Research Paper on "Economic and Social Effects of the Second World War on Germany"

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Currency Reforms of June 1948

Results of the Economic Reform

Abstract

Between the years of 1919 and 1945, the Republic of Germany had started two World Wars. Over those years the Germany economy, employment level, and population had suffered tremendously. Germany undoubtedly had become a product of the War eras. At the end of the First World War and as a result of the signing of the Treaty of Versailles, Germany had experienced a loss in territory, population, and its unemployment rates were staggering. Shortly after, the Great Depression occurred in the United States and the financial investments that supported Germany from the United States were gone -- leaving Germany in further despair. It was at that time that Adolph Hitler with the intention of becoming the permanent ruler of Germany and of the World took control of the Republic of Germany. He instituted numerous government controlled programs that appeared to benefit the people, but this benefit was short lived -- within five years of Hitler taking control of the Republic he led the nation into World War II. Post World War II Germany's economic issues were more severe than previously -- not only due to the consequences of losing the War, but because of the government controls that Hitler had put in place. Shortly after, political and economic strain caused a split of the country into two separate nations and it would remain split for approximately 40 years. Not until Wilhelm Ropke instituted his controversial plan for economic reform did the country begin to see improvement. This improvement, in terms of the employment, the industrial output, and the consumption of goods remained steady over the next few decades and as a result the German economy became functional again. Finally, in 1989, the Berlin Wall, which divided the nation into to countries was demolished and the country, once again became united as one.

Overview

Prior to World War II and immediately following the Great Depression of 1932, Germany was in a state of economic recession. Having not yet rebounded from the effects of World War I, the German economy felt the effects of the Treaty of Versailles, which was signed to end World War I, and were beginning to feel the effects the Nazi rule. At the end of World War II, Germany's economy suffered even more. It was not until after World War II and a controversial system of economic reform on taxes, currency, and price controls that the German economy began to rebound, and within 10 years of the economic reform, the German economy was being called a miracle. This paper compares and contrasts the pre-World War II period and Post World War II period of Germany and particularly, the economic peaks and valleys that took place during each period.

The German Economy Prior to World War II

Prior to World War II, the German economy was in a state of economic recession.

By 1936, the government was the master of the economy and all small businesses had been economically subordinated to the large industries that would nourish the German war machine.

In 1933, the National Socialist German Workers' Party -- the Nazi Party-- led by Adolph Hitler began to take control of what was a suffering economy. For the next few years, Hitler and the Nazis would implement different economic and work related programs throughout the nation that resulting in a revival of the slumping economy. While these programs fueled and revived the economy, they beneath the surface, set the nation up for World War II-- the second World War started by Germany in 20 years.

The National Socialist German Workers' Party (Nazis)

The Nazi Party was a communist group led by Adolph Hitler. Membership in the Nazi Party was strict and limited to people that could meet qualifications that discriminated based on race or national origin, institutional affiliation, and medical history. The qualifications required one to be a member of the German people, have a clean record, be of pure German blood, not belong to a Freemason's lodge or any related organization, and has completed his 21st year/birthday (in some cases his 18th).

The Nazis forbid membership to anyone who was married to a Jewish person or a person of a 'colored' race, anyone belonging to a Freedman's lodge, or anyone suffering from a hereditary illness.

The Nazi government under the rule of Hitler was called the Third Reich. It was the Nazi's goal to totally subordinate the German people and the German economy to its rule. The Nazis came into power during a period that Germany was suffering economically and in need of reform. The Nazis brought the reform to the people of Germany, but at a cost. Under the rule of the Nazis, all males under 25 were forced into compulsory labor and after 1939 women were also forced into labor.

. The government began and grounded its rule on the workforce by introducing the Arbeitsbuch (work book) that gave the Nazi government power to limit the job choices to individuals of its choosing. This gave the Nazis control in which to feed labor into the industries that it deemed more profitable to the economy such as food and agriculture.

The Nazis also adopted a strict rule on wages -- the piecework rate was adopted instead of the hourly wage. The piecework rate paid employees based on production and work efficiency rather than hours worked.

. The outcome under this system was absolute control of the workforce that, ironically, resulted in a growth of the labor market. For example the only way that a worker was to earn more money was to work harder or longer. The more the worker produced the more he was paid.

What resulted was this -- economic control by the Nazis which appeared to strengthen the economy and on the surface it did. However, the actual result was a weakening in the underlying structure of the German economy. Employees worked harder, longer, and produced more goods, but the general economy still remain stunted because of the tight rule by the Nazi party. Price controls were in place and food rationing became a national policy. Price controls permitted goods to be sold at a level below market level therefore permitting the government to save money. Rationing was began after the World War II began and was a system that helped the economy deal with the extensive food shortages that occurred during the War.

Still, some scholars have argued that the rule of Hitler and the Nazis created a complete turn around of bleak economically depressed situation of Germany prior to World War II. Henri Liu commented in his article, Nazism and the German Economic Miracle, "Through an independent monetary policy of sovereign credit and a full-employment public-works program, the Third Reich was able to turn a bankrupt Germany, stripped of overseas colonies it could exploit, into the strongest economy in Europe within four years, even before armament spending began."

The German economy prior to the Second World War was in recession and the effect that the Third Reich had on the economy can be documented. However, one must also consider whether the influence that the Third Reich had on the Pre-World War II German economy contributed to the severe economic depression that the German economy faced after World

War II.

Also a contributing factor the economic recession of Germany Pre-World War II. A way to compensate for the lack of available cash was the creation of a second bank currency by the Nazi party. These notes were used to pay subcontractors that performed work for the government. These fictitious notes became the second form of currency for the country in the Pre-World War II and the era of the Third Reich.

Creation of fictitious notes that were drawn on a fictitious bank further negatively affected the economy because the businesses performing work ultimately provided either free labor or reduced cost labor and in turn lost money for their business.

While their… READ MORE