American-European economic balance without WWs?

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Deleted member 1487

If the World Wars did not happen, how would the US and European economies have balanced in the long run? The wars wrecked US competition, brought in the wealth of Europe to finance it, and created vast industries where there had been none before. It also somewhat unbalanced the economy after WW1, which led to the development of government systems cope with the expansion after WW2. What was the relative US-European GDP balance pre-WW1 and what would it have been without the distorting wars?
 
Well, there were (and are) a lot of differences within the different countries in Europe as far as their economies went. The economy of the UK would be an entirely different beast than the economy of Germany. The latter seems to have been more productive than the former, which leaned heavily on the ability to wheel in the colonies - white and otherwise - to prop up a sagging industrial sector. The emphasis on financialization and the City of London also means a very different economy than a German one that emphasizes production and export.

Oil is a significant factor as well, since Europe has very little, while the USA was an exporter for a long time. If the Middle East is not under European control, formally or informally, there exists the possibility that this weakness can be used as a weapon against their economies. On the other hand, without two world wars, I'm not sure if the USA would end up pursuing the same sort of influence it had/has in the Middle East, so maybe the oil there would be a weapon in the hands of a European power - probably the UK - to be wielded against economic rivals. Countries on the receiving end of that weapon might end up closer to the other major oil exporter, Russia.

One thing that would be different is that the dollar would probably not become the world's currency. The effects here are pretty huge, since OTL this means that the USA suffers less from a lot of worries that other countries have, balance of trade being a pretty important one. The USA in TTL would be slightly more restrained in how it could effect the economies of other states, lacking the lever of dollar seigniorage. Of course without the world wars there probably wouldn't be something like Bretton Woods either, as far as international economics goes.

Anyway, those are my guesses.
 

Deleted member 1487

The Ottomans would survive and be a major player in European oil supplies as A-H and Romania faded, though Russia would still be important. Germany had most of the contracts to develop the Ottoman lands, so they'd have a major counterweight to the US, even as the Brits develop Kuwait and Persia.
 
Yeah, I hadn't thought of the German-Turkish relationship. That's an interesting point. Although, that's contingent on the Ottoman Empire retaining control of its Arab-majority territories. Even without world wars, I don't think politics (or the map, for that matter) will remain static.

If the majority of oil reserves remain in Ottoman hands, then it makes perfect sense to assume that there would be a lot of efforts by non-German European powers to either influence the Turkish government or to topple it, or both.
 
The world wars completely devastated the economies of Western Europe and caused them to lose ground vis-a-vis the United States. For instance in 1913 Germany's per capita GDP was 69% of the U.S. and it would sink to 59% in 1929, only only recovering briefly by 1938 to 72%, however this was due to the severity of the depression in the U.S. and rearmament under Hitler. By 1950 Germany's per capita GDP was 41% of the U.S. showing the economic destruction caused by World War II. The economic recovery in both West and East Germany allowed German GDP to reach 72% by 1973, this however sank to 67% in 2000 due to the problems in the former East Germany. However, by 2014 it had reached 84%, showing that Germany was converging on the U.S.

The UK was also a big loser after the wars as its per capita GDP declined from 90% of the U.S. to 51% in 1950 before reaching 72% in 1973. The UK postwar recovery lagged that of continental Europe, as the UK had far more labour trouble and much of its heavy industry was unable to compete with that of Japan and Europe. The British automobile industry for instance peaked in 1972, coincidentally the following year it joined the EEC and its market was flooded with imported vehicles. Since 1973, the UK has failed to converge on the U.S. remaining at 72%, however it has not lost ground.

France too lost out with the First World War, but not to the extent of Germany and the UK. It's industrial base consisted more of small cottage industries and this along with reparations from Germany actually allowed France to jump from 66% of the U.S. GDP to 68% in 1929 and 73% by 1938. France was far less affected by the depression than the U.S. However, World War II was far more of a shock with its per capita GDP declining to 55% of the U.S. by 1950. The postwar economic boom in France would be the best the country ever knew known and would last until 1973 when France's per capita GDP peaked at 79% of the U.S. average. Since then however, France has continuously lost ground to the U.S sinking to 74% in 2014.

