Athens Journal of Business & Economics (Oct 2024)
Domestic Growth and External Equilibrium: The Early Years of Transatlantic Economic Integration
Abstract
This contribution explores the category of international economic interdependence through the case study of the economic mobilisation within each of the infant Atlantic Alliance’s member state economy, as well as the industrial and trade integration that NATO’s multilateral rearmament programs stimulated in the early 1950s. Assuming a definition of economic interdependence as the ratio of transnational flows in capital and consumer goods to domestic growth, this article focuses on the transition from U.S. bilateral assistance programs to the inception of multilateral off-shore procurement programs (OSP) launched by NATO to provide European partners with both military assistance, and balance of payments support as well as continued economic assistance to industrial production and employment after the termination of Marshall Plan economic aid. Some references are made to the case study of Italy to explore this multifaceted nature of NATO collective rearmament as then Italy both suffered from balance of payments disequilibria, and came with a real economy that, unlike many other European economies, featured both unutilised industrial capacity and a painful rate of unemployment. The allotment of military production contracts to the Italian aircraft and mechanical industry to provide the Italian and other NATO partners with military end items and products, combined with a call by Washington on the West European governments to raise defense spending, was intended to target the U.S. objective of making the Atlantic Alliance the engine to attain at the same time industrial integration, trade partnership and balance of payments equilibrium among its member nations, as well as sustained aggregate demand within each of them. Therefore, the off-shore procurements programs were a combination of these elements and became the fly-wheel to combine domestic growth and high level of transnational flows in capital and consumer goods germane to the process of economic interdependence. A set of data aimed at comparing key macroeconomic conditions affected by bilateral and multilateral aid as employment rates, balance of payments equilibrium, foreign exchange reserves, and particularly the inflow of dollardenominated assets, as well as the terms of trade of OEEC countries with the United States and the dollar world from prior to the inception of multilateral military assistance to the full implementation of the OSP programs are offered to provide a quantitative assessment of the impact that multilateralisation of rearmament had on the European economies of NATO in a matter of a few years.
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