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.
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?
- A stronger yen pushed them to move factories to Southeast Asia.
- It banned Japanese exports to the USA.
- It weakened the yen.