The neutral countries during World War I fared much better economically, with the Netherlands, Switzerland, Scandinavia, and Spain all converging on the U.S. GDP by 1929 and again in 1938 (the exception to 1938 being Spain, a country whose economy was devastated in the latter period by its civil war). Immediately after World War II only Switzerland and to a lesser extent Sweden maintained much of their economic output unscathed, as they were the only two European countries where per capita GDP was at least two-thirds the U.S. level by 1950. Switzerland only lost ground during the 1973-2000 period, but during the 2000s it managed to bounce back.

For the poorer countries of Southern and Eastern Europe, World War I was particularly devastating. Prior to the War, men from Southern Europe, Eastern Europe and the Balkans were beginning to emigrate to the Americas in large numbers, many as seasonal workers, sending remittances and returning with savings, providing a stimulus to their underdeveloped economies. Romania, Bulgaria and Yugoslavia were particularly hard hit by this, with their economic performance in the 1920s and 1930s being amongst the weakest in Europe. The USSR was also badly affected during the 1920s, but by the late 1930s had recovered mainly due to the push to industrialise. World War II would take a toll and its postwar growth until 1973 though higher than the U.S. was still far behind most of Europe, the result being that by 1973 it had been surpassed by Greece and Portugal.

Between 1973 and 1989 the Warsaw Pact countries all lost ground on the U.S. and Western Europe and diverged in terms of economic output. Yugoslavia was the sole exception amongst the Socialist countries as it actually managed to converge on the U.S. during this period. More likely than not this was due to the country's encouragement of Western Tourism, economic migration to Western Europe and its emphasis on exports of consumer goods. Romania in particular lost ground and was one of the poorest countries in Europe. During the 1980s, Italy was the economic star in Europe as its economy continued to grow, briefly overtaking the UK in size.

During the 1989-2000 period, the U.S. economic growth outpaced most of Europe's, with the exceptions of the Denmark, Ireland, Netherlands, Norway, Spain and Portugal. Ireland in particular grew with its GDP jumping from 47% of the U.S. in 1989 to 77% in 2000, and briefly surpassing it before its economic collapse. Despite this, Ireland's per capita GDP is only outranked by Norway and Luxembourg. Norway too went from 68% of the U.S. output in 1973 to 88% in 2000 to 123% in 2014, though this was due to its oil production.

For the former Communist countries the 1989-2000 period was particularly depressing as their economies adjusted to capitalism. Poland alone remained stable at 25% of the U.S. GDP. On the other end of the spectrum the GDP of the ex-USSR sank from 31% of the U.S. in 1989 to 16% in 2000. For the ex-Yugoslavia too it sank from 27% to 16%. Bulgaria 27% to 19% and Romania from 17% to 11%. Between 2000 and 2014 however, most of Europe's economies converged with the U.S. with France and Italy being the sole exceptions. The former Communist bloc in particular recovered with these countries finally playing catch up to Western Europe and the U.S. in terms of per capita GDP.

If we compare where countries stood compared to the U.S. in 1913 vs 2014, the majority of Europe converged on the U.S. The UK is worse off with 90% in 1913 vs 72% in 2014, meaning its economy has diverged for much of the century. The immediate postwar World War II period having been particularly devastating. Belgium remained stagnant with 80% vs 79%, this is due to the country having been so wealthy early on due to its reliance on coal and steel, industries which have moved to Asia. All of the other European economies have converged with the U.S. during this period, some more than others with Norway in particularly having been poorer than Italy in 1913 in terms of per capita GDP going from 46% to 123% of the U.S. in 2014. Ireland too having gone from 52% to 90%, Finland from 40% to 74%, Spain from 39% to 61%, Greece 30% to 47% and Portugal 24% to 49%.
 

Deleted member 1487

So does that mean the the convergence would continue without the world wars?
 
So does that mean the the convergence would continue without the world wars?

