The Rise of the European Economic Giant

Introduction

Over the past six decades, the global economy has undergone dramatic transformations. In the early 1950 s, the world was essentially divided between the industrialized “North” - comprised of Western European nations, the United States, Canada, and Australia - and the developing “South” which encompassed most of Asia, Africa, and Latin America. The global economic landscape of 2022 looks vastly different, shaped by the rise of economic unions in Europe, the emergence of Asian economic powers like China and India, and the increasing interdependence brought about by globalization. Whereas the “North” accounted for the vast majority of global GDP and manufacturing output in the 1950 s, economic might has gradually dispersed across different regions over the intervening decades. This shifting distribution of economic power has been driven by geopolitical changes, technological advances, and the interconnected nature of the modern global economy. The following sections will examine these dramatic changes in detail, starting with the global economy of the early postwar era.

The Global Economy in the 1950s

In the early 1950 s, the world economy was essentially divided between developed or industrialized countries in the “North” and developing or non-industrialized countries in the “South.” At that time, the developed countries, excluding Japan, accounted for a staggering 90% of total world manufacturing output and an equally impressive 90% of all world exports of manufactured goods. This stark divide demonstrated the economic dominance of the industrialized nations in the post-World War II years.

While other regions were still rebuilding and developing, the advanced economies of North America, Western Europe, and Australasia had rebounded rapidly after the war. Their manufacturing and export capacities skyrocketed during this period. The rapid growth was fueled by thriving consumer demand, technological innovations, and renewed global trade. With their advanced infrastructure and skilled workforces, developed countries were uniquely positioned to capitalize on the economic boom. Their expansive manufacturing capabilities and extensive trade networks allowed them to supply the latest automobiles, machinery, appliances, and other goods to populations around the world. As a result, developed nations solidified their control over the vast majority of manufacturing output and exports in the 1950 s. This lopsided arrangement was an economic emblem of the times.

The Rise of Economic Union in Europe

In the years following World War 2, efforts were made to unite the economies of Western European countries. This was seen as a way to not only rebuild after the devastation of the war, but also to foster cooperation and interdependence so as to prevent future conflicts.

The first major step was the establishment of the European Coal and Steel Community (ECSC) in 1951, uniting key industries in France, West Germany, Italy, Belgium, the Netherlands and Luxembourg. The ECSC eliminated trade barriers and controlled production of these vital resources.

Building on this, the Treaty of Rome in 1957 created the European Economic Community (EEC), aiming to eliminate trade barriers and promote free movement of goods, capital, services and labor. This expanded economic cooperation and integration between member states.

Additional mechanisms like the Common Agricultural Policy and Common Market were implemented in the 1960 s to further unite the economies of member states. The EEC continued expanding, with Denmark, Ireland and the UK joining in the 1970 s.

While there were challenges along the way, these early efforts to develop economic union laid the foundations for increasing integration. They enabled Western Europe to emerge as a major economic power on the global stage.

Western Dominance in the 1950s

In the early 1950 s, the world economy was essentially divided between developed or industrialized countries in the “North” and developing or non-industrialized countries in the “South.” Developed countries, excluding Japan, at that time accounted for 90% of world manufacturing output and 90% of world exports of manufactured goods.

Efforts to develop economic union in Western Europe had made this region start to dominate the international economic order. Together, the EU and the US created a world economic order that marked the era of western dominance in the global economy in the 1950 s. The US provided aid and technical expertise to rebuild Western Europe after WWII through the Marshall Plan. Meanwhile, European countries were forming economic cooperation through organizations like the European Coal and Steel Community, which later evolved into the EU.

By the 1950 s, the EU and US dominated global manufacturing and trade. Most economic power was concentrated among these Western nations. This western dominance of the global economy was a hallmark of the 1950 s era.

The EU as a Global Economic Power

The European Union has emerged as the largest trading power in the world and plays a major role in providing financial and technical support to poorer countries across the globe. The EU acts as an influential force in shaping the economic, social, political, human rights and foreign relations policies of its member states.

Since the late 1980 s, scholars such as Michel Beaud have emphasized that the EU has tremendous capacity for global influence, indicating that more than 30 countries on different continents have over 40% of their total economic exchanges with this powerful regional entity.

The EU is deeply involved in assisting developing nations through various aid and development programs. It provides humanitarian aid, infrastructure support, governance assistance, trade benefits and other tools to lift up disadvantaged countries.

The EU remains the largest donor of development assistance worldwide, contributing over 55% of total aid from the world’s wealthiest 29 countries. It works closely with international institutions and NGOs to distribute this support effectively to nations in need.

With its unified economic strength and commitment to multilateral cooperation, the EU has clearly established itself as a global leader in international development and a major force shaping the global economic landscape. Its trading power and capacity for global influence is expected to grow in the decades ahead.

