Postwar Reconstruction

Domestic Politics

Contrasts to the post-World War I Period

• More planning and forethought

• Deliberate effort to avoid the mistakes of the failed peace and the interwar period

• Very different outcome– Domestic peace– Following reconstruction, unprecedented

prosperity and economic growth

Domestic politics

• Impact of war and depression:– Realization that it was unacceptable to go

back to mass unemployment

• Resistance experience– Openness to new coalitions -- initial

incorporation of Communists– Desire for change

• End of earlier taboos on government intervention, involvement in the economy

Impact of Cold War

• Reinforces American determination to remain involved in Europe

• Does so in ways which not only divide Europe between east and west, but also shape postwar economic boom– e.g. Marshall Plan

Britain:

• Comes through the war exhausted and indebted• But also determination to improve the position of

its citizens• Labour wins parliamentary majority in 1945

– Attlee replaces Churchill

• Free to implement its programme, including– nationalization of basic industries– Establishment of universal welfare state including

pensions, unemployment insurance, and after 1948, National Health Service (NHS)

France

• Liberation in 1944• Initially governed by victorious forces:

Free French Army, Communists, Socialists, Christian Democrats (MRP)

• Establishment of 4th Republic– Exclusion of Communists– Shifting coalitions -- divided cabinets– Successful economic planning despite weak

cabinets

Italy

• Demise of fascism, establishment of a liberal democratic regime

• Reconciliation of Church and Italian state

• Dominant role of Christian Democracy

• Rapid economic growth – But still wide gaps between north and south,

as well as rich and poor

Germany

• Fate determined by defeat, allied occupation, cold war

• Allies’ initial desire: – to return Germany to its pre-1870 agrarian

state – cf. Morganthau Plan

• Wartime agreement on four power occupation but little else

Germany – cont’d

• Partition occurs as– British, American, and then French zones assembled

into an economic and then political unit

• Berlin blockade, airlift intensify rift between west and east

• Federal Republic of Germany (FRG): Liberal democratic regime, established in the 3 western zones

• German Democratic Republic (GDR) established in Soviet zone

Federal Republic of Germany

• Liberal democratic constitution with explicit safeguards to prevent return to totalitarianism– Emphasis on rights of citizen– Federalism– Limitations on presidential power– Extensive measures to ensure that there would

always be a government– Provisions to ban anti-democratic forces

• Incorporation of Germany into western alliance, links to western economies

Social market economy in Germany

• Public-private coordination of investment in different sectors of the economy– Economy nominally decentralized– However investment banks assume major role

in coordinating the economy

• Expansion of pre-existing welfare state• Co-determination in industry: workers

involved in management of firms – especially in coal and steel

Explaining the welfare state

• War and depression experience

• Recognition that people expected better

• Advent of new tools -- Keynsian economics in place of classical liberal economics

• Coming together of political forces willing to assume an active government role in the economy

The postwar economic miracle

• Reconstruction in Germany and Italy facilitates employment

• Availability of workers – taking up slack• Availability of new markets – workers,

middle classes• Advantages of mass production• Stabilizing role of United States – US

finances by extending credits, allowing favourable exchange rates