It's hard to say, since 1890s, the U.S. economy was growing at a faster rate than most European countries, the exceptions being Italy, Norway and Finland. However, this was a result of the industrialisation of the U.S. along with its growing frontier. Keep in mind that Argentina and Canada had faster rates of growth during this period as their economies were even more underdeveloped during this period.

I imagine that the U.S. would continue to grow at a faster rate at least for a while. What is more important is that without the wars, the divergence wouldn't be so sharp, particularly by 1950. During the 19th century economic growth was generally lower without the booms and busts that would occur after abandonment of the gold standard. When economic contractions occurred, they were usually sharp, such as in 1908 when U.S. GDP declined by 8.2%, however recoveries were also quicker, as in 1909 when the GDP grew by 12.3%.


One important thing that the first World War altered was it made New York a centre of global finance and banking. Prior to the war, London and Paris were by far home to the world's largest banks and insurance companies. This allowed the two to become the world's largest creditors with $20 billion of British capital invested abroad. France had just under half of that at $9.7 billion and German was third with $5.8 billion. Berlin was the world's third largest centre of banking based on deposits, whilst New York was close on its tail in fourth place. However, Vienna this was followed by Vienna in fifth place, and it can be said that in banking at least, finance was slow to catch up to a country's decline as a great power. The outflow of capital to the U.S. during World War I and later World War II drastically altered this and as a result, Berlin lost its position as did Paris and Vienna, however London still vies with New York as the world's largest financial centre.

Trade and Commerce

Britain remained the world's largest trading nation in 1913, and 37% of its trade was with its empire, the bulk being with the Dominions and India (31%). However, Britain slipped behind Germany and the United States in terms of GDP. British industrial exports were also less sophisticated than those of Germany with coal rising in value and accounting for 9% of British exports in 1910. Another 14% were textiles, whereas Germany and the United States were leading in the production and export of electronic equipment and chemicals. The dominions provided a safe market, but by 1913, the U.S. had replaced Britain as Canada's leading source of goods (though Britain remained Canada's largest market).

By World War I, Germany had emerged as the world's second largest exporter, exporting $2.4 billion worth of goods to other countries.
Unlike Britain, Germany traded overwhelmingly with neighbouring countries, it's noteworthy that by 1913, Germany was by far Russia's leading trading parter, providing nearly two-thirds of its imports. Interestingly enough, Germany was displacing France in much of Latin America as the second largest supplier of goods. However, 76% of all German exports went to Europe, 15% to America, 5% to Asia and the rest to Africa and Australia, a mere 0.5% went to the colonies. As for imports 58% came from Europe, 29% from America, 10% from Asia, and 0.5% from the colonial empire. As for Germany's colonies, they provided a mere 0.5% of Germany's raw materials.

The United States emerged as the world's largest economy by 1913, and it was making inroads in world trade. It dominated trade with Canada, Mexico, Central America, the Caribbean and Northern Latin America along with its territories in the Philippines and Liberia. It also displaced Britain, as Germany's largest source of imports before the war, and was among the top 5 trading partners for most European nations.

France like Britain was in a malaise, as it had been Europe's largest economy a century earlier. Though still an important country, France's trade was overwhelmingly with Europe and a mere 8% with its empire. However, France (along with Belgium) did continue to be a major supplier of foreign capital in Russia, Latin America and China. However, France did dominate the luxury goods sector at the time, exporting fine silks, luxury automobiles, furniture and porcelain.

Below is a comparison of the share of imports from selected nations in 1913.

British Imports as a % of imports with rank
India 64% (#1)
Australia 61% (#1)
South Africa 58% (#1)
Argentina 31% (#1)
Chile 30% (#1)
Egypt 30% (#1)
Ceylon 28% (#1)
British East Africa 27% (#1)
Uruguay 27% (#1)
El Salvador 26% (#2)
Norway 26% (#2)
Portugal 26% (#1)
Sweden 25% (#1)
Brazil 24% (#1)
Greece 24% (#1)
Peru 23% (#1)
Ottoman Empire 22% (#1)
Venezuela 22% (#2)
Canada 21% (#2)
Colombia 20% (#2)
Nicaragua 20% (#2)
Bolivia 18% (#2)
Spain 18% (#1)
China 17% (#3)
Denmark 17% (#2)
Japan 17% (#2)
Russia 17% (#2)
Belgian Congo 16% (#2)
Guatemala 16% (#3)
Bulgaria 15% (#3)
Costa Rica 15% (#3)
Persia 15% (#2)
France 13% (#1)
Honduras 13% (#2)
Cuba 11% (#2)
Malaya 11% (#2)
Netherlands 10% (#4)

