japan
70
World production: peak to trough
-46.8%
-16.2%
-41.8%
50
UK
40
USA
1999: Single European currency, the euro, adopted and the eurozone is
formed. Denmark, Sweden and the UK choose not to join.
The plan sped up recovery in Europe
and forced important structural
adjustments such as mandated
free trade.
60
4. NEW GLOBAL ECONOMY
RISE OF THE US; BREAKUP OF EMPIRES
US emerged from WWII the largest and richest economy in the world. In
contrast, the war left Britain – though a victor – severely diminished in wealth
and global influence. This set the stage for the collapse of its empire.
30
20
Britain chose a path of peaceful disengagement, while France and Portugal
fought futile wars to keep their empires intact.
Italy
10
-33.0%
-31.3%
-8.5%
0
1991: More countries joined in the years that followed, and the EC became
the European Union in 1991, with new areas of co-ordinated policies:
security, asylum, immigration, drugs, terrorism.
RAPID GLOBAL GROWTH (1945-1970S)
1939
1940
1941
1942
1943
1944
Post-war economic boom saw high
growth in output and employment
globally – especially in Western
Europe and east Asia.
Source: The Economics of World War II,
Cambridge University Press
THE ECONOMIC WAR
Economies devastated by the war West Germany, France, Japan, Italy also saw spurts of growth now
considered “economic miracles”.
1. BLOCKADES
 Britain and France waged economic war on Germany, cutting off supplies of
raw materials and food with naval blockades.
 Germany staged its own blockade of Great Britain, attacking all Allied
shipping with its submarines.
5. UK WELFARE STATE
 A struggle to buy up raw materials needed in war production – such as oil
and iron ore – from neutral countries to prevent them from landing in
enemy hands. .
During WWII, Britain’s coalition
government appointed a
committee to relook its social
insurance and related services.
2. LEND-LEASE
GDP per capita , 1938-1987, at
1990 prices (US$ ‘000)
25
USA
20
Germany
France
Japan
UK
Italy
15
10
USSR
5
0
1938
1950
1973
1987
Source: The Economics of World War II,
Cambridge University Press
The 1942 Beveridge report formed the basis for post-war reforms including
expanded national insurance and the creation of the National Health Service.
 In March 1941, the US passed the Lend-Lease Act to supply France, Britain,
China and later the Soviet Union and other Allied nations with food, oil and
other resources.
The war gave the implementation of the Beveridge report a political slant UK’s leaders saw the introduction of the Welfare State as a way to boost
public morale, a reward for war-time sacrifices.
 The US$50.1 billion in supplies made up 17 per cent of US war expenditures.
They were provided free in return for leases on bases in Allied territories
during the war. With this, US neutrality was over and the US joined the war.
The Labour Party, which won the 1945 post-war election, adopted the
report’s proposals and implemented many of its social policies.
BT Graphics: Teh Shi Ning, Simon Ang & Khairie Rahmat
The war in
numbers
NATIONS / TERRITORIES INVOLVED
100
World War II:
September 1939 - September 1945
Victory in Europe (V-E Day):
May 8, 1945
more than
Victory over Japan (V-J Day):
September 2, 1945
THE MAJOR ALLIED POWERS
in all
France
Soviet Union
Britain
United States
China
VS
THE MAJOR AXIS POWERS
HUMAN COST
World population before
WWII broke out:
about
Germany
Italy
Japan
Total deaths: ( more than
3% of world population)
2b 50-80m
38-55
m
Total civilian deaths
22-25
m
Total military deaths
50,000
Deaths in Singapore (about 7%
of population of 728,000)