AH Challenge: Earlier European Union

[Akiyama]

WI there had been something like the EU after the First World War?

With a POD no earlier than 1918, have the beginnings of a European Union (called whatever you want) in place by 1933.

At the very least there should be a free trade agreement, involving both France and Germany, and regular meetings of the heads of government or foreign secretaries of the nations involved.

 

[Darkest]

World War II could possibly be averted...

 

[MarkA]

The US drops repayments of all war debts.

In OTL Britain nearly persuaded France to stop all reparations against Germany. It was dependent on the US dropping its war debt claims against France and Britain.

If the Allies had no debts to repay, then France agrees and reparations are phased out over three years. One of the reasons France was so reluctant to forgive German reparations was its fear of Germany's greater industrial potential and higher birth rate. This meant that Germany could recover faster from the effects of the war and be a threat again in another generation. They were right but one of the reasons was the self fulfilling prophecy they brought into being by keeping Germany humiliated and unable to manage its own economy efficiently.

No reparations and German moderate politicans become credible and electable. SDP and moderate conservative governments alternate peacefully and all fringe groups stay that way.

Nonetheless, France's anxieties remain and Britain too does not want Germany to win the war after all by economically dominating Europe. So a proposal to initiate a regular six month summit of Foreign and Trade Ministers is enacted in 1920. This soon expands to include regular, sometimes informal, meetings of other ministers and their respective civil servants. A formal trade agreement is signed in 1924 that allows some goods to be traded between the three powers free of duty.

Other European states feel left out, particularly Italy, Netherlands and Belgium. They are brought in to the existing Tripartate Economic Alliance in 1925. The European Council on Free Trade is born. Britain is targeted by the other members because of the Imperial trade preference deals and is threatened with sanctions. Britain and France stand together against the rest and Germany proposes a compromise that allows some Imperial goods to be counted as British. The Big Three prevail and Australian wool, wheat and beef along with NZ dairy, lamb and mutton and Canadian wheat and South Africian fruit are exempt from EC tariffs.

The Dominions experience less attachment to the Imperial ideal earlier and their other commodities are still in demand in Europe. As a result, they begin to trade more widely and are less dependent on British markets. The United States becomes a market for much of their output which leads to a slowdown in US production of commodities. When Wall St crashes in 1929, commodity prices hit rock bottom. The Dominions suffer as much as they did in OTL but the effects in the US are slightly worse. Europe weathers the storm without too much difficulty and lends to the affected countries to bail them out. The effect is a less severe and shorter depression.

By 1933 the Union has grown to encompass much of Europe and is now a formal entity. States include, Poland; Chezoslovakia; the Nordic states; Austria; Hungry and the Baltic states. Many of the others are associate states that must meet certain minimum criteria to become eligible.

The US is again a nett debtor nation like it was before the war and it bitterly regrets forgiving the war debts. European loans stop its economy from going into decline and its dependence on foreign commodities lessens as the former Dominions diversify into other economic areas.

 

[Darkest]

Oh, man, I forgot that... yeah, a permanent Great Depression for the United States because of no World War II? Definitely. Ouch, that sucks.

A) It seems like this European Union forms too quickly. Are you sure all of this could be done in such a short timeframe?

B) Any hope for the US to pull out of its depression?

 

[MarkA]

Oh, man, I forgot that... yeah, a permanent Great Depression for the United States because of no World War II? Definitely. Ouch, that sucks.

A) It seems like this European Union forms too quickly. Are you sure all of this could be done in such a short timeframe?

B) Any hope for the US to pull out of its depression?

Probably not a permanent depression but a more prolonged one and at the end of it the US is not as economically advanced or any where near as powerful.

France was inclined to go along with whatever Britain suggested. There were occasions where it did not and the reparations were one instance. If France had no debts to pay and had already got some compensation from Germany, then it would almost certainly have gone along with the UK on the deal.

Both France and Britain would very quickly realise, as they did in OTL, that a Germany with no large armed forces to maintain and no drain on its finaces through reparations, would swiftly dominate Europe economically. The dilemma is how to keep Germany pacified but not dominant while maintaining the pre-eminent staus of the Entente? An economic union, at first limited and narrow in its aims, is the obvious answer.

To maintain equilibrium in the partnership, regular ministerial and departmental meetings are essential so that everybody is aware of what is happening. Trade and Foreign Affairs as well as Head of Government meetings are the most essential ones. Head of State visits would need to be fairly regular to sell the idea to the populace. regular meetings engender trust and cooperation and the union would soon expand into other areas of mutual self interest like arms limitation; external trade; relations with other European and non-European powers and increased internal trading arrangements to name a few. All these need formal treaties so an overarching Treaty of Economic Union makes sense as framework within which the other subsidery agreements can be held.

Fairly soon the Treaty expands into other areas like social justice and common responses to crises and so becomes a Treaty of European Cooperation and Economic Union. This needs to be overseen by a body accountable to the representive nations so a European Council is established. The League of Nations becomes irrelevent to the European Powers as more and more of them join the Council. Other powers like the Dominions seek alliances outside the Empire.

