Belgian economic miracle

Economic miracle

During World War II, Belgium had been occupied by Nazi Germany had seen a deterioration in its gross domestic product through war damage and the economic policies pursued by the occupiers, despite the efforts of figures like Alexandre Galopin who attempted to preserve Belgium's industrial capacity through compromise with the occupiers.

From 1945, however, demand for Belgium's traditional industries (steel and coal, textiles, and railway machinary in particular) grew across Europe, boosting the recovery of the Belgian economy. In comparison with neighbouring countries, whose industries had been heavily damaged by fighting, the comparatively intact Belgian industrial base was able to restore its capacity to respond to the rise in demand. In 1946, the government announced its intention to increase production in Belgium's important coal mining industries by inaugurating a "Battle for Coal" (Bataille du charbon). At the end of 1947, Belgium became the first former belligerent in Europe to reach its pre-war level of industrial output.

The economic miracle was also greatly facilitated by the monetary policy of Camille Gutt whose "Plan Gutt", begun in October 1944, reduced the money supply which had grown hugely during the occupation. The effect of the policy, which reduced the amount of circulating currency by two-thirds, was to limit inflation sharply and facilitate a general rise in living standards.

Living conditions for Belgian workers improved rapidly during the economic miracle. Historically, Belgium's urban workers were paid less and lived in worse conditions than those in other comparable countries, even while the Belgian economy grew rapidly during the Industrial Revolution. In 1944, shortly after the liberation, the Belgian government had introduced a series of new social security measures which began the rise in living standards. By 1947, wages of coal miners in the Borinage were 40 percent higher than they had been in 1938. Birthrates rose. The desire for increased production created greater demand for labour, raising wages levels. The need for workers, particularly in the Battle for Coal, meant that the Belgian economy was perpetually short of workers. After briefly using 64,000 German prisoners of war as mineworkers, the Belgian government created a guest worker programme with Italy in 1946.

Criticism

Some historians have criticised the use of the term "economic miracle" to describe the period. According to historian Martin Conway, the term is "singularly inappropriate" to describe Belgian economic recovery during the period because "growth rates, salaries, and levels of investment lagged substantially behind, and production costs significantly above, those of Belgium's competitor economies". Government policy focused on monetary stability rather than on investment. Taken by surprise by the speed of the country's economic recovery, the Belgian government claimed little of the Marshall Aid that was being used by its competitors to develop new industries. By 1953, Belgium's industrial production was just 11 percent higher than its 1929 output, compared with a 70 percent difference in other Western European countries. The result was that Belgian heavy industry faced a "acute structural crisis" in the 1950s as Belgian industrial exports became uncompetitive. This led to the start of the deindustrialisation of Wallonia and the start of regional economic divergence between Wallonia and Flanders which would become visible during the general strike over the winter of 1960–61.

The study of the period was important in the formation of the economic thought of the economist Alexandre Lamfalussy who wrote on the subject in the early 1960s.