What this lesson teaches
I can judge which factors did most to grow the global economy after 1945, and how this changed over time.
Syllabus 9174, Paper 1, Theme II, Learning Outcomes. evaluate the factors that contributed to the growth of the global economy over time
Make a guess
Western Europe and Japan grew rapidly after 1950. Do you think they only gained from global growth, or also drove it?
- They just gained, because the USA did the driving.
- Neither, because their economies were closed to trade.
- They drove it too, through European integration and Japanese exports.
Show the answer
They drove it too, through European integration and Japanese exports.
The EEC widened markets for firms, and Japan's export-led industries became new engines of world growth.
Western Europe and Japan became new engines of growth, through integration in Europe and export-led industry in Japan.
Western Europe grew by joining its markets together. The European Coal and Steel Community of 1951 led to the European Economic Community (EEC) in 1957. The EEC removed tariffs between members and completed a customs union in 1968.
A larger market let firms produce on a bigger scale and trade more. West Germany's "economic miracle" made it the largest economy in Western Europe and a major exporter.
Europe deepened integration later. The Single European Act of 1986 led to a single market in 1993, and the euro was launched in 1999.
Japan grew at about 10 per cent a year from the mid-1950s to 1973. By 1968 it was the second largest economy in the non-communist world, exporting ships, steel, cars and electronics.
The Plaza Accord of 1985 raised the yen's value, which made Japanese exports dearer. Japanese firms moved factories to Southeast Asia, spreading investment, technology and growth across the region.
- Treaty of Rome
- 1957: EEC created.
- Japan second largest
- By 1968, in the non-communist world.
- Plaza Accord
- 1985: yen rises; Japanese investment in Southeast Asia grows.
Real examples to use
West German reform, June 1948
Ludwig Erhard's currency reform and end of most price controls started the 'economic miracle' in the western zones.
Customs union, July 1968
The six EEC members removed the last tariffs between them and set a common outside tariff, ahead of schedule.
Tokyo, 1964
Japan hosted the Olympics and opened the first Shinkansen high-speed line, showing its recovery to the world.
Worked example: Comparing contributions
How did Europe and Japan add to global growth?
- Europe: integration created a large market and more trade.
- Japan: export-led growth, then investment abroad.
- Both: competition lowered prices and spread technology.
- Link: both depended on the US market and open trade rules.
Watch out for this
Western Europe and Japan only benefited from global growth; they did not drive it.
From the 1960s they became sources of demand, investment and technology for others. An example is Japanese investment in Southeast Asia after 1985.
Check your understanding
What effect did the Plaza Accord of 1985 have on Japanese firms?
- It banned Japanese car exports to the USA for five years.
- It weakened the yen, so Japanese exports boomed.
- A stronger yen pushed them to move factories to Southeast Asia.
Show the answer
A stronger yen pushed them to move factories to Southeast Asia.
Right. Their exports became dearer, so they produced abroad.