World War II Economic Impact on Germany - Essay Example

Macro and Microeconomics 29th March, The Economic Impact of the World War II in Germany Introduction The economic growth foris of a major concern in a country. Germany was one of the European nations which encountered a big destruction Second World War. There was a great economic downfall in the continent. The infrastructure was greatly demolished and their starving in the country since the agricultural sector could not support the country. The German’s main problem was due to the stagnation in its economy. German was affected by the communism. The communist controlled everything in the country and the economic growth depended on them. These also led to the war. If the economy of the country would have grown, there would be an occurrence of the war again. The continued existence of communism would cause this. This war led to the drop in the economy in Europe and many people died. As a result, there was a need to revive its economical strength in this continent. This was to involve a well structured plan and if need be get financial support. This was also to end soviet communism that was widespread in the most parts of the continent, especially in the Eastern German. These on the other hand had an effect on various aspects. These include: Gross Domestic Product (G.D.P), per capita income, infrastructure and national strength. Marshall Plan was involved a program that would provide a solution for German’s downfall. This plan was a reconstruction program that was borrowed from the United State of America and aimed at providing financial support to the dying economy of Europe. The Marshall plan was brought about by George Catlett Marshall. It was a plan the European countries were to accept to so that the economy that had died during the WWII. Its major aim was to finance the Europeans scheme to revive the economy among its nations. It was to ensure that various uncertainties in those schemes were brought to an end. The plan was also trusted on the side of military support to the continent ( Albrecht 2008). Four years after the end of the Second World War, the continent had experienced tremendous success in its states, Germany for this matter. Therefore European states became part of the American organizations to ensure that they were economically stable. The plan had a lot of concern on regaining what was lost during the war. As a matter of fact, the advanced American models that were highly effective were employed. The major concern of this was to make the business practices and industrial sector advanced. Analysis (Descriptive) The incorporation of the plan had a number of effects the stability of the countries of the continent. Firstly, German became well financially and this was even better than the before the start of the war, seven years after the war. The war left the country with its relation with countries being minimal. These caused it to have less access of the products in those nations. Fortunately, the county’s financial capability was raised by zero-point-three-five six years later after the war. The national industrial production went down drastically. This caused the state to incur a lot on expenditure despite the taxes being reduced. On applying the recovery plan, the industrial production went up abruptly. This was better as compared to the production in the Agricultural sector. Germany depended on coal production, which immediately after the war grows slowly, but later on picked up and boosted the economy in the state. This production in this country was better as compared with other states. The production was low because the European countries had difficulties with obtaining raw materials from other countries worldwide for their industries. European culture demanded that Agricultural items were to be obtained from the eastern and in turn industrial items were sold to their partners from western side. This business between states was interfered with since there was no good trade relation amongst them. The labor division was also hard to be brought back to normal immediately. Contrary to these calamities, Germany enhanced its trade ranks externally after the war. This was through the net taxes that were collected from the overseas shipping of imported goods. This economic recovery also encouraged the revival of the external market for the goods produced by the state. The foreign countries developed interest in investing in the European states since the rules on foreign loans were not strict. The investments involved loaning the countries because the due the good trade relation that was being restored between Europe and countries like America. Nevertheless, Germany had pending debts that were to be settled. It had to cause the country to pay back these debts when the government was in the process of recovering its economy. This led to the cost of imported goods being at the top placing Germany in a poor economic state. This is the time during which the country faced instability in the political and financial aspects. This really derailed the recovery of its economic status. One year after the war, the per capita income of the country had gone down. The drop in this was about a quarter of the per capita income a year before the start of the war. The country experienced a rapid growth when the Marshall Plan was put in place as compared that before the war began. In comparison with the First World War, the country’s per capita income was far much better after the Second World War than after the first one. The major boost of the per capita income was the increased production of coal that was on a great demand in the country, Europe and outside the continent. Marshall Plan played a big role in making the income stable and this compensated the losses that the country had incurred during the war. On the other hand, the plan devised after the war revived the lost hope of the country’s economic growth. National per capita income increased after the war in comparison with that before the war. The recovery program of the economy western Germany enabled it to realize remarkable growth by a bigger amount after the Second World War. This made west Germany a vehicle of economic awakening of Europe that had greatly died before the start of the war. This was a great achievement for the plan since it was