Although well timed to coincide with the 50th birthday of the Treaty of Rome, this book appears to be either too late or too early to add significantly to the stock of existing analysis on the history of the European economy. In spite of the fact that so much has already been published on the topic, the author’s stated main aims (page 23) are to explain how Europe managed to sustain rapid growth and high investment rates in the twenty to thirty years after the second world war and then to examine why growth weakened in the late 20th century (although there is some coverage of Eastern Europe, this is chiefly analysis of the new EU member states and, sensibly, discussion of Russia and other Eastern states is limited). It is difficult to add value here. On the other hand, it is “too early” to provide an historical analysis of the most recent period – the jury is out regarding how well the European model is coping with the current set of challenges, in absolute terms and also relative to the US. Certainly this book is too weak with regard to the latest information (most references do not go beyond 2001) to add much to the current economic debate.

The author is keen to promote his thesis that Europe’s institutions and policies were especially conducive to success during the simple “extensive growth” period after 1945 but may have turned into a handicap once Europe more or less caught up with the US in the 1970s. How much institutions themselves were driven by economic necessity (such as the overwhelming need to achieve economies of scale and thus a single market) rather than being the drivers of change is not addressed although lack of suitable institutions and policies would certainly have hindered the post-war task of putting Europe back at the forefront of technology and productivity. Overall the evidence put forward regarding competing explanations is rather weak, leaving a cautious reader to conclude that many factors contributed to Europe’s successes and failures. Although opinions expressed in the text could have been illustrated and tested against the data and by systematically breaking out and examining contributions to the economic outcome (the technique as used in the analysis of contributions to labour productivity growth by van Ark and Smits, as reproduced in Table 12.2), no new evidence or original analysis is offered by the author.

The book is full of references to other publications (serving as a literature survey), including reproductions of tables and charts. Little attempt has been made to supplement this material and add original work and analysis. There is even a chart reproduced from a 1994 book by De Grauwe (figure 11.1) that shows Italian versus German inflation for 1980 to 1992 – surely this could have been re-done by the author to include data for other countries of interest in order to substantiate comments regarding problems encountered not only by Italy but also the UK and Sweden in maintaining their position in the ERM in the early 1990s.

Unfortunately, there are reasons to be concerned about the lack of attention to evidence. For example, the author suggests that Ireland’s soaring unemployment rate in 1987 was linked to a severe recession in the UK (page 390) but data do not support this. Another opinion stated without qualification is to be found on page 422: “Europe is not a perfect society…..Fiscal discipline is too weak”. This clearly begs the question of weak compared with what? The US and Japan? Given both historic divergence and the weak growth during 2001-2005, recent budgetary performance has (arguably) been quite good across the EU, albeit not always in line with Maastricht targets. These points may seem trivial but are telling of the overall tone. The author should have made more effort to demonstrate that claims could be substantiated and that opinions expressed had evidence to support them. The lack of such material severely limits the added value of the book while inaccuracies diminish confidence in the views expressed. 

Amongst the minor irritations are also some comments that seem bizarre – for example, the reference on page 10 to “irreconcilable enemies”: obviously European countries were not irreconcilable and, after all, most countries were not even enemies. A more specific comment about the importance of agreement between France and Germany might have been more pertinent here. Even the emphasis in the opening sentences on the material transformation of everyday life in Europe seems quaint and trivial for a book supposedly out to persuade the reader of the key role of institutions and policies – rather than quoting gas furnaces and gadgets, attention could more appropriately have been drawn to how European policy-making has radically changed, to how many European companies are now global and to how many citizens are now free to live and work across the continent, with their rights (more important than gadgets) guaranteed by the agreements forged in Europe since the 1950s.   

Vanessa Rossi

Director International Economics, Oxford Economics and Associate Fellow, Chatham House, London