Making sense of Europe Challenges in 1960s, 1970s, 1980s and 1990s.

The first word we will define is Austerity. 

1. Severity or plainness: severity of discipline, regime, expression, or design

2. Economy pressure: a saving, economy, act of self-denial, especially in respect of something regarded as a luxury

3. ECONOMICS enforced thrift: thrift imposed as Government policy, with restricted access to or availability of consumer goods. (1)

Fig Tree Blossoms in 1960 Africa. 

All these changes took place a vacuum of spaces created predominantly in Europe's back yard and in the hands of previous colonial masters who had become accustomed to living off foreign governments in old colonies. A flurry of requests for independence had also characterized life In the 1960 also had unexpected results on an economy that was being driven by Foreign labor, commodities much like what had happened previously in the Americas and in the U.S itself when the North and South were forced to contend with each other on the questions of slavery and the benefits of human labor in the predominantly agrarian south. Island nations that were producing spices, coffee, cotton, sugar were also bound to suffer if these changes were implemented much too quickly. Trace the path of European decline in the seventies and you will find former colonial giants of shipping and trade beginning to feel the pinch of a loss of major services. 

Europe and Austerity in the 1970s.

Marshall the 'Troops'

These marked changes in the economies of Europe after the second world war could be traced back to the Marshall plan and the monies that was pumped into the struggling economies of the day to inject some much need growth and redevelopment in the war-devastated economies. But given what we have learnt about Foreign led growth and the consequent effects of the same on struggling economies maybe the decline of the European economies after yet another war was a sign that external investment cannot be viewed as a long term method of driving true sustainable growth.  

Commodities and the rise of Regional Powers. 

Most of the challenges that are mentioned in regards to Europe in the seventies hinge on the energy crisis, most particularly the price of oil, which had quadrupled since the Middle East war of 1973. The result was projections of double digit inflation for at least a decade in Europe. great. Great Britain was facing price rises o 17%, Italy was dealing with rises of 20% and Spain and Portugal were dealing with upwards of 30% price increases. Measures like a freeze in prices and wages had limited success. 

Premier Raymond Barre succeed in stabilizing the franc and reducing the deficit but the latter remained high and growth slowed and unemployment did not decrease. Barre was attacked both by Socialists and Communists on the left and by Gaullist followers of premier Jaques Chirac on the right. 

The Rise of the Foreign Banks and their Bailouts

Austerity plans were adopted by Great Britain ($3.9 Billion), Spain, Italy ($500 million from the IMF and $500 million from EEC) and Portugal ($49million had been given in April of that year to offset a deficit of $1 billion) . These plans had conditions that were attached to them with large loans from the International Monetary Fund. As discussed in the previous post on Bubbles, the discussion around loans further raised fears of the effects on local economies that infused capital from outside would affect economic sovereignty ad governments freedom of action. 

New Tactics for Modern forms of Economic Warfare

Several  major changes occurred firstly, Growth rates slowed in Europe (3%) while the rates of growth for the U.S and Japan rose (expansion rate 5%). Rapid growth and austerity are difficult to achieve simultaneously. Secondly, foreign investment in Europe went to other economies (investment from oil rich states). 

Thirdly, wages rose as a natural effect of inflation and a decline in productivity. Fourthly, the cost of European goods for export was expensive bringing about a trade imbalance 

Revival of Capitalist Communist Debates and Thinkers

Fifthly, unemployment.  In countries that had strong leanings toward communism and socialism or those who sought to marry different economic tendencies the natural result of unemployment was the return and revival of trade unions and workers movements the start of uneasy debates between capitalist thinkers and their marxist opposites. 

It was these conditions that brought about a major shift to the left, which is also common in the present day, the rise of the Iron Lady an her assault against the Trade Unions in the U.K, the trio of Reagan, Gorbachev and Thatcher, as wells as pressure on the Soviet Union and the Berlin Wall. (3b)

Europe and Austerity in the 1990s.

Sweden-a case for mixed economies. 

For a long while (since the 1930s) it seems as though the decision of the Swedes to marry two systems of economic development provided some insulation from economic challenges that confronted other European Countries. This they did by splitting their economy into a 'local' and and 'an other'. The local was made up of cooperatives and unions that managed key aspects of their economy and development. They ensured through these groups that simple commodities were transformed and maximized to benefit locals. The energy then invested in the development of these local industries was then pumped into controlled Foreign exports whose profits were returned to members of the same. This model was affected by a recession in the 1990s. The result was a drop in employment and a budget deficit. The government decided to respond using some austerity measures which included tax reform, reductions in civil service employment, cuts in social-welfare programs and partial privatization of some state owned enterprises( postal services, telecommunications and railroad transport). The result was a reduction in the public sector, a restoration of confidence in the Swedish economy and an economic recovery that slowed the economic downturn of 2001. (2)

Italy-Politics, Religion, Economics and their effects on Austerity

In 1995 Lamberto Dini, Berlusconi's treasury minister, was appointed prime minister to lead a politically neutral transitional Government. There was uncontrolled public expenditure, political corruption, an unproductive public sector all of which contributed to the budget deficit and a rising national debt. Dini's response was to pass an austerity budget, to reform election system, state pension system and to enact rules that controlled political access to TV. He resigned in January 1996 but continued in office until April. 