implemented. This also gave the country power to carry out its trade activities with constraints as compared to the pre- war period. However, the plan was so much restricted to the trade between east Europe and the American nations. The German’s raw materials for its industrial plants and other goods were to be bought from America. The relation between the initiators of the plan would collapse if at all the nation would not import from them. This on the hand boosted the American economy after the war through its exports and the loans given to these nations in the East Europe. During the outbreak of the Korean War, the west part of Europe was to finance its militaries that had gone down. This also gave the Marshall plan an upper hand to continue supporting the activities of the nations, German being among them (Eichengree 1991). In addition, the currency of German was to be made locally. Owing to a great need of the improvement of industrial production, three fifths of this money was to be allocated to industries to increase its productivity. The private traders were given an opportunity to borrow loans from the government to restore their economic growth. There was the circulation of the money in the country because once other groups could access the money after others had refunded their loans. After the German had realized this benefit, two-fifths of this money was used to make the currency more stable, to repay the pending debts and also other projects that were not industrial based were invested in. in the long run, the country become more prosperous and economically stable. On the other hand, the country gained strength since it had the financial capability. The plan also played a big role in the good performance of the technically developed programs. This involved the smooth running of the productivity of labor and channeling the funds to develop the industrial technical sectors. The technical team included: statisticians, engineers, literature surveys, economists and organized industry visitors. There was a need for the manufacturers to be trained in matters of statistic measurements by the American specialists. This was made possible due to the existence of the United States’ body known as Bureau of Labor Statistics (BLS).This Technical Assistance Program led to the efficiency and increased productivity of manufacturers in the country. This was proportional to the increased economy, well developed infrastructure, people’s improved living standards and thus enhancing the national strength. The technical program was also to look into the issues of infrastructure development that was in a critical situation after the war. The performance of the industries was to be inspected to ensure that the technical aids were appropriately applied. The plan was put into categories according to the per capita of the countries that took part in the reconstruction efforts of the economy. The nations that had more ability were given priority of getting the bigger portion money given to European countries. German enjoyed this benefit and its per capita income was higher as compared to other countries except France. The clearly showed how the Marshall plan effectively allocated its fund to these nations in aid of the growth. This was represented in a table that showed the allocations in million dollars as based on The Marshall Plan Fifty Years Later. /CAPITA $MILN CAPITA $MILN CAPITA $MILN CAPITA $MILN COUNTRY 1948/49 1049/50 1950/1951 CUMULATIVE Austria 232 166 70 468 Belgium&Luxernberg 195 222 360 777 Denmark 103 87 195 385 France 1085 691 520 2296 Germany 510 438 500 1448 Greece 175 156 45 376 Iceland 6 22 15 43 Ireland 88 45 0 133 Italy &Trieste 594 405 205 1204 Netherlands 471 302 355 1128 Norway 82 90 200 372 Portugal 0 0 70 70 Sweden 39 48 260 347 Switzerland 0 0 250 250 Turkey 28 59 50 137 United Kingdom 1316 921 1060 3297 TOTALS 4924 3652 4155 12731 However the existing communist groups in West Germany posed a great threat to American nations. This was because these parties were strong and famous in the region. It is the war that posed a challenge the groups and this had made them to be well prepared to oppose the war period. The America was required to support the nations that were not communists to get rid of the Soviet Communism. This was proposed by the containment doctrine. German was the nation that was expected to bring economic growth in Europe. This was due to increased production of coal and steels that increased from a quarter to a half more than the production before the start of the war. In this regard, the German economy was the main factor to determine the economic growth of Europe. This was achieved where the manufactured items and raw material were exchanged. Consequently, the recovery of German’s production capability led to the high production of Europe as a whole. This was as per the report given by the president of United States, Herbert Hoover. Secondly, the plan also had a big effect on the communism. The communism had policies and rules that affected directly various outcomes of the national growth. Among this is the Gross Domestic Product. The country which is not strict on the external trade encourages a big number of imports and exports. This in turn determines the proportion the GDP of the country. It was noted at that there was great improvement of the income and longer life expectance in the non-communist than in the communist nations. Likewise, the western and eastern parts of German were in the situation where the West German was non-communism while East German was communism. As a result of rapid transition in German, the GDP per capita increased because the cases of corruption were so much reduced. The East German also adopted the flat rate tax that made it successful. The adoption of this, to some extend increased the country’s economy and also led the improved standards of living of people. The cases of unemployment were gotten rid of (Katchanovski 2000). Courting controversy to the expectations of the plan, the Soviet communism dragged the efforts of bringing up the economy of German. Rather, the Soviet worked on transforming the socioeconomic status of the country and also pushed for the reparation claims to be fulfilled. This happened because the Soviet communism was all over the eastern part of Europe. The communism controlled the cultural values of the region. These had a greater influence on the corruption deals. Incentives were bait for the communism’s act of corruption. The remedy for this was the acceptance of the Marshall Plan to freeze this act. The nation’s strength was greatly determined by the cultural values. The culture in the Soviet communism was corrupt in nature. The employment of the Marshall Plan scared the Soviet Union because it would lose the power to make the Eastern Europe as one. There was a lot of opposition to this plan by the Soviet communism but it later on succeeded (Roberts 2006). Thirdly, the infrastructure in the country was improved. During the World War II, there was also a lot of destruction of infrastructure and displacement of people who turned out to be refugees in other parts of the continent. Marshall P Plan did not put into consideration into the assistance of these two aspects. Fortunately, America provided a loan of about fourteen dollars to help bring back the poor condition of infrastructure to normal and settle the displaced people. Two years after the employment of Marshall, there was a great need of pushing for the economic wellness of Germany. This was to put into account the infrastructure, plants of the industries and the goods which were earlier own demolished. Also the poor living standards and lack of food amongst the people was eradicated in the West and East German just after the war. Infrastructure on the hand played a big role in connecting the country and others to promote the economic growth. This in turn led to the socioeconomic stability amongst the nations. Communication and transport sector provided accessibility of the market increase. This was to be realized if the costs of the products at the market were made low. The costs of trade that were dealt with comprised: cost of transport, information, local distribution, contract enforcement and the policy barriers. Infrastructure made it easy for the movement of products thus leading to increased production and cost reduction. These made German compete favorably with other nations. In addition, infrastructure made it possible for the smooth running of the information. This also led to reduction of irregularities in the market and provided avenues of trade. The accessibility of energy to the industries in the region was facilitated by infrastructure (Zhai 2010). Marshall Plan was widespread in German and the entire East of Europe. In the region, there was number of people who were uncomfortable with it and therefore posed a lot of argument about the Marshall Plan. The plan was viewed as the American strategy to control over the western part of Europe like the way Soviets Union did to the East Europe. They were historians majorly from this region. After the recovery of West German’s economy in duration of six years after the war, the critics of the plan saw that American states was not so much needed in the planned schemes. They compared other economic policies like that of to Ludwig Erhard contributed a lot in the revival of the economy than that of the Marshall Plan. They say that this plan mainly targeted the economy of European nations only. Their areas are on the fact that it was just to improve the living standards of people (Hazlitt 1947) in his work noted the errors in the Marshall Plan. The communism era involved the cultural aspects of the people. This was characterized by high level of corruption. The people’s living standards were not pleasing the there were rampant unemployment and lack of enough food in the states. This was because the countries were under the control of Soviets communism. This in controlled the economic growth of the East German. In regard to this, the production was low due to poor trade relations with other states before the start of Second World War. This communism was greatly frozen after the end of the war by the adoption of Marshall Plan. The corrupt communism had weakened the nation’s economic capability. As a result the plan facilitated the removal of communism in Germany After the war, there was enormous demolition of the industries that were not active though they would also contribute to the economy of German. Therefore the German government established the plan that was for the industries that had power in productivity. This enabled the country’s production to be high after the war. Conclusion East and West German were positively affected by the Marshall Plan. Initially, the communism had locked these economic growth opportunities that had led to the retardation of the country’s economy, infrastructural development and unemployment of people. In the communist regions, the people faced lack of adequate food. These aspects together with the refugees of the war were removed by the implementation of the plan. Thus there was increased per capita income, GDP, improved infrastructure and improved national strength in Germany. Work cited Albrecht, Ritschl, "The Marshall Plan, 1948-1951". EH.Net Encyclopedia, 2008. Balabkins, Nicholas. Germany under Direct Controls: Economic Aspects of Industrial Disarmament 1945 - 1948, Rutgers University Press, 1964. Henry Ashby. The Two Germanies since 1945: East and West, University Press 1987, Yale Ericson, Edward E. Feeding the German Eagle, Greenwood Publishing Group, 1999: Soviet Economic Aid to Nazi Germany, 1933–1941, Greenwood Publishing Group 1999. Robert Grogin, Natural Enemies: The United States and the Soviet Union in the Cold War, 1917-1991, Lexington Books 2001 Michael, Hogan, America, Britain, and the Reconstruction of Western Europe, 1947–1952, Marshall Plan, Cambridge University Press1987, Cambridge Roger Gene, Miller. To Save a City: The Berlin Airlift, 1948-1949, Roberts, Geoffrey (2006), Stalin's Wars: From World War to Cold War, 1939–1953, Yale University Press, 2000, Texas A&M University Press. Seymour, Harris. The European Recovery Program, University Press 1948, Cambridge. Gimbel, John and Palo Alto: The Origins of the Marshall Plan, Stanford University Press, 1976. Peter, Calvocoressi and Guy, Wint. Total War: Causes and Courses of World War II. Pantheon Books, 1972, New York. Eichengreen, Barry. The European Economy since 1945: Coordinated Capitalism and Beyond 2008, p. 57. Roberts, Geoffrey. Stalin’s Wars: From World War to Cold War, 1939–1953, Yale University Press, 2006. Read More