German Exports
Kamerun 79% (#1)
Russia 64% (#1)
Finland 44% (#1)
Austria-Hungary 40% (#1)
Denmark 38% (#1)
Sweden 35% (#1)
Switzerland 34% (#1)
Bolivia 33% (#1)
Norway 30% (#1)
Romania 30% (#1)
Netherlands 27% (#1)
Chile 25% (#2)
Bulgaria 22% (#2)
Guatemala 20% (#2)
Dominican Republic 18% (#2)
Argentina 17%(#2)
Brazil 17% (#2)
Italy 17% (#1)
Uruguay 17% (#2)
Peru 16% (#3)
Portugal 16% (#2)
Colombia 15% (#4)
Costa Rica 15% (#2)
United States 15% (#1)
France 13% (#2)
Mexico 13% (#2)
Belgium 12% (#2)
Belgian Congo 11% (#3)
Honduras 11% (#4)
United Kingdom 10% (#2)
United States 10% (#2)

French Exports
Switzerland 20% (#2)
Spain 16% (#2)
Belgium 15% (#1)
Colombia 15% (#3)
Honduras 11% (#3)
Brazil 10% (#4)
Haiti 10% (#2)
Argentina 9% (#4)
Egypt 9% (#3)

Italian Exports
Switzerland 10% (#3)

American Exports
Puerto Rico 84% (#1)
Hawaii 81% (#1)
Haiti 73% (#1)
Honduras 67% (#1)
Canada 65% (#1)
Dominican Republic 62% (#1)
Nicaragua 56% (#1)
Cuba 52% (#1)
Costa Rica 51% (#1)
Guatemala 50% (#1)
Mexico 50% (#1)
El Salvador 40% (#1)
Venezuela 33% (#1)
Colombia 27% (#1)
Serbia 25% (#2)
Peru 21% (#2)
UK 18% (#1)
Chile 17% (#3)
Japan 17% (#3)
Brazil 16% (#3)
Germany 16% (#1)
Argentina 15% (#3)
Italy 14% (#2)
Australia 12% (#2)
Austria-Hungary 10% (#2)
France 10% (#3)
Netherlands 10% (#3)

Austria-Hungary Export Markets
Serbia 42% (#1) (1911)
Bulgaria 32% (#1)
Romania 22% (#2)
Greece 16% (#3)
Ottoman Empire 15% (#2)

Japanese Export Markets
Korea 61% (#1)
China 21% (#2)
Hawaii 8% (#2)

Russian Export Markets
Persia 57% (#1)
Finland 31% (#2)
Greece 20% (#2)
Germany 13% (#3)
 
Of course, absent the world wars, would Europe have gotten rid of protectionism? Or would it have ended up, like Argentina, with sclerotic economies behind walls of tariffs?
 
You also have to factor in military spending, without the world wars the USA would unlikely to be spending what it does, and Europe would have to provide for itself.
 
Of course, absent the world wars, would Europe have gotten rid of protectionism? Or would it have ended up, like Argentina, with sclerotic economies behind walls of tariffs?

The 1860 Franco-British trade agreement with the Cobden-Chevalier Treat was the first of its kind as it initiated a wave of free trade treaties between the European nations. In the 1880s and 1890s there were agricultural tariffs implemented by some countries like Sweden, followed by the Méline Tariff in France to protect small farmers from grain imports from the Americas. Despite this, tariffs remained low, as France only taxed certain items at 20%. Before World War I, most countries had been increasingly bringing down tariffs. The U.S. was the last holdout, only cutting tariffs in 1913, as this was one of President Wilson's campaign promises.

