Population and living standards, 1945-2000

The sixty or more years since the end of the Second World War have seen an unprecedented increase in the average European’s material standard of living. Europeans are now enjoying incomes that are, on average and in real terms, about three to five times as high as in 1950; those born now can expect to live about ten years longer than the generation born in the early 1950s, and access to secondary and tertiary education is far wider than it was sixty years ago. The now widely-used Human Development Index (HDI) seeks to capture changes in the quality of life as a weighted composite measure of per capita income (GDP), longevity, and years of formal education cum literacy. A bounded, relative index of development, the HDI is useful as a convenient means to document some of the comparative quantitative dimensions of welfare change in Europe. Below we report HDI scores for nineteen European countries. Leaving aside, for the moment, changes in country rankings, regional variations and the behavior of the underlying series, the big message is clear: in HDI terms just as much as in terms of per capita GDP, Europeans are now much better off than they were in 1950, and variance in HDI across European countries is now only half the level it was then. However, the HDI is certainly a less than perfect measure of broadly conceived living standards. It ignores the extent to which human rights, civil liberty, and political freedom are protected. It makes no allowance for how income and wealth are distributed among members of society or for the extent of unemployment. It incorporates longevity, but not the health status of the population. Most tellingly, perhaps, it does not tell us about what could be reasoned to be a fair expression of human well being – happiness. Richard Layard’s recent work (2003) has shown that the happiness of the population in the western world has not increased, despite rapid growth in material living standards. The changes in living standards across Europe since the end of the Second World War have been shaped by changes in incomes, demographics, and the institutional settings of “welfare delivery.” The chapter starts by sketching out the Europe-wide rise of the public sector. The second section offers a comparative quantitative examination of changes in key welfare measures and the relationships between them. The final section explores the causes and economic consequences of demographic change