I wonder whether a major reason that the US are among the most prosperous countries is that the country suffered relatively little damage in both World Wars, while Europe basically had to be rebuilt from scratch from 1945 onward. Is there an empirical consensus on if, and how much, this matters?

by Hasanowitsch
IconicJester

If you mean the US' absolute level of income, then no. The US has been among the highest income areas of the world about as far back as US independence, and even earlier. This is caused by a superabundance of favourable factors, including but certainly not limited to abundant and relatively fertile land (that could be taken by force from indigenous peoples...) navigable waterways, relative proximity to Europe, lack of nearby military rivals, a generally stable political and legal framework, a cultural emphasis on literacy and higher education, large-scale migration of adults from Europe, and about a hundred other things. The United States is very productive per person, and that productivity advantage predates WWI, and probably even the American Civil War.

There could, conceivably, be some kind of competition or specialization effect, where increased export competition from Europe pushed the US away from labour-intensive manufacturing. In that case, the US would have been more of an agricultural and resource-based economy, looking a bit more like Canada or Australia. But those are both relatively rich countries, and in any case it is hard to imagine this factor as being decisive, as the US already had a sophisticated manufacturing base even before WWI.

If you mean the relative level of US income, then the disruptions of the wars probably does help explain why the US is so far ahead of Europe at particular times. Specifically, the 1920s and 1950s were periods where US incomes surged ahead, but European incomes had fallen behind and not yet caught up.

After both wars, however, there is substantial and rapid catchup - European economies grow faster than the US economy after WWII. Partly, this is recovery from war damage, though the gains from reconstruction are concentrated in the years immediately following the war. Partly, this is a long streak of relative peace, both in terms of international war and also domestic political conflict. But mostly, this is European states integrating the technologies of mass production and consumption that had been rolled out in the US in the previous decades.

These years between the end of WWII and 1973 are usually described as some kind of golden age, or economic miracle. (The trentes glorieuses in France, the wirtschaftswunder in Germany, etc.) These were also good years for the US economy, but to a lesser extent, so that its enormous lead in the early 1950s shrinks considerably by the 1970s. Britain sits somewhere between these poles, being neither quite as far ahead as the US, nor catching up quite as quickly as continental Western Europe.

Albrecht Ritschl provided a calculation of how far from the pre-WWI trend Western Europe had fallen, suggesting that WWI left Europe about 20% below their "potential," and by the end of WWII about 40% below. This gap closes over the following 25 years, until by the 1970s growth has fully caught up. This is counterfactually assuming growth would have continued at previous rates, though this does at least fit both with US growth rates, and also European growth rates since the 1970s when catch up was complete.

From the 1980s onwards, the gap with the US begins to widen again, as manufacturing takes on a smaller share of the aggregate economies of developed countries. High productivity in manufacturing (automation, scale economies, also offshoring) drives workers into the service sector, and the US service sector is among the most productive in the world. But in any case, the gap ceases to narrow from that point onwards, and the US remains the highest income country among large nations (i.e. not city states like HK or Singapore, oil states like Qatar or Norway, or tax havens like Ireland or Monaco.) Any direct effect of WWII is now well in the past.