The inter-war period was when trade barriers went up for good. The devastated economies of Europe sought protectionism as a way to reconstruct their economies. This was further exacerbated by the depression, culminating with Britain abandoning free trade for good in 1932. Only the postwar GATT era would swing the pendulum the other way.

One thing that many people mistakenly believe on this forum was that countries were highly protectionist before the wars and economics were guided by foreign policy. Keep in mind that by 1913, Germany was ready to overtake Britain as France's largest source of imports and that Germany was by far Russia's largest trading partner. Another misconception is that that colonial markets remained closed, and that some sort of mercantilism existed by 1913. This is patently false, as Germany imported raw materials in large quantities from British India and the Dutch East Indies, and exported far more to the British and French Colonial Empires than it did to its own.
 
You also have to factor in military spending, without the world wars the USA would unlikely to be spending what it does, and Europe would have to provide for itself.

% of GDP spent on defence, annual average
Between 1870-1913
Japan 5.0%
France 3.7%
Austria-Hungary 3.5%
Italy 2.8%
Germany, UK 2.6%
USA 0.7%
16-Country Average (includes Belgium, Denmark, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland) 2.7%

2014
Russia 4.5%
USA 3.5%
France 2.2%
UK 2.2%
China 2.1%
Italy 1.5%
Germany 1.2%
Japan 1.0%

The U.S. would certainly spend less, the UK and France slightly more. Germany and Japan would definitely spend more, as their politicians are cautious not to seem as if they are militaristic.
 
if there's no worldwars the usa doesnt end up with all the continental patents and intellectual property - that's lots of money and economic activity, the german patents/ip seized after the war were around 10 billion $ worth at the time - 5 times the manhattan project! the usa would either have to develop everything on its own or pay up.

early 1900s industry and mid to late 1900s industry are different beasts, scientific knowledge was becoming more and more important which impacts the economic output. by 1950 the usa had 50% of the worlds output, that wont be possible if europe and east asia arent bombed out.
 

Deleted member 1487

Another misconception is that that colonial markets remained closed, and that some sort of mercantilism existed by 1913. This is patently false, as Germany imported raw materials in large quantities from British India and the Dutch East Indies, and exported far more to the British and French Colonial Empires than it did to its own.
That's disingenuous though, because it wasn't being able to buy from them that was at issue, it was being able to sell to them that was.
Also I'm curious to know how Wilson's lowered tariffs would have impacted the global economy/trade system in the long run and how long it would before Germany dropped its tariffs on agriculture for industrial tariff reductions.
 
Without the wars too, Russia likely remains stable and Austria-Hungary and the Ottoman empire fall (if they do), much more slowly. Without the devastation of the War, European aeronautical companies will run far ahead until the US finds its feet. IN Russia for example, Sikorsky's airliners will start regular services in 1914, undoubtedly spurring other European powers to develop their own airlines.
 
That's disingenuous though, because it wasn't being able to buy from them that was at issue, it was being able to sell to them that was.
Also I'm curious to know how Wilson's lowered tariffs would have impacted the global economy/trade system in the long run and how long it would before Germany dropped its tariffs on agriculture for industrial tariff reductions.

Not quite, prewar colonial markets were not very protected, as British share of trade in its colonies declined. The same was true in the Dutch and French colonies as well. By 1913, colonial trade was far more diversified than it had been in 1870. Despite this, the largest markets for industrial goods remained in Europe, North America and to a lesser extent Latin America. For that reason the EEC and EFTA made far more sense than Imperial Trade communities.

Prewar French tariffs were 5-9%, for industrial goods it was 8%. However, most favoured nation treaties often lowered or negated these all together. Their archenemy Germany particularly increased trade with France so that by 1913 over half of all machinery imported came from Germany. Germany was also the single largest source of foreign grains, larger than the U.S. or Argentina. Over 40% of chemical imports came from Germany, 38% of tools and hardware, 47% of furs and skins, and 51% of ceramics and glassware.