EU’s Capacity for Global Influence

The European Union wields significant economic influence around the world. According to scholar Michel Beaud, since 1989 the EU has demonstrated a large capacity for global polarization, with more than 30 countries across different continents having over 40% of their total economic exchanges with the EU regional bloc.

The EU is able to leverage its position as the world’s largest trading power to affect policy decisions and drive economic integration with many nations globally. Through providing financial assistance, negotiating trade agreements, and regulating standards, the EU can incentivize political and economic reforms in developing countries seeking greater access to its vast common market.

Key tools the EU uses to project its economic power include its generalized system of preferences, which unilaterally reduces tariffs on imports from developing countries, and its Everything But Arms initiative that grants duty-free and quota-free access for exports from 49 least developed countries. The EU is also able to influence policy by conditioning trade preferences and aid on compliance with its values and standards.

Overall, the European Union’s status as an economic giant enables it to polarize global trade and diplomacy to an unparalleled degree compared to other international actors. Its bargaining power and allure as the world’s largest market underpin its capacity to shape development trajectories and regulations across continents.

The EU as an Economic Giant

The European Union is often described as an economic giant and the largest trading power in the world, able to compete with the United States and China. The EU accounts for approximately 40% of global trade, with its GDP roughly equal to that of the United States (and about 25% of total world GDP).

The EU’s economy is more than twice as large as Japan’s. When looking at global exports in both goods and services, the EU has earned the highest export values in the world. The EU is a key global exporter across many industries, including automobiles, pharmaceuticals, aerospace, and agriculture products.

With its massive Single Market, the EU wields substantial economic clout and influence. The union has leveraged its economic power to negotiate trade deals around the world. As an economic giant, the EU has emerged as a counterweight to the dominance of the United States and a competitor to the growing influence of China.

EU’s Global Exports Dominance

In the period from 1999 to 2006, the European Union led the world in the total value of exports. The EU out-exported both the United States and Asian exporting powerhouses like China and Japan during this time.

Several factors contributed to the EU’s strong exporting position in the early 2000 s. The introduction of the euro as a common currency boosted trade between EU member states. It also strengthened the EU’s standing as an economic union. Additionally, EU expansion brought new Eastern European countries into the fold, expanding the union’s economic reach.

Key EU industries like automotive, pharmaceuticals, aerospace, and luxury goods saw rising global demand during this period. Germany, the EU’s largest national economy, produced high-value added exports that were attractive worldwide. The EU was adept at concluding free trade agreements globally, gaining it greater access to foreign markets. With its large affluent consumer base, advanced industries, and geographic proximity to growth markets, the EU became the world’s foremost exporting power.

While the EU ceded the top exporter title back to China after 2006, its strong exporting capacity remains an important pillar of its prominence as an economic giant. The EU consolidates the exports of 27 member states into a single powerful player in global trade.

International Transactions in EU Currencies

A significant portion of the world’s international transactions, investments in foreign exchange markets, central bank reserves, bond issues, and international trade are conducted in euros and British pounds, the currencies belonging to the EU member states.

The euro has become the second most important international currency after the US dollar. Many central banks and governments hold euros as reserves alongside dollars. The European Central Bank reports that as of the end of 2019, the total value of euro banknotes in circulation was over 1.3 trillion euros.

The euro accounts for around 20% of foreign exchange reserves, making it the second most widely held reserve currency. It is also the second most traded currency in the foreign exchange market after the US dollar. Around 36% of the payments handled worldwide by the SWIFT payment network are denominated in euros.

The British pound sterling is also still considered one of the major global currencies. It is the fourth most traded currency in the foreign exchange market. While not used as widely as the euro, the pound still accounts for around 4% of foreign currency reserves. Major financial centers like London also conduct a significant portion of international transactions in British pounds.

So between the euro and the pound, currencies from the EU member states facilitate a large share of the world’s cross-border financial transactions and trade. The EU as a powerful economic bloc boosts the importance and demand for its currencies on the global stage.

Conclusion

The European Union has established itself as a global economic superpower over the past several decades. After World War 2, the global economy was dominated by the United States. However, through efforts to increase economic integration and cooperation, Western European nations have emerged as a formidable economic force.

Today, the EU accounts for approximately 25% of global GDP, making it comparable in economic size to the United States. Additionally, the EU is the world’s largest exporter of both goods and services. The EU’s share of global exports reached 40% in the early 2000 s, surpassing the export share of the United States.

The EU’s economic might also gives it significant influence in international finance and trade. The euro is one of the most widely used currencies in the world, alongside the US dollar, Japanese yen, and British pound. Many international transactions, investments, and central bank reserves are held in euros. This gives the EU power in international financial markets.

In summary, through the creation of a common market and shared currency, the nations of Europe have successfully forged one of the largest economic entities in the world. The European Union today stands alongside the US and China as one of the three pillars of the global economy, giving it substantial influence in economic affairs. Its trade dominance and financial power ensure the EU will remain an impactful force shaping the global economic landscape for years to come.