The Rise and Fall of the Great Powers (84 page)

Nevertheless, measured on strictly economic criteria, the PRC seemed a classic case of economic backwardness. In 1953, for example, it was responsible for only 2.3 percent of world manufacturing production and had a “total industrial potential” equal only to 71 percent of Britain’s in 1900!
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Its population, leaping upward by tens of millions of new mouths each year, consisted overwhelmingly of poor peasants whose per capita output was dreadfully low and rendered the state little in terms of “added value.” The disruption caused by the warlords, the Japanese invasion, and then the civil war of the late 1940s was not stopped when the peasant communes took over from the landowners after 1949. Nevertheless, economic prospects were not entirely hopeless. China did possess a basic infrastructure of roads and light railways, its textile industry was substantial, its cities and ports were centers of entrepreneurial activity, and the Manchurian region in particular had been developed by the Japanese during the 1930s.
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What the country required, if it was to enter the stage of industrial takeoff, was a long period of stability and massive infusions of capital. Both conditions were achieved to some degree—because of the dominance of the Communist Party, and the flow of Russian aid—as the 1950s evolved. The Five-Year Plan of 1953 consciously imitated those Stalinist priorities of developing heavy industry and of increasing steel, iron and coal production. By 1957, industrial output had doubled.
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On the other hand, the amount of ready capital for industrial investment, whether raised internally or borrowed from Russia, was quite insufficient for a country of China’s economic needs—and the Sino-Soviet split brought Russian financial and technical aid to an abrupt halt. In addition, Mao’s fatuous decisions to achieve a “Great Leap Forward” by encouraging thousands of cottage-sized steelworks and his campaign for the “Cultural Revolution” (which led to the disgrace of technical experts, professional managers, and trained economists) slowed development considerably. Finally, throughout the 1950s and 1960s, the PRC’s confrontationist diplomacy and its military clashes with almost all of its neighbors meant that far too large a proportion of the country’s scarce resources had to be devoted to the armed forces.

The period of the Cultural Revolution was not
all
bad in economic terms; it did at least emphasize the importance of the rural areas, stimulating small-scale industries as well as improved farming techniques, and bringing basic medical and social care to the villages.
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Nevertheless, significant increases in national product could come only from further industrialization, infrastructural improvements, and long-term investments—all of which were aided by the winding down of the Cultural Revolution and by the growth of trade with the United States, Japan, and other advanced economies. China’s own coal
and oil resources were being swiftly exploited, as were its stocks of many precious minerals. By 1980, its steel output of 37 million tons was well in excess of that of Britain or France, and its consumption of energy from modern sources was twice that of any of the leading European states.
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By that date, too, its share of world manufacturing production had risen to 5.0 percent (from 3.9 percent in 1973), and was closing upon West Germany’s.
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This heady recent growth has not been unattended by problems, and the party leadership has had to readjust downward the targets for the country’s “four modernizations”; it is also worth repeating that when any of China’s statistics of wealth or output are presented in per capita terms, its relative economic backwardness is again revealed. Yet, notwithstanding those deficiencies, it became clear over time that the Asian giant was at last on the move and determined to build an economic foundation adequate for its intended role as a Great Power.
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The fifth region of economic power identified by Nixon in his July 1971 speech had been “western Europe,” which was of course more of a geographical expression than a unified assertive Power like China, the USSR, and the United States. Even the term itself meant different things to different people—it could be all of those countries outside the Russian-dominated sphere (and therefore include Scandinavia, Greece, and Turkey), or it could be the original (or enlarged) European Economic Community, which at least possessed an institutional framework, or it was often used as a shorthand for that cluster of formerly great states (Britain, France, Germany, Italy) which might need to be consulted, say, by the U.S. State Department before the latter initiated a new policy toward Russia or in the Middle East. Even that did not exhaust the possibilities of semantic confusion, since for much of this period the British regarded “Europe” as beginning on the other side of the English Channel; and there were, moreover, many committed European integrationists (not to mention German nationalists) who regarded the post-1945 division of the continent as a merely temporary condition, to be followed in the future by a joining of the countries of both sides into some larger union. Politically and constitutionally, therefore, it has been difficult to use the term “Europe” or even “western Europe” as more than a figure of speech—or a vague cultural-geographical concept.
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At the economic level, however, there did seem to be a basic similarity in what was being experienced across Europe in these years. The most outstanding feature was the “sustained and high level of economic growth.”
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By 1949–1950, most countries were back to their prewar levels of output, and some (especially, of course, the wartime neutrals) were significantly ahead. But there then followed year after year of increased manufacturing output, of unprecedented levels of growth in exports, of a remarkable degree of full employment and
historically high levels of disposable income as well as of investment capital. The result was to make Europe the fastest-growing region in the world, Japan excepted. “Between 1950 and 1970 European gross domestic product grew on average at about 5.5 percent per annum and 4.4 percent on a per capita basis, as against world average rates of 5.0 and 3.0 percent respectively. Industrial production rose even faster at 7.1 percent compared with a world rate of 5.9 percent. Thus by the latter date output per head in Europe was almost two and a half times greater than in 1950.”
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Interestingly enough, this growth was shared in all parts of the continent—in northwestern Europe’s industrial core, in the Mediterranean lands, in eastern Europe; even the sluggish British economy grew faster during this period than it had for decades. Not surprisingly, Europe’s relative place in the world economy, which had been declining since the turn of the century, soon began to expand. “During the period 1950 to 1970 her share of world output of goods and services (GDP) rose from 37 to 41 percent, while in the case of industrial production the increase was even greater, from 39 to 48 percent.”
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Both in 1960 and in 1970, the CIA figures were showing—admittedly on statistical evidence that can be disputed
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— that the “European Community” possessed a larger share of gross world product than even the United States, and that it was twice as large as the Soviet Union’s.

