European economic growth 1913–1950: a comparative perspective

From 1913 to 1950 the European growth record was rather poor. The “Second Thirty Years War” (Churchill 1948, p. xiii), or the period from the beginning of the First World War in 1914 to the end of the Second World War in 1945, stands in sharp contrast to the following Golden Age of Growth between about 1950 and 1973 (see Chapter 12 in this volume). And indeed, the rates of economic growth across European countries were “unusually” low: they seem to distinguish Europe from other parts of the world during that time span, but also stand out compared to Europe's growth experience from about 1870 to 1913. A substantial literature has pointed to several key factors that may account for this slowdown of growth rates in Europe. Not surprisingly, a central role is attributed to the occurrence of two devastating wars that raged in the center of Europe over a third of the entire period 1913–1950 (Svennilson 1954). The remaining twenty years have often been characterized as a time of political turmoil and, in many cases, misguided macroeconomic policies; and, related to this, a general failure to coordinate policies between countries, which prevented Europe from fully realizing its economic potential (Feinstein, Temin, and Toniolo 1997).

To see how policies and coordination failures affected economic growth, we need to understand how large Europe's potential for growth actually was after the First World War.