Fance provided Germany with 46% of its raw silks and was France's second largest market for woolen goods, its largest market for cotton and cotton textiles and its second largest customer for chemicals. It was also France's third largest export market for motor vehicles.

As for Wilson's tariffs, it would have been interesting to see the result. By 1913, US productivity was finally high enough that American manufactured goods could compete on price. I imagine with a peaceful Europe with far lower trade barriers, low-priced American automobiles would have become commonplace in Northern Europe by the 1920s. The same could be said for American appliances in the following decades. A peaceful Europe would have far more disposable income with which to buy American consumer goods.

As for Russia, it was mainly a supplier of raw materials, paritcularly for Germany. However, French and Belgian capital was helping the country industrialise and I imagine greater productivity would have been achieved. By 1913, Britain was still the world leader in textiles, however Japan was catching up and without the war and revolution, Russia may well have become a leader in this field, particularly with a growing supply of raw cotton from Central Asia. Heavy industry would have followed, but I imagine that eventually consumer goods would have been produced by the mid-20th century. One field where Russia was a leader had been aviation, particularly under Sikorsky. Prior to the war, only France spent more on military aviation.

Speaking of armament, the U.S. spent very little on heavy arms other than its navy before World War I. The U.S. spent very little on aviation, so the initial leaders in fixed wing flight might be France and Russia. I imagine that commercial aviation would take off as the Zeppelins were already active in Germany. Perhaps larger aircraft would be developed earlier.
 

Deleted member 1487

What about European ability to sell in the US? Are you sure about military aviation spending? I've read Germany was reaching #1 by 1914. Also I don't think we can call Russia a world leader in aviation, it had interesting designs, but was heavily outspent by Germany and France.

Would the lack of US defense spending then retard the US economy and general science/technology?
 
What about European ability to sell in the US? Are you sure about military aviation spending? I've read Germany was reaching #1 by 1914. Also I don't think we can call Russia a world leader in aviation, it had interesting designs, but was heavily outspent by Germany and France.

Would the lack of US defense spending then retard the US economy and general science/technology?

Between 1907-1913 the total spending on air forces was as follows:

Germany $28 million
France $22 million
Russia $12 million
Italy $8 million
Austria-Hungary $5 million
UK $3 million

In 1914 the allocation for air fleets before the war was as follows:
France $7.4 million
Germany $5 million
Russia $5 million
UK $3 million
Italy $2.1 million
Japan $1 million
Mexico $400,000
USA $125,000

However, this money was spent in different ways. France and Russia tended to spend more on airplanes, with Russia not having a single air ship. Germany and Austria-Hungary however were more focussed on dirigibles.

I imainge that Britain, Japan and the U.S. saw little reason to spend on planes or airships since they did not share land borders with hostile powers and range was so limited at the time.
 
What about European ability to sell in the US? Are you sure about military aviation spending? I've read Germany was reaching #1 by 1914. Also I don't think we can call Russia a world leader in aviation, it had interesting designs, but was heavily outspent by Germany and France.
World leader and powerhouse are not necessarily the same thing. Yes they were a world leader in multi-engined aircraft. Also, they were undergoing indstrial restructuring, come back in a couple of years time and things could easily be different.
 
World leader and powerhouse are not necessarily the same thing. Yes they were a world leader in multi-engined aircraft. Also, they were undergoing indstrial restructuring, come back in a couple of years time and things could easily be different.

I don't imagine Russia being a leader longterm, but at least short-term with the heavier Sikorsky. Keep in mind France was an early leader with automobiles, but was soon surpassed.
 

Deleted member 1487

Yeah Russia didn't have the industry to really be a world leader ever; it was likely headed for a middle income trap and like today be limited to being an exporter of raw materials and cheap manufacturing:
https://en.wikipedia.org/wiki/Middle_income_trap

That's assuming their political system doesn't implode and reforms peacefully.

It would be interesting to see what immigration does ITTL as the US would get a large amount of Russia, German, and A-H emigrants. Russia might well end up suffering brain drain like IOTL and have to deal with a lot of political issues around Poland and various ethnic minorities, plus their horrific poverty situation.
 
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