The reasons for Europe’s economic recovery are, on reflection, not at all surprising. For too long, much of the continent had suffered from invasions, prolonged fighting and foreign occupation, bombings of towns, factories, roads, and railways, shortages of food and raw materials caused by blockade, the call-up of millions of men and killing off of millions of animals. Even before the fighting, Europe’s “natural” economic development—that is, growth which evolved region by region, as new sources of energy and production revealed themselves, as new markets took off, as new technology spread—had been distorted by the actions of the nationalistically inclined
Machtstaat
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Ever-higher tariff barriers had separated suppliers from their markets. Government subventions had kept inefficient firms and farmers protected from foreign competition. Increasingly large amounts of national income had been devoted to armaments spending rather than commercial enterprise. It was thus impossible to maximize Europe’s economic growth in this “climate of blocks and autarky, of economic nationalism, and of gaining benefits by hurting others.”
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Now, after 1945, there were not only “new Europeans” like Monnet, Spaak, and Hallstein determined to create economic structures which would avoid the mistakes of the past, but there was also a helpful and bénéficient United States, willing (through the Marshall Plan and other aid schemes) to finance Europe’s recovery provided it was done as a cooperative venture.

Thus, a Europe whose economic potential had been distorted and underutilized by war and politics now had a chance to correct those deficiencies. There was a broad determination to “build anew” in both eastern and western parts of the continent, and a willingness to learn from the follies of the 1930s. State planning, whether of the Keynesian or socialistic variety, gave a concentrated thrust to this desire for social and economic improvement; the collapse (or discrediting) of older structures made innovation easier. The United States not only gave billions of dollars of Marshall Plan aid—“a shot in the arm at a critical time,” as it was aptly described
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—but also provided a defense umbrella under which the European states could shelter. (It was true that both Britain and France spent heavily on defense during the Korean War years and the period before their decolonizations—but they, and all their neighbors, would have had to devote much more of their scarce national resources to armaments had they not been protected by the United States.) Because there were fewer trade barriers, firms and individuals were able to flourish in a much larger market. This was especially so since trade
among
developed countries (in this case, the European states themselves) was always more profitable than trade elsewhere, simply because the mutual demand was greater. If the “foreign” trade of Europe rose faster than anything else in these decades, therefore, it was chiefly because much more buying and selling was going on among neighbors. In one generation after 1950, per capita income increased as much as it had during the century and a half prior to that date!
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The socioeconomic pace of this change was truly remarkable: the share of West Germany’s working population engaged in agriculture, forestry and fishing dropped from 24.6 percent in 1950 to 7.5 percent in 1973, and in France it fell from 28.2 percent to 12.2 percent in the same period (and to 8.8 percent in 1980). Disposable incomes boomed as industrialization spread; in West Germany per capita income soared from $320 in 1949 to $9,131 in 1978, and in Italy it rose from $638 in 1960 to $5,142 in 1979. The number of automobiles per 1,000 of population rose from 6.3 in West Germany (1948) to 227 (1970), and in France from 37 to 252.
