2.3. OIL CRISIS

The Golden sixties crowned Belgium as one of the economies with more merit within the international plane: Belgium had got neither raw materials nor an export agriculture, but its power during the industrialization process was the key for its achievements.

However, the 1970’s radically changed the situation. In 1973 the oil shock affected all European countries in great measure. Due to Belgium’s dependence on other countries, its exports fell by 11%, which caused a deceleration of its economic growth.(for further information: 2.2. GOLDEN SIXTIES) This resulted in a disequilibrium of the economy.

This was one of the worst periods for the country’s economy, which worsened its position in the international plane.

According to ‘Economic Growth in Europe since 1945‘, we can divide this period of crisis into two periods, one in which the disequilibria of the economy worsened, and one in which the government tried to take hold of the situation and stop the crisis through several policies.

This first period lasted all of the 1970’s. Due to the oil shock, energy prices started to rise. The domestic economy, which was not involved in the international plane, was not as affected by this as the domestic economy, which was open to other economies. That is because the open economies had to compete in the international market and could not regulate the prices of their goods, while the firms which were not internationally open were able to regulate the price of their products in order to keep their profit as before the prices rose.

The second period comprised the 80’s decade. This period was based on the prevention of the expansion of the crisis. For this reason, the government applied several strategies and policies, such as the devaluation of the franc or the reduction of public employment. These measures contributed to the recovery of the country, but did not manage to increase the economic growth rate.  

(Centre for Economic Policy Research, 1996)

• As we can see in the following table, the macroeconomic data of the decade known as the ‘Golden Sixties’, are, overall, higher than in any other period; it is subdivided into (1960-1967) and (1967-1974).
• All of the macroeconomic variables move more or less together; when we  move to another economic period, they either increase altogether, or decrease altogether, with very few exceptions. The magnitude of these increases/decreases, however, is different. In this table, two economic periods are represented, both the Golden Sixties, and the Leaden Seventies and Eighties.
  • The great downfall in exports from the (1967-1974) period to the (1974-1981) period. These results of the Exports growth are the highest and the second lowest of the economic period (10.78; 4.39). This is due to the effects of the oil crisis in Belgium’s foreign demand for domestic goods.

IMAGES:

1. Foundations of Western Europe. (s.f.). The Beginning of Industrialization in Britain. Obtenido de Foundations of Western Europe: http://foundations.uwgb.org/cause-and-effect/
2. Macalister, T. (3 de March de 2011). Background: What caused the 1970s oil price shock? The Guardian.
3. Centre for Economic Policy Research. (1996). Economic Growth in Europe Since 1945.Cambridge; New York; Melbourne: Cambridge University Press

BIBLIOGRAPHY:

1. Centre for Economic Policy Research. (1996). Economic Growth in Europe Since 1945.Cambridge; New York; Melbourne: Cambridge University Press