Question: Economic Recovery

How did Germany recover after WW2. It was demoralized, lacking population and raw materials. it was also paying the Allies money. How on Earth did it recover after such injustice?

 

I don't think those countries who fought the Germans or were occupied by them would consider it an "injustice." In fact, they might consider all the "help" given to them, the "injustice." But, that is neither here nor there, and it is what it is.

First, I don't think that the Germans were "demoralized." Yes, they had been beaten, but they had not been broken, and one still has to go on living one's life. After all, they had just been through several years of making due with less(just as many others had done), and they would continue to do so.

Second, I don't believe that Germany was "lacking population" either. German population in 1946(maybe a few million more) was roughly where it was at in 1933, right when Hitler rose to power, and began his "turning around" of Germany. You have to remember that while Germany did lose some millions during the war, there was now many ethnic German that were being forced from their respective nations, with nowhere else to go.

Third, it was not so much "paying the Allies money" - as in cash - but they were carrying off a good bit of her industry and intellectual property(patents, etc.). While this did hurt the German economy, it all could be rebuilt.

Fourth, as to the economy, Ludwig Wilhelm Erhard usually gets the lion's share of credit in that department.
http://en.wikipedia.org/wiki/Ludwig_Erhard

Fifth, there was the Marshall Plan and the Soviet countermove, the Molotov Plan/COMECON(Council for Mutual Economic Assistance). But, IIRC, neither of these really did much to help West and East Germany get back on their feet, but they did help to improve the eventual pace of German recovery.

Sixth, the onset of the "Cold War" saw both West and East moving rapidly to help rebuild their respective Germanys in an effort to strengthen their overall positions.

and that's just off the top of my head. I am certain that there is a wealth of material to be found on the internet.

 

Here's a good start point-
http://www.econlib.org/library/Enc/GermanEconomicMiracle.html

 

Priceless!

 

Poor competition...then and now.

 

Thx for all the feedback, as an economics student this storehouse of knowledge is priceless! Thx all. However I have a few more questions. After reading the page on the German Economic Miracle I found this extremely intriguing.

" - Moreover, while West Germany was receiving aid, it was also making reparations and restitution payments well in excess of $1 billion. Finally, and most important, the Allies charged the Germans DM7.2 billion annually ($2.4 billion) for their costs of occupying Germany. (Of course, these occupation costs also meant that Germany did not need to pay for its own defense.) "​

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I found this interesting as one of your points Takao would seem to say other wise, so my next question is to understand this one better is that if Germany did not have a military defense from the US/UK/France/USSR what kind of costs in terms of US Dollars (Today Terms) would it have to pay on top of the $1+ billion reparations and restitution payments along the annual payment $2.4 billion for Occupational costs to the Allies however we don't need to look at the Occupational costs as, in my situation where if Germany didn't have a military defense in terms of the occupational force of the allies it would have to pay the occupational costs , so in a nutshell.

My Question 2 = ($1+ Billion reparations and restitution payments) + (??What kind of money would Germany have to invest in scrapping together a defense along with the kind of restrictions would be imposed by the allies post-war??)

I dont know if this is to far-fetced but I think it would be ineteresting to know what kind of economic pains contires went through post-world war.

 

Need to have a look before I could give you a decent answer to that.
However, West Germany's armed forces were reconstituted in 1955, and they formally joined NATO, so you'll need to factor defence spending into reparations/GDP after that date. Did their allies continue to charge occupation costs after that?
Worth mentioning the role of the IMF and World Bank too.
I would reckon the combination of currency reform, improved trading links through the EEC, higher industrial output and better spending power counted for more than they're credited with.

 

How much of that "occupation charge" was in straight money...and how much of it was offset by the Allied forces of occupation occupying former Wehrmacht kasernes, training grounds etc.? I've read too many accounts and memories of British squaddies in BAOR living in old Third-Reich era barracks in the late 1940s and early 1950s...

On the issue of the actua; economic miracle - there are certain other "factors" that we don't like to speak of....like how WE in the UK continued with our old pre-war heavy industries and production lines....

...but in the British Sector, which IIRC included the Ruhr, we merrily spent half of 1945 and half of 1946 dismantling...and dynamiting!...Germany's heavy industry. Which meant that ocne the Germans werte allowed to rebuild, they concentrated to a greater degree on light industry and the "technologies" than before the war...AND of course did it with U.S. money. But we provided the tabula rasa...

Meanwhile, right into the early 1960s, we were still trying to manufacture and sell our way out of immediate postwar woes....the "export or die" period...and making it on worn-out plant, worn-out production lines, and worn-out ideas - except those designs we took from the Germans as reparations.

Also - when we're comparing the German economic miracle with our non-miracle - British war industries that SHOULD have flourished postwar because of the huge monies they'd made during the war being available to re-invest...well - no they didn't; there was a LOT of profit-taking by owners....while the now-huge aviation indsutry was busy shrinking...and their orders shrinking faster still.