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However one measured it, and despite continued regional disparities, the evidence of very real gains was clear.

This combination of general economic growth, together with wide variations in both the rate of change and its effects, can clearly be seen if one examines what happened in each of the former Great Powers. South of the Alps, there occurred what journalists hyperbolically termed “the Italian miracle,” with the country’s GNP in real terms rising nearly three times as fast after 1948 than it had during the interwar years; indeed, until 1963, when growth slowed, the Italian economy rose faster in these years than that of any other country except Japan and West Germany. Yet perhaps that, too, is not surprising
in retrospect. It was always the least developed of the European “Big Four,” which is another way of saying that its potential for growth had not been as fully exploited. Freed from the absurdities of fascist economic policies, and benefiting strongly from American aid, Italian manufacturers were able to utilize the country’s lower wage costs and strong reputation in design to boost exports at an amazingly fast rate, especially within the Common Market. Hydroelectricity and cheaply imported oil compensated for the lack of indigenous coal supplies. Motor construction was a great stimulant. As local consumption levels boomed, FIAT, the domestic automobile producer, occupied an unchallenged position for many years in this home market, giving it a strong base for its export drive north of the Alps. Traditional manufactures, like shoes and fine clothes, were now joined by newer products; Italian refrigerators outsold any others in Europe by the 1960s. This was not, by any means, a story of unqualified success. The gap between north and south in Italy remained chronic. Social conditions, both in the inner cities and in the poorer rural areas, were far worse than in northern Europe. Governmental instability, a large “black economy,” and a high public deficit, together with a higher than average inflation rate, affected the value of the lira and suggested that this economic recovery was a fragile one. Whenever European-wide comparisons of income, or industrialization, were made, Italy did not compare too well with its more advanced neighbors; when
growth
rates were compared, things looked much better. That is simply another way of saying that Italy had started from a long way behind.
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By contrast, Great Britain in 1945 was a long way ahead, at least among the larger European states; which may be part of the explanation for its relative economic decline during the four decades following. That is to say, since it (just like the United States) had not been so badly damaged by the war, its rate of growth was unlikely to be as high as in those countries recovering from years of military occupation and damage. Psychologically, too, as has been discussed above,
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the fact that Britain was undefeated, that it was still one of the “Big Three” at Potsdam, and that it regained all of its worldwide empire made it difficult for people to see the need for drastic reforms in its own economic system. Far from producing newer structures, the war had preserved traditional institutions such as trade unions, the civil service, the ancient universities. Although the Labor administration of 1945–1951 pushed ahead with its plans for nationalization and for the creation of a “welfare state,” a more fundamental restructuring of economic practices and of
attitudes
to work did not occur. Confident still in its special place in the world, Britain continued to rely upon captive colonial markets, struggled in vain to preserve the old parity for sterling, maintained extensive overseas garrisons (a great drain on the currency), declined to join in the early moves toward European
unity, and spent more on defense than any of the other NATO powers apart from the United States itself.