 

[Faeelin]

The Dominions experience less attachment to the Imperial ideal earlier and their other commodities are still in demand in Europe. As a result, they begin to trade more widely and are less dependent on British markets. The United States becomes a market for much of their output which leads to a slowdown in US production of commodities.

Umm. Why would the US be buying wheat from Canada or fruit from South Africa?

The US is again a nett debtor nation like it was before the war and it bitterly regrets forgiving the war debts. European loans stop its economy from going into decline and its dependence on foreign commodities lessens as the former Dominions diversify into other economic areas.

I also don't see why the Crash leads to the depression in this TL, but that's another story.

Interesting, and plausible, except for the US descending into economic chaos while Europe remains intact.

 

[MarkA]

The US would not be buying wheat but it did buy fruit from the Dominican Republic and Cuba etc. I suggested that it would be Europe buying those things from the rest of the world. The US would buy other cheaper commodities like iron ore or copper or even dairy products. Perhaps meat would also be cheaper. As a result the United States would haveless developed commodity markets domestically.

Why would the Crash not lead to the Great Depression in this ATL?

The US would not necessarily decend into economic chaos as it still has a large domestic market but it would not be as developed as it was in OTL. It would still have the same problems as it did in OTL before the war profiteering during the war and the debt repayments after it alieviated those problems. Assuming a burden equivilent to the burdens the Europeans did during and after thewar would see Europe recover but the US not.

 

[JimmyJimJam]

Probably not a permanent depression but a more prolonged one and at the end of it the US is not as economically advanced or any where near as powerful.

.

It may just be my imagination, but wasnt the depression more or less worldwide?

 

[MarkA]

It may just be my imagination, but wasnt the depression more or less worldwide?

It was only worldwide because of the dependence of the other economies on the US. In this POD the US is not the main economic player. Even so it still affects the others.

In OTL it was not uniform in its effects. It was worse in Australia and less so in Germany for example.

 

[Max Sinister]

Maybe we could put that together with the Stresemann survives thread. He and Briand had some plans... a European customs union might've been a big help during the depression...

 

[benedict XVII]

Why would the Crash not lead to the Great Depression in this ATL?

A more accomodating monetary policy (as in 1987 or in 2000) could have perfectly avoided the Great Depression. More resistance to protectionism could have mitigated it to a large extent. It is not so much the Krach that caused the Depression, that the complete mismanagement of its aftermath.

 

[Faeelin]

The US would not be buying wheat but it did buy fruit from the Dominican Republic and Cuba etc.

These were American satellites, though. And why would it be cheaper to import products like dairy products or iron from abroad, when the US was an exporter of these goods in OTL, and already had extensive trade with Canada?

The US would not necessarily decend into economic chaos as it still has a large domestic market but it would not be as developed as it was in OTL. It would still have the same problems as it did in OTL before the war profiteering during the war and the debt repayments after it alieviated those problems.

The problems that led to the economic doldrums of the late 19th century in America?

Assuming a burden equivilent to the burdens the Europeans did during and after thewar would see Europe recover but the US not.

Err.

What?

But if your argument is that the US couldn't pay the debts, then I can't see the US taking up the debts for Europeans.

 

[MarkA]

Faeelin,
Dominion trade with the US is not important for this ATL. If the US economy was able to sustain domestic production of dairy and/or other primary products then it could continue to do so. You do realise of course that just because a country is a nett exporter of goods that does not mean it does not import any of those goods?

Economic doldrums must be a nice way of saying prolonged recession and serious economic structural porblems. Before the war the US was in no position to repay the debts it had accumulated because its industry was incapable of producing enough wealth to generate enough surplus capital. Insufficent surplus capital meant far less investment in more industry or infrastructure and an increasing interest burden on the debts.

I am not sure what you mean about the US not being able to afford the debts? You probably did not understand what I meant either so we are even there.

My argument is that in OTL the US lent money to the Allies as war debts to enable them to buy American munitions and other essential supplies. So the US abolished its debts while ensuring that it got interest payments from the loans. At the same time it sold war material at extremely high prices (war profiteering) to the Allies. So its economy got a double boost.

As a result the US economy turned around and became a creditor instead of a debtor nation. If, in this ATL, the US had forgiven the Allied war debts in return for them abolishing German reparations, then the US would not be getting regular interest payments to boost its GDP. At the same time its industries would not be expanding at the same rate because the markets in Europe would recover their domestic competitiveness quite quickly. Therefore, the rapid and sustained expansion of the US economy and industrial base that occured in OTL would not be as rapid or sustained.

benedict XVII,

An economic policy invented 60 or 70 years after the event is not possible to be used to solve the problem. Besides I do not wish to debate the assertion that monetary policy equates to economic responsibility.

Economic theory in the period under consideration was solid on balancing the budget, restricting economic expansion to prevent further loss of capital and lowering wages to reduce inflation. No body at this time taught anything different.

 

[benedict XVII]

benedict XVII,

An economic policy invented 60 or 70 years after the event is not possible to be used to solve the problem. Besides I do not wish to debate the assertion that monetary policy equates to economic responsibility.

