What Happened to Germany After World War II?

Today, Germany is considered one of the most powerful economies in the world. It is a cornerstone of the European Union, especially financially. While it does not count among the European nuclear superpowers (the United Kingdom and France), it is clearly a political and economic leader of the region.

An interesting part of history to understand, therefore, is what happened to Germany right after World War II. From its post-World War I depression to the military powerhouse that snuffed out the lights of Europe, we see political influence and power until the pushback and its defeat.

Post-World War II, we will look at the state of Germany, the decisions that split it down the middle and made it part of the Cold War strategy board, and the beginnings of its modern position of influence. 

What Was the State of Germany Right After World War II?

Germany surrendered to the Allied powers (headed by the United States, the United Kingdom, France, and the Soviet Union) in May of 1945. The surrender effectively stripped Germany of sovereignty. 

In addition, the battles had brought the fight all over Germany just as Germany had brought the fight all over Europe. In all of Germany, 1 out of every 4 residences or residential units could no longer be made livable (25% of all housing). The most damaged cities bore the largest percentages, with some recovering from 50% of their housing destroyed. 

A journal article by Paul Whitcomb Williams called “Legitimate Targets in Aerial Bombardment” written in 1929 states that factories or compounds of general military importance are legitimate targets. While the fine print emphasizes that the factories should be producing “distinctly military supplies,” it is logical for most if not all factories to be included as nations redirected industrialization to win wars.

This would quickly become the case. Factories were fair game for all the Allies, according to Ronald Schaffer’s journal article on American aerial bombings of Germany. The final step was “morale bombings” of even residential and commercial areas. Factories were a no-brainer as a target. 

As a result, Germany’s factories were nearly completely out of commission by the end of World War II. Transportation lines, also fair game for aerial bombardment, were fragmented throughout the nation. This automatically curtailed the movement of people and supplies. 

As supply chains and stores dropped, inflation began to shoot up. Incredible demand of desperate citizens caused anyone distributing supplies to regulate the distribution through exorbitant prices. As the reichsmark (German currency at the time) was practically worthless, citizens began to barter goods and services for much-needed food and drink. 

Why Was Germany’s post-World War II Political Economic State So Concerning?

The political economic “crash” of Germany after World War II would have had haunting echoes of the devastated Germany following World War I. Germany had been the main aggressor, and as a result the nation was ruthlessly stripped of land and economic power following the Treaty of Versailles. It lost 10% of its land (the land it held before wartime expansion), found strict limits placed on its army and navy, was fined billions of dollars in repayments.

The strictness of the measures following World War I, and their justifications, can be left to debate. What is clear, however, is that these measures made it easy for post-World War I leaders to rally a demoralized German people to arms. 

A terrible depression and hyperinflation led to suitcases full of cash being exchanged for just enough food for the week, or the day. The desperation was easily convertible to anger. The anger, eventually convertible into aggressive action.

As a result, after World War II, while war repayments still needed to be considered, another goal was top-of-mind. In short, Germany should not be so devastated that the resulting desperation and poverty would lead to another world war. This was made much more difficulty by the dispersed German citizens-turned-refugees (in both peacetime- and wartime-occupied areas) finding their ways home. It is estimated that as many as 16 million Germans were sent back to their land.   

How Did Germany Become Divided?

The role of Soviet Russia

Even before the surrender of Germany, the Allied powers planned together how they would occupy and administrate Germany at the end of the war. War repayments were, of course, a large part of the discussion. Europe was terribly in need of rebuilding, with some cities (like Warsaw) having lost 90% of the city itself. 

Russia, at this time already the Soviet Union following the Bolshevik Revolution in 1917, had also been badly affected by Germany. Originally a German ally, Russia was invaded by Germany in 1941 through Operation Barbarossa. Germany pushed well into Russia, aiming for Moscow and causing 4 million Russian casualties. 

Russia was able to turn the Germans back at Stalingrad, while Germany had far overextended. Up to eighty percent of its force had been deployed in Russia, and in the entire war, 4 out of every 5 Germans killed in the war died on the Eastern Front. 

Despite the Soviet victory, much of the western side of Russia had been war-torn. Millions of their soldiers ended up in German prisoner-of-war camps. When the end of the war came, the other Allied powers knew that Russia would be looking to war repayments to help rebuild their federation and, in a way, as compensation for the victories they won. 

Their joining of the Allied powers, besides the arrival of the United States, was crucial in limiting Nazi Germany’s spread and eventually winning the war.

Planning post-war administration

Since this was the case, the other three Allied powers had no political reasons to exclude Russia in any way from the post-war administration of Germany. In 1943, President Franklin Roosevelt of the United States and Premier Joseph Stalin of Russia met at the Tehran Conference for initial talks on the occupation of Germany. They met again in 1945 at Yalta in the Soviet Union, agreeing to split the occupation into 4 administrative sections.

The Soviet troops eventually took Berlin, and Germany would surrender. By this time, the ideological and political divide between the Soviet Union and the other three Allied powers would rise rapidly to the top now that their common opponent was removed. 

Berlin and Germany were divided into two administrative areas. The United States, the United Kingdom, and France took over administration of West Berlin and Germany. Soviet Russia took over administration of East Berlin and Germany. 

The Allied powers had agreed before the war that the occupation of Germany was temporary. It was meant to stabilize the area after the war (to avoid another post-world war depression) and ensure the safety of the region.

As the Soviet Union and the other Allied parties clearly had two different political approaches to government and administration, the nation began to divide according to ideology and perceived opportunities for prosperity. At the same time, the Soviet Union had not endeared themselves in any way to Germany; Berlin received an estimated 1 million grenades from them in the final battles. 

German citizens from East Germany began to escape to West Germany, and the Soviet Union acted through barbed wire, concrete walls, and finally a long wall with accompanying no-man’s-land that created a powerfully physical picture of a divided nation. 

How Did West Germany Develop?

West Germany, and indeed all of Germany and most of Europe, was devastated by the recent conflicts. Many of its industries had been diverted to fuel the war, and had been targets of aerial bombing even before the arrival of Allied forces. Transportation lines likewise had been bombed and destroyed. 

Pictures that show East versus West Germany were often taken after enough time had passed to make the difference in development evident. After the end of the war, both sides of Germany needed massive reconstruction and economic support.

What were Germany’s Advantages?

Despite its devastation, Germany had a powerful “industrial core.” In other words, it was a land of large factories and massive industries, and its people were skilled accordingly. It would have been inefficient to shift to another economic model (for example, agriculture). Both the land and the population would need to change.

The most efficient model of growth would take advantage of what Germany already had, and develop an economic environment that would allow it to independently grow and develop. For the West side of Germany, this happened.

The Marshall Plan

The European Recovery Program introduced by the US Secretary of State George C. Marshall (hence, the Marshall Plan) was proposed not only for Germany, but for most if not all of war-damaged Europe. 

Again, the central concern of Western Europe and the United States (besides the growing Soviet power) was to avoid another world war by forestalling another drop into devastation. The rapid recovery of every part of the world touched by war was seen as necessary to avoid future wars on the same scale as World War II. 

The resources poured into Europe would firstly rebuild industries, and then promote trade across the continent. Intra-European trade had and has always been a strong economic driver for Europe. The way back to growth and development would be through the rise of trade again in the continent. 

Regional Economic Agreements

To boost trade quickly across the region, the Organization for European Economic Cooperation, or the OEEC, was created. The OEEC regulated trade barriers, keeping them low between European nations. Goods were allowed to flow freely, and another organization made currency conversion simple and fair between nations. 

Large-scale industries in Germany such as coal and steel factories benefited greatly from the European Coal and Steel Community. They took active part in intra-European trade, and as a result their economy developed rapidly and sustainably. German per capita income grew at roughly 13% per year, on average. As East German per capita income growth was capped at around 5% in 1948, it is clear that West Germany carried most of the growth. 

How Did East Germany Develop? 

The simplest way to understand the economic development of East Germany after the Second World War is to take a quick look at the Soviet economic model of development. 

In a free market, what others would call a liberal economy and is generally better known as capitalism, the economy is guided by the government and the central bank. In general, industries are supported or unsupported by the government, and the government is often considered as simply the enabler of various industries. The government may develop economic plans, but its people are free to choose the industries they want to work in or build businesses for. 

In the socialist economic model, the key to successful economic development was supposedly centralized planning on a massive scale. A simple way to understand the model is to see an entire nation as one factory. The factory has one or a few products, and each department and sector knows its role in creating those products. As long as each sector does its part, the well-oiled machine will consistently produce, and the economy will consistently grow.

The trade-off for citizens, supposedly, was job security and state-provided housing, utilities, education, and so forth. As the citizens would not need to worry about basic requirements for life and living, they would ideally be content as part of the “factory.”

As we know from the world’s long experience up to the collapse of the Soviet Union (signaled, fascinatingly enough, by the tearing down of the Berlin Wall), the model was not sustainable in a number of nations. At the very least, it was not flexible enough to keep up with the ever-shifting demands of capitalist nations. While the Soviet industries focused on infrastructure and manufacturing of basic goods, factories and shops in the capitalist world were ever-changing to meet the demands of citizens in liberal economies. 

The most realistic approach would have been inter-regional trade, but Western Europe was intra-trading so freely. There was no market to break into given the rising tensions between the US-and-Western Europe and the Soviet Union, which includes much of Eastern Europe and Central Asia. As a result, East Germany’s economy was centralized, sluggish, and limiting. 

What Led To the Fall of the Berlin Wall?

The Berlin Wall fell in 1989, signaling the end of the Cold War and the dissolution of the Soviet Union. The Soviet premier, Mikhail Gorbachev, had declared a new policy of opening and restructuring (glasnost and perestroika). Border controls were relaxed, and there was no military opposition to popular (people-led) uprisings. 

This was as much an economic decision as anything else. The Soviet Union had become increasingly isolated, politically as well as economically. The numerous nations part of the Federation of Russian States were beginning to push against the centralized economy and harsh military controls, and it was no longer economically viable for the Soviet Union to maintain them. 

At the same time, the global nuclear threat that was a characteristic of the Cold War had died down. Diplomacy, particularly economic diplomacy, continued to be important in an increasingly peaceful United States and Europe. (Central and South America, Central Asia and the Middle East, Africa and much of East, South, and Southeast Asia were emerging new nations, with accompanying conflict.) 

There was no longer a reason to maintain “buffer” states to shield Russia from political or economic threat. The Berlin Wall came down. 

What Were the Seeds of Germany’s Future Political Economic Success?

In summary, we can see that there were several seeds of Germany’s future political economic success. One very important one was that Germany was not allowed to fail as a state or as an economy. Devastation in a surrendered nation after World War I sowed the seeds of World War II; the victorious nations would not make the same mistake.

Another is that Germany already had a strong industrial base before the war, in fact long before the war. The Industrial Revolution in the late 1700s had started in the United Kingdom but spread to Europe. Intra-European trade based on the specialty industries of each nation had fueled the region’s growth since before the war. Post-war agreements made it possible to resume such trade even during reconstruction. 

At risk of oversimplifying the answer, Germany eventually became a successful economy because it played to its strengths, opened itself for trade, and deliberately forged economic ties with its region. At the same time, through the strategy and openness of the United States and of Europe, it was able to reintegrate itself economically and politically.

The European Union is another story altogether.