Elections in that year brought the communists into power for the first time in Italy's history as a republic. Thus the country began its shift to the centre-left. Also notable during this time was an attempt toward separation from a more 'productive' north which failed to win popular support when the idea was floated in the election. 

The national election brought into power 56 year old Romano Prodi (a mix of economics and religion) economist and former state conglomerate. He defeated the centre-right leader and media magnate Silvio Berloscuni former prime minister. Perhaps this time around the effects on Media that had been  attempted a few years before by Lamberto Dini would now gain fresh momentum. 

It was also another time of firsts in which Italy's evolving political system had generated two opposing major candidates for prime minister before citizen voted. 

Unable to win a majority an Olive Tree coalition was formed which brought in a formerly communist party the PDS (democratic party of the left) which had given up Marxism after the fall of the Berlin wall resulting in 

loss of its core group from the Reformed Communists. Their 21% added to the 35% of the original bloc. The new government attracted other prominent leftists like Massimo D'Alema (party secretary), Walter Veltroni (PDS second in command), Georgio Napolitano (Interior Minister) and Vincenzo Visco (Finance Minister), Lamberto Dini(former prime minster was appointed Foreign Minister), Carlo Azeglio Ciampi (former premier and political independent become treasury minister), and Antonio Di Pietro (former Star prosecutor who headed operation clean hands investigation was appointed Minister of Public Works but later resigned after charges of abuse of office were brought against him). 

Prodi wanted to work on public finances (a criteria for joining the European Monetary Union),deal with the threats of succession by the Northern league leader (Umberto Bossi), reform of the constitution along federalist lines as well as the creation of a winner takes all voting system (to replace the proportional representational system). 

Of all the challenges mentioned above the only external challenge that would affect Italy's future was that of the Monetary Union. The rest of the issues strictly speaking we're internal, with hybrids such as the corruption cases or trials off terrorism suspects (Majed Youssef al Molqi) that affected the perception of the Americans on the Italian Justice System (Giovanni Brusca, Giovanni Falcone). 

The appointments were important because they helped determine what the coalition government would focus on in the years to come because on the whole, the men that were placed in positions of power were all major pieces in the political 'games' that characterized the functions of the the nation in the years previous. It is no wonder that Berlusconi was castigated and later tried in connection to kickbacks to tax inspectors of his Fininvest media-to-retail conglomerate (possibly a consequence of the over exertion of his media power in the past and present-the present bribery charges notwithstanding). (4)

1. Encarta Dictionary

2. Microsoft Encarta 2008, Microsoft Corporation 1993-2007

3. Collier's Year Book (for events of 1997). Monthly updates in Encarta Yearbook). 

3b. Microsoft Encarta 2008, Microsoft Corporation 1993-2007

4. Microsoft Encarta 2008, Microsoft Corporation 1993-2007

Key Words: Austerity, Debt, Credit Rating. 

Both this article and the previous one have only dealt with two issues on a regional basis with some more I depth coverage of some European countries like Italy. The responses used my most countries and their Central Banks are universal. 

Here is what I found out about economic bubbles.

To begin with, the idea of a bubble is a rapid economic expansion (Boom) followed by an economic explosion (burst). You cannot talk about bubbles without coming across three major ideas or themes. Banks, Markets and people (investors). 

Globalization and Regionalism (1)

When you study or combine all this with the idea of globalization, you can see how complex or interested the problem of economic bubbles becomes. Under the subject of Globalization, you will find three primary institutions the World Bank, International Monetary Fund and the World Trade Organization. These groups usually can have an effect on the local economy by bringing in in unexpected change in the economic structure of the government. A loan for example can bring about the illusion of growth and expansion at a time when the reality Is that the economy is slowing down. This perception amongst locals can then be exploited by those who may be partners say in Construction or roads. As a result cement, steel, tar (by products of petroleum) may increase in price. So here you see the banks (International) having an effect on the markets which also cause an effect with people. 

The effects described above all take place on the global level. On the other hand though, there can be effects that take place on a Regional Level. The dynamics are the same in this case, governments almost everywhere have to deal with the results of agreements under which these deals or loans or bail outs are administered. Secondly, many of these agreements are signed in the interests of larger groups as opposed to individuals or the grass roots if you like. In current affairs you can see how tension is beginning to build between the Americans on one hand and the Chinese on another. In this example the Americans would like to benefit from selling certain chicken products to their Asian counterparts. The Chinese on the other hand have responded using subsidies for their local produce. What this does is make it almost impossible for the American Business people to thrive in the Chinese Environment. You could argue that the Americans have been fed some of their own medicine given some of their practices in Island Nations suck as Haiti which receive Rice from America at almost no cost at the detriment of their own local markets. 