Economic theory in the period under consideration was solid on balancing the budget, restricting economic expansion to prevent further loss of capital and lowering wages to reduce inflation. No body at this time taught anything different.

A certain Maynard Keynes did... And free trade vs. protectionism has been part of economic debate for as long as trade existed; Ricardo's theory of comparative advantages was more than a century old.

 

[MarkA]

A certain Maynard Keynes did... And free trade vs. protectionism has been part of economic debate for as long as trade existed; Ricardo's theory of comparative advantages was more than a century old.

Keynes was influential only as far as his ideas matched the political position of the UK government. His attack on reparations and the peace treaty was welcomed because the British government wanted an excuse to be less involved in the continent. Yet just a decade later, his advice was completely ignored as a means of fighting the Depression. His theories were therefore not mainstream or widely accepted even over a decade after they were promulgated!

Free trade vs protectionism is in the same catagory. Britain wanted free trade only as long as it benefited itself (just as the US does today). Once it is seen as disadvantageous to a section of the economy, it is abandoned for a protectionist position. This was the prevailing wisdom of the time.

What has Ricardo's theory got to do with preventing the effects of the GD? Comparative advantage is only applicable after the event. That is, once the GD lessens in its effects then trade can resume normally and the principle of comparative advantage can be considered. What government can apply free trade and comparative advantage when its workers are being laid off in the tens and hundreds of thousands and its industrial base is shrinking?

 

[Faeelin]

Economic doldrums must be a nice way of saying prolonged recession and serious economic structural porblems.

Actually, I was being a bit sarcastic.

http://www.eclac.cl/publicaciones/DesarrolloEconomico/5/LCL1665PI/lcl1665i.pdf#search='america%20economic%20growth%201900'

In the period 1900 to 1914, America's economy grew, on average, 4% a year. Germany's grew 3%, and France's 1.7%

 

[corourke]

We still have a Soviet Union in this timeframe. How does the USSR develop with no WWII?

Perhaps Stalin continues to purge his way down the ranks until he is overthrown (by whom?).

 

[LordKalvan]

The main issue is the willingness of UK (and France, in minor measure) to protect their imperial markets. IMHO, it is not credible to see UK entering a continental Common Market to the detriment of the agricultural produce of the Dominions (and allowing competion there from continental industry), nor can I believe Central Europe accepting tariffs on the Argentinian grain and beef to protect Australia, Canada and South Africa.

The keystone to an early Common Market in Europe is UK retreating into their imperial sphere. Pity that in 1920 France and Germany will find very difficult to agree on which day of the week it is, much less on economical policies (while in 1955 there are both a common interest - the big bad Russian bear frightens everyone - a big sponsor - Uncle sam needs to rebuild as fast as possible western Europe - and - just possibly, and put in last and least place - the Europeans starting to understand that they cannot anymore go for a suicidal war every generation.

Which means that there must be another POD before the early common market: if it cannot be after an Entente victory, it must be either after a CP victory or because WW1 did not happen.
IMO, the former is possible only if WW1 does not last very long (it ends in early 1915, with a German breakthrough on the western front) and UK stays out (no invasion of Belgium). Maybe the POD is Nicholas cancelling the mobilization order after receiving the telegram by George V, while France forces in any case the issue on the Rhine front. The Russians are late, French attacks are too ambitious, and we end up with a replay of 1870.
After a general European conference and a reasonable peace treaty, Germany and A-H start a custom union (I was reading that Kaiser Wilhelm had this idea in mind), Holland and Belgium join, Italy the same. Slowly the Balkans and the Nordic countries are pulled in. UK stays aloof, but France - after a while - is forced to apply.
In the latter scenario (no WW1 - Serbia kowtows, and pays reparation to A-H), it goes in the same way. Even easier.

I doubt that the Depression can be made less painful through the application of different economic theories (it's too early, and too much wealth is still tied up in land rents). OTOH, it is also quite likely that there is no great depression: the economic cycle goes on as before. Slowly the custom union becomes a true common market, and the safeguards are built in.

Ok, at times I am an optimist.

 

[wkwillis]

Faeelin,
My argument is that in OTL the US lent money to the Allies as war debts to enable them to buy American munitions and other essential supplies. So the US abolished its debts while ensuring that it got interest payments from the loans. At the same time it sold war material at extremely high prices (war profiteering) to the Allies. So its economy got a double boost.

As a result the US economy turned around and became a creditor instead of a debtor nation. If, in this ATL, the US had forgiven the Allied war debts in return for them abolishing German reparations, then the US would not be getting regular interest payments to boost its GDP. At the same time its industries would not be expanding at the same rate because the markets in Europe would recover their domestic competitiveness quite quickly. Therefore, the rapid and sustained expansion of the US economy and industrial base that occured in OTL would not be as rapid or sustained.

That was what we did. We not only forgave the European debts, but we gave them as much money after the war as we did during the war, and forgave them that, too, when they agreed to forgive the German debt. Keynes argued against us giving the Europeans a dime until they reformed their economy, arguing that they would default anyway, and he was right.

 

[wkwillis]

Maybe the Germans win in 1914, the French evacuate to Algeria, and the Germans unify Europe while the British unify the colonies?