Coal Price Regulation in the European Community, 1946-1961

Abstract

WESTERN EUROPE has been plagued by coal problems for many years. These difficulties have taken several forms but only recent conditions can be considered here. These troubles have inspired considerable attention. Every major coal-producing state in Europe has designed elaborate coal policies. A vast literature has developed on the subject. This article deals with a limited portion of the problem. It presents economic analysis of regulation as it operated since I 946. The details of the regulation have been amply discussed in many readily available works. The analysis is, however, scattered through many publications most of which have had limited circulation.2 This article stresses, therefore, these theoretical issues. Over 95 per cent of the coal produced in Western Europe is mined in Britain, Germany, France, Belgium and the Netherlands [24, pp. 92-3]. France invited all these countries and Luxemburg and Italy, which have large steel industries, to join a European Coal and Steel Community.3 All but Britain accepted and ECSC began operation in I952. The article is primarily concerned with the ECSC countries but the analysis is also applicable to Britain. Part I of the article presents enough information about the coal industry to introduce the simple model of intervention sketched in Part II. Part III examines the arguments for this type of intervention. Part IV discusses the special issue of 'average-cost supply' which has dominated much of the analytical debate. Part V uses the previous analysis to evaluate the performance of the coal market.