European Economic History



EuropeanEconomic History

Economiceffects of WWII in Europe

TheSecond World War is a global armed conflict that took place between1939 and 1945. However, the conflicts reading to the real war hadexisted as early as during the First World War. Although there weresome immediate causes of the war, historians have argued thatunsettled conflicts in the First World War could have led to theSecond World War. The war involved almost all nations in the world,including great powers that formed alliances to confront commonenemies. The main alliances in the war were Allies and Axis. It isconsidered the biggest global conflict in the history of human kind,resulting into death of more than 100 million people mainly in Europeand Asia. Additionally, it was characterized by major participants inthe war committing all their economic, scientific and industrialresources to the war. The hallmarks of the war were the holocaustwhere the Germans killed over eleven million Jews and the atomic bombattack in the industrial cities of Hiroshima and Nagasaki in Japan bythe United States (Black, 2003).

TheSecond World War had huge impacts in the European continent and thehistory of the world. The large number of casualties and massivedestruction of economic resources and infrastructures remains some ofthe most visible impacts of the war. Additionally, the war alteredthe social, economic and political alignment of the world societies.The formation of the United Nations and other internationalorganization were aimed at enhancing cooperation between nations inpreventing future armed conflicts. The Second World War started inthe European continent. Additionally, all the European nationsparticipated in the war. Therefore, the war had far reaching impactson the economy of the European continent. It is estimated that about40 million people died in the European continent during the war. Themassive destruction of physical capital within the six years ofbombing and ground battles has far reaching economic impacts onEurope (Lee, 2007). The war disrupted economic activities in Europe,which lead to almost collapse of the economy. This paper looks atsome of the economic aftermaths of the Second World War in theEuropean continent.

Economicaftermath of the second world war in Europe

TheSecond World War was mainly fought in Europe and Asia. Although thewhole world experienced the economic impacts of the war, the Europeancontinent and the Asian continent were more affected. The cost of thewar, the high number of military and civilian casualty, destructionof property, forced migration, and disruption of economic activitieshas short term and long term impacts on the Europe. Depending on thelevel of engagement in the war, countries in Europe suffered varyinglevels of economic costs of the Second World War (Black, 2003).Additionally, the post war policies adopted by each country as wellas engagement in economic alliances and partnership have an impact onthe speed in which the specific economy recovered from the effects ofthe war. Nonetheless, the European powers lost significant influenceon the global economy, which say the emergence of new superpowers,outside Western Europe, mainly the United States and the Soviet Union(Harrison, 2010).

Oneof the most important impacts of any war is the destruction of unitsof production. War and conflicts destroy capital stocks that taketime to reconstruct. The second war led to the destruction of majorinfrastructures in many European countries. This resulted intosignificant reduction in the production capacity of the continent.The main concerns of economists on the effects of the Second WorldWar on the European economy were the ability of independent economiesto catch up with the rest of the world. Additionally, economists havebeen concern with how visible has been the effects of the destructionof the units of production and productive capacity in the Europeancontinent, several decades after the war. Statistics indicates thatwhen compared to the United States, the gross domestic product ofmajor European powers reduced significantly as a result of the war.For example, the gross domestic income per head, relative to theUnited States in 1938 was 98% in United Kingdom, 84% in Germany, 72in France and 53 in Italy. Immediately after the war in 1950, thefigures changed to 72% percent in United Kingdom, 45% in Germany, 55%in France and 53% in Italy (Kesternich, 2014). Statistics indicatesthat the United Kingdom and Germany economies were unable to matchtheir prewar performance, four decades after the war. This suggeststhat the destruction of social and economic infrastructures duringthe Second World War has a significant impact on the long termeconomic prospects of the European continent. It sifted the economicpower and influence in the European continent and the world. Morerecent economic analysis indicates that some of the impacts of thewar are still evident in some of the European economies, more thanhalf a century after the end of the war (Kesternich. 20140.

Economistshave been particularly interested in the short term and long termeconomic effects of the war on the United Kingdom, Germany, theSoviet Union and Italy and other European countries involved in thewar. By the end of the war, there was no doubt that the UnitedKingdom has suffered immensely from the war. The United Kingdom spentmore than a quarter of the country’s immense wealth to finance thewar. Until 1941, when an agreement of lend lease was established withthe United States, the United Kingdom government was using it assetsto buy military and war equipment such as ships and aircrafts mainlyfrom the united states. The agreement was reached just before theUnited Kingdom economy was exhausting its economic power to sustainthe war. Despite this, it was not possible for the economy to recoversince over half of the country’ reproductive labor force wasdirectly or indirectly involved in the war. Thus, the economicresources continued to shrink until the end of the war. In additionto the massive destruction of economic infrastructures during thewar, the wartime debts become the most important economic challengethat faced the United Kingdom in the aftermath of the war (Harrison,2010).

Theeconomy of the Soviet Union was also devastated by the effects of theSecond World War. This is despite the fact that the country remainedsignificantly strong in the post war era, resulting intoconfrontation with the United States in the cold war era. Economistsestimated that over 25 percent of the capital resources in the SovietUnion were destroyed during the Second World War. This significantlyaffected industrial and agricultural output in the country. It isestimated that the Soviet Union reduced by up to forty million peopleduring the war. At the end of the war, there was no doubt thatrebuilding the economy of the massive nation would require a hugeeffort. This led to massive borrowing from other European nations.Nonetheless, the Soviets declined the support of the United Statesunder the Marshall Plan. Using it massive natural resources andtechnical knowhow, a recovery plan that concentrated on heavyindustry, as opposed to agriculture and consumer goods worked infavor of the nation. For example, by mid 1950s, the steel industryproduction capacity in the Soviet Union had surpassed the prewarcapacity by more than 100 percