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Germany lost in World War II. Being the loser, its economy started at a disadvantage compared to her World War II victors in the aftermath of WW2. However, Germany managed to recover more successfully than her World War II victors to become the dominant European economic power by the late 20th century.

What did Germany do to become more prosperous than its victors after World War II?

Can the troubled European nations of today draw lessons from Germany's history of rebuilding so successfully despite being a loser in both World Wars?

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    Related: How did Germany rebuild so quickly after World War I? – yannis Dec 10 '13 at 9:00
  • @Yannis Rizos: Related but not the same. This question is asking how did Germany perform the same miracle after World War 2. The conditions in both periods are different. – curious Dec 10 '13 at 9:02
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    Didn't say they were the same. – yannis Dec 10 '13 at 9:03
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    No worries. I just thought it would be helpful to point to the WW1 question, as people interested in how Germany recovered after WW2 will probably also be interested in how they did it after WW1. – yannis Dec 10 '13 at 9:06
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    European countries were the superpowers of the 19th century, rather. – Lennart Regebro Dec 10 '13 at 9:24
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What did Germany do to become more prosperous than its victors after World War II?

The boring answer to that it the rather simple: It didn't. The economy of both Germany and France were devastated by the war, the UK and US economy much less. Germany and France both recovered quickly, and Germany, France and the UK ended up with very similar levels of prosperity.

Germany's industry was of course in a much worse state than France and UK's, but they were able to rebuild it to a large extent thanks to economic help from the victors.

As you see the US beat all of them, and the other major victor, the USSR of course never reached levels of prosperity close to this, but that's because of socialism.

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[Source]

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    I like the answer, but the graph is ... less helpful than it could be. All the lines are yellow; I can't tell if Germany is ahead of or behind France in 1970. (of course that is the point - the three are essentially indistinguishable from 1950 on.) – Mark C. Wallace♦ Dec 10 '13 at 12:12
  • I think you are correct to isolate the response to the period about which OP asks. European industrial and monetary policy after adoption of the Euro is distinct from policy in the post war years. – Mark C. Wallace♦ Dec 10 '13 at 12:13
  • @MarkC.Wallace I know, gapminder is a great source and very helpful, but it's really lacking in the coloring respect... – Lennart Regebro Dec 10 '13 at 12:25
  • I'm surprised that your answer says nothing of the Marshall Plan's role in the rebuilding effort. – Bruce James Feb 3 '15 at 22:22
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    And the reason they failed in playing catchup was socialism. – Lennart Regebro Oct 11 '16 at 15:34
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Good question with several answers. First a nod to Lennart for pointing out that Germany grew just like France and Britain and the USA, so a certain amount of "a rising tide floats all boats." However there were some factors that advantaged Germany more than the others:

  1. Highly educated, savings-minded workforce whose population losses were instantly replenished by the influx of millions of refugees from former eastern Germany, Poland, and Czechoslovakia.
  2. Wartime destruction meant wonder years for the construction industry. Entire cities were destroyed and had to be rebuilt.
  3. Just fighting the war under conditions of scarcity and bombing engendered a high level of state-industrial cooperation and focus on efficiency and optimization. Do more with less. For example, Germany managed to produce more war materiel in 1944 than in 1940.
  4. Germany shrank by 25% in 1945 compared to its 1937 territory. Most of the lost territory, such as East Prussia and Pomerania, was historically relatively poor and agricultural. Silesia was an industrial region but hardly on a par with the Rhineland. Other relatively poor regions such as Mecklenburg and Brandenburg were sequestered away into East Germany. So the richest and most industrial parts of West Germany could grow without having to subsidize the East.
  5. Ludwig Erhard, the minister given much credit for the "Economic Miracle," astutely kept exchange rates artificially low in order to promote German exports.
  6. The Marshall Plan certainly helped somewhat by infusing capital. Rather than investment, East Germany experienced a net loss of capital and industrial plant as "reparations" but still managed to become the 7th largest industrial economy at its height.

Finally, a political factor that is often overlooked: Before World War II Germany's middle class had no political home. Instead it was fractured six ways to Sunday. This had led to much political friction over the years, to the point of enabling the Nazi Party to rise to power by grabbing the votes of a frustrated middle class who wanted an end to the chaos. Finally the Catholics and the Protestants joined forces to form the CDU, giving it a solid base of political support to carry out the Economic Miracle. By the same token, the Communist Party was outlawed, and working class politics was united under the SPD. Political stability and the rule of law are seen as essential conditions for the growth of capitalism.

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  • Great answer! IMO, there is an additional, psychological reason (for which I can not provide any source apart from intimately knowing Germans of the post-war generation): They were ashamed of the atrocities committed and were subconsciously trying to 'work off' the guilt. – ssc May 9 '14 at 18:50
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    And item 7: many factories in Germany was largely dismantled and transported to Russia (or the US) after WW II. When rebuilding, Germany had the most modern state-of-the-art equipment. That effect mostly wore off by the 1970s, partially explaining why growth since then has leveled off. We still see some of that effect; US steel plants, mostly built in the 1920s or earlier, reportedly need seven times as many workers per ton of steel as German steel plants. – Kevin Keane Oct 13 '16 at 21:09
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At the closing of WWII the Cold War had already begun. West Germany bordered the Soviet Bloc and became the premier battle ground. Long story short, Sec. George Marshall guilt tripped/spooked congress into agreeing to give very very large amount of their constituents money to Europe. W. Germany and Greece being the two most at risk to shifting into the Soviet sphere, they received the most. ^^^(Turkey was as well, & was a big part of selling the idea yet they did not receive Marshal Plan aid) I think what I'm saying is accurate but I did not check.... Aside from that we were going to do everything possible to help make sure West Germany looked like Disney Land compared to the other side of the Wall. Also Germany, historically is a very innovative society and has been a technological hub --- so with someone else writing blank checks to invest they were able to produce - that's what i speculate anyway.

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    Factually incorrect. Britain was the biggest receiver followed by France; Germany received half of Britain's amount and Greece only 1/10 or so. – Semaphore♦ Oct 21 '14 at 5:52
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    makes sense. only without Jewish scientists they cant really progress in their own, hence the golden age of 19th century science in Germany never came back. – Bak1139 Feb 2 '15 at 13:16
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When the 2ww ended the cold war started.....

The UK, USA, France etc spend a lot of time and effect including using most of their best engineers to create weapons and defenses for the cold war.

Germany was not allowed to create weapons; therefore all their best people worked in industry creating goods that could be sold.

The US and UK also based lots of solders in West Germany, and these solders spend money while there. At least some of the effort in building the bases was then by German workers (that got paid).

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    <begin humor>I can't help but imagine the Carl Sagan poster,"Nice hypothesis you have there; pity if someone decided to test it...." </humor> You've presented a hypothesis devoid of any evidence or any framework by which the hypothesis could be tested. – Mark C. Wallace♦ Aug 25 '15 at 18:54
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    I believe this is partly true, despite being poorly worded. The most significant fact is that W. Germany had no army, and during the cold war a good third of Government's budget went for the army. That means W. Germany could save a lot of money by not having any army (the Bundeswehr was created at some point, yes, but it is small and not very powerful for obvious reasons) – Bregalad Aug 25 '15 at 19:19

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