The debates about increased integration took place against the backdrop of fears and hopes about Europe’s place in the world. Since the oil shocks of the 1970s, much of European industry had been in a chronic structural crisis. The traditional heavy industries, the veterans of the period of classical industrialization in the mid-nineteenth century-steel and coal—were the worst hit. They had been at the heart of the early European post-war efforts to obtain greater economic co-operation. They were also the industries whose future raised great political sensitivities. At first, governments were inclined to follow an approach similar to that adopted in the late 1950s and early 1960s to manage the relative decline of agriculture (which had also been a political hot potato). A European plan of 1977 (produced by the European Community’s Commissioner, Etienne Davignon) to reconstruct the steel industry through a progressive reduction of productive capacity in a cartel framework also involved very costly subsidies. In the early 1980s, the United States Department of Commerce calculated that for some products the subsidy amounted to 40 per cent of the quoted price. At the same time as the taxpayer provided a significant transfer, users of steel in machine tools and other industries faced higher costs because of the cartel pricing. The steel plan meant in sum a retreat from the trade liberalization which had been the dynamic behind European industrial performance. (It was in fact also a violation of the 1952 treaty establishing the ECSC, which in Section 1, Chapter 1, had prohibited ‘all agreements between undertakings that limit or control production, and the fixing of prices by any means’.)
Subsidizing heavy industry was a potentially much more expensive undertaking than dealing with agriculture. Eventually, most countries came to accept that a dramatic decline was inevitable. The number of operating coalmines in Britain fell from 958 in 1947 to 50 in 1992 (with further cuts proposed), and the number of miners from 718,000 to 43,000. The output of coal in Britain in 1946 had been 193.1 million tons, in 1970 it had fallen to 144.6 million, and in 1990 it was 93.5 million (the equivalent figures for Germany are 108.4 million, 260.6 million, and 70.2 million).
The fears of the 1970s and 1980s led to a Euro-pessimism which believed that it had identified a Euro-sclerosis. The impetus given by the Single European Act generated a brief Euro-phoria. The problems of the Maastricht treaty, and the belief that jobs would be lost to the formerly socialist and newly marketized economies of central Europe or to the dynamic economies of East Asia, generated a new round of scepticism and gloom.
Although after the sharp recession of 1981-2 economic growth in the 1980s was generally stronger than it had been in the 1970s, recovery created surprisingly few jobs. Unemployment at high levels appeared to have become an endemic problem. Economists constantly revised upward their calculation of the non-inflationary unemployment level (the level which could only be reduced by an acceleration of inflation). Like the mass unemployment of inter-war Europe, this seemed to indicate the failure of markets. But dealing with this failure could not be tackled in the conventional way any longer. The large fiscal deficits that had built up in all European states ruled out traditional Keynesian-style approaches to the unemployment problem.
World History