The Rise of new Powers (Colonialism and Hegemony) (2)

The British were making their mark on the world and were rapidly expanding. Naturally there was a need to grow and extend territory. Those who owned ships were therefore able to exert an unequal effect on the markets for timber, cotton, men, sugar, spices. Naturally promises could therefore be made and speculation based on the forecasts of growth. Because certain members of the monarchy maintained rights over the major companies back in the day, these small groups were able to concentrate vast amounts of wealth around them. These ideas mirror some of the developments in modern days. The transfer of power from one economic power to another and changes in shipping that favor large companies that can transport good as well as oils and naturally those who can control these routes using military means. A study of the U.S and China and other giants of shipping and trade can provide more useful information.  In addition to this the effect of a transfer of labor and the monies that are recovered and sent back to poor nations can also have a skewed effect on the economy. 

The U.S (Black Friday and Black Tuesday) (3)

The U.S had two major events the first in Friday 24th September 1869 was brought about by speculation on the price of Gold. A small group (James Fisk and Jay Gould) of investors bought so much Gold and then made the attempt to corner the market on the same. In the current day you could equate this to the current effect that we have seen with the price of oil and the influence of a specific group (OPEC) on this price. The Saudi for example were producing so much of it that they would sit by for years with a knowledge that no matter how low the price of the commodity got, they would still have a substantial amount of money in their reserves. You can expect to see much more activity in this regard especially as new power rise and attempt to join the exclusive club of oil producers. 

The second event (Black Tuesday)(4) was caused when high tariffs on imported goods were combined with foreign loans and the attempt to export goods. This could not be sustained because the countries that were trading with the Americans could not afford to pay off the loans while at the same time struggling to deal with the challenge of exporting goods to the U.S under such high tariffs. The effect of these initial practices was the growth a wealthy class. The trouble with this rise that it was based on loans that could not be sustained. In a sense the Americans though their loans were financing their own local markets and depending on the the foreign governments to pay for these practices. 

A large amount of people began to believe in the illusion of wealth that had been created by few 'wealthy' people. The result was investment in over-valued stocks. The crash that followed had effects on interrelated areas of the economy where wealth was unevenly distributed, where agriculture has been 'abandoned in favor of other industries and in banks that had been under supervised. 

The U.S-The effect of war on an Economy (5)

The effects of war can be internal or external. 

The first effect if not watched can be the un-natural push for one means or method of generating revenue for the economy at the expense of all the others. Maybe this is part of the warning that was given by the Head of State (David Dwight Eisenhower) at the time when he warned the American to beware of the military industrial complex.

On the external front South Vietnam benefitted from the kind of growth that can be generated in a time of war. Industries driven by the need for weaponry and related sub-economies like transportation, infrastructure, communications. As a result one group of the populace benefitted and was able to achieve a high standard of living. Those closely related to the same group also benefitted but on the whole the country was struggling. 

These issues can be extended in peace time to countries that thrive in dictatorships where small groups of well connected individuals enjoy the limited resources in a given country while many others in the periphery suffer. 

The Asian Tigers. (6)

A few economies (Hong Kong, Taiwan, Singapore, South Korea) opened up by adopting market friendly practices. This caused a rise in investment by foreign investors. Massive drives toward construction and infrastructure then followed. But because many of these practices were not driven internally by policies aimed at arming people with knowledge and skills, growth and was soon followed by a collapse. Many of these major projects were not built for locals but for the foreigners and few locals who had had the benefit of an international Education sufficient enough to prepare them to run these institutions on behalf of the 

Larger foreign corporations to which they were subservient. 

The other effect was mentioned before under the subject of regional effects where one economy by virtue of its size influences the workings of other smaller economies in the area. This is the case with Japan and could be the case with China. Closer home bastions of stability such as Kenya could have detrimental effects in the region were they to suffer economically. It is no wander that there have been attempts to move new developments towards the restorations of the standard Gauge Railway have been moved in favor of a more stable looking Tanzanian route as opposed to the Kenyan one. 

The Technology Bubble. (7)

The most interesting note about this technology bubble is that the notable survivors of the fall are our current giants even of some of them are now floundering. On the local scene we wonder how long the talk about application development and mobile technology will last in Uganda as it begins to wane in the U.S and as many innovators throng into Europe. In addition to this, we can see how many economies (France) are beginning to question Foreign practices of tax evasion and clamping down on companies such as google. Perhaps one of the tools that will be responsible for part of this decline will be International law and international trading agreements which in a large part have managed to constrict the likes of Microsoft and Apple and have continued to mitigate between various other groups struggling to drive innovation while protecting trade marks and patents.  

(1) Microsoft Student 2008 Edition DVD and the specific section mentioned above was developed from the work of Tabb William K. 

(2) Microsoft Student 2008 DVD and are part of the contribution given by Weisser, Henry G. And Kashlansky, Mark. 

(3) "Black Friday" Microsoft Student 2008 DVD Redmond WA Microsoft Corporation.  

(4) "Black Tuesday" Microsoft Student 2008 DVD Redmond WA Microsoft Corporation.  McElvaine, Robert 'Great Depression of the United States'.

(5) Microsoft Corporation 2008. Encarta DVD. 

(6) Microsoft Corporation 2008. Encarta DVD. 

(7) Microsoft Corporation 2008. Encarta DVD.