But there's one aspect that I've yet to see anyone picking up on - except the exanple of the British occupation control officer who got Volkwagen saved and back up off its knees...

We did that for a LOT of German industries. We took control of them - and told them what they could and could not make. And quite honestly we did that better for GERMAN industries than we were doing for our own industries at home!!! We made the same tired product for another deceade or two - but we forced German industries to make different to what they had before. And guess which nation did the best out of that?

 

Thx for the reply. Had to read it twice before I got my head round it. I had the delusional idea that Britain's Industries had ultimately benefited from the war. So if the British Homeland was at an Industrial "do-or-die" stage, France facing the main-land economic disaster and Germany Occupied, what kind of money estimated in today terms were being spent on defense on average between the allies at that stage. I want to know if the allies just forgot about Germany what kind of many they would have to pay. Added to the original $1+ Billion on top of the $2.4 Billion. The price of a rag-tag defence would do to Germany, even after 1955.

 

You must be joking; right into the '70s-'80s the attitude in Britain was "we-won-the-war-we-don't-need-to-change-nothing", helped by the trade unions' natural aversion to anything that even remotely looks like change.,

 

It is pretty hilarious. My retiring History teacher told me Britain had eventually benefited loads from the war. I think I need to get the opinion of a "reliable" economics professor and give me a 15 days presentation on the matter from which I will under stand 1/3275th of.

 

"Economics" would be only a part of the story; there's the social history too....

Britain was bankrupt by the end of the war; we depended on Marshall Aid too...although we were the ones who really HAD to pay it back, in our case it got folded into our war debt to the U.S.!

The REAL problems started in 1945...when the new labour government had to...in that period of economic disaster...start making good on its electoral promises - to create the Welfare State, the National Health System....AND out of the blue we also had to start developing our own nuclear industry and nuclear deterrent, as the pprospect of sharing what he helped to develop at Los Alamos vanished in a puff of smoke.

It came to a head in 1947-48...although the winter of 1945 into 1946 was bad enough; rolling power blackouts, stricter rationing in many items than DURING the war etc. Not only was the UK trying desperately to make and sell everything it could abroad - at home, what was offered for sale here from British manufacturers was basically crap! The U.S. for example got the nice, brightly coloured sports cars...we got the pre-war "grey porridge" recycled...

IF you could even buy the stuff. Part of the economic policy the labour government introduced...and successive governments kept it up until 1959...was an incredibly tight credit and loans system. You had to be over 21 to be able to apply for Hire Purchase or a mortgage...a mortgage MAY even have been as high as 30 years of age, I'll have to check...and you had to have a 50% deposit! So not only was there nothing REALLY worthwhile to buy - you had to be able to front up the money...or you just couldn't buy it.

The BIG turning point was in 1959 with MacMillan's "You've never had it so good" speech - credit controls were slashed; you could get H.P. or a mortgage at 18, and the desposit requirement shrunk to 5% for Hire Purchase. That's what created the "teenager" in the UK, and the teenage spending boom of the 1960s. Teenagers in work could now buy stuff...so rapidly the market got swamped with domestically-made stuff for them to buy, and more expensive imports. And shops and businesses started offering credit terms on anything...

It was a bit like the Rearmament-driven consumer booms of the 1930s that brought European nations out of the Depression; governments freed up money for armaments...so the makers took people on again...the work put money in THEIR pockets...and other domestic industries re-expanded to make and sell stuff to take the money off them again.

In the UK, once the credit restrictions were relaxed - suddenly car makers sold their brightly coloured sports cars HERE, instead of shipping them across the Pond, the motorcycle manufacturers started selling the sporty and brightly-painted bikes they'd shipped to American speedheads...putting young people on the road for the first time in/on something that wasn't fourth-hand grey porridge.

That's how long the postwar economic crisis really lasted in the UK - fourteen years!

 

Dunno, we had full employment in the '50s - albeit in obsolescent industries where workforce numbers counted for more than actual productivity- and many people started the era with reasonable savings, courtesy of six years of war followed by another nine of rationing where you had cash but sod-all to spend it on. Trouble was, there was too much of a "let's-just-pick-up-where-we-left-off-in-1939" attitude, complete complacency regarding the Empire and the changing world generally.
Instead of looking to new markets in Europe, good old Britain opted for Empire preference status with the colonies and continuing trade with the US, so when the Dollar crisis happened in 1947 we got hit a lot harder than some others. Best attempts to sort the problems in the '60s consisted of mergers creating monolithic industrial giants which managed to become even less competitive than they were to start with, since eliminating rivals also eliminated competition and a need to keep ahead.
And then there was the Mediaeval monetary system...
Germany had no other option but to start from scratch and just go for it, coupled with a great work ethic and an overwhelming desire to prove the Nazi era wasn't the norm.

 

So...My main question sort of got buried there, how much money would (in Today's terms) would Germany have had to pay for it to have a defence alongside the $3.4 Billion dollars it was paying out already.

 

one word-Germans had discipline