After rate reached 22.7%. Countries were much

After WWI and the Great Depression there was a great deal of recovery taking place across Europe but after both these events the recovery was not substantial enough to create a long-term growth trend. This was only done after the WWII reconstruction period. Before the Second World War there was volatile and unstable economic growth throughout the whole of Europe. Post WWI there was sustained stagnant economic growth but the Great Depression caused even greater economic problems but lasted for a shorter period. During WWII the state of the economy was even worse but the recovery after was much stronger.

Leading up to WWII all countries had similar levels of physical and human capital as well as GDP per capita. However, after the Second World War the similarities ended as Germany and Austria remained capitalist states whereas Eastern Europe introduced policies such as state redistribution and central planning. A key aspect of centrally planned economies is to invest heavily in broad capital, but this was not very effective as these economies didn’t catch up in terms of economic growth. Although during the period 1930-1990 education levels and physical capital was pretty equal, the GDP per capita in Austria and Germany was far greater than other countries around Europe. Providing human capital is a key driving force in long run economic performance then this could be portrayed as being a large reduction in the productive efficiency of human capital accumulation in Eastern Europe during socialism.

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During the period between 1946 to 1973 there was a sustained period of long run growth across the majority of Europe. It was after the Yom Kippur war in 1973 when the oil crisis took affect that caused a sharp downturn in growth rates as the price of oil sky rocketed.

Post WWII was when investment really took off. In 1947 the investment rate reached 22.7%. Countries were much better at investing after WWII as opposed to WWI where the investment rate was very meek. The investment level stayed high at around 19% between 1948 to 1953. It then further increased to 24.5% in 1964 and was sustained until 1974. Investment rates then started to decline but were still relatively high for the period in question as a whole.

Foreign trade suffered greatly during and in the interwar period in Europe. Even in the recovery periods trade barely improved. In 1945 foreign trade was over 40% below its 1913 value. Trade then increased up until 1973 when similarly, the oil crisis had some large negative effects on international relations. There was then a period of stagnation between 1980s and 1990s where trade did not fluctuate a lot. US trade was far greater than Europe which is a key reason in why the US grew faster than a lot of Europe as they were exporting large volumes of goods and services across the world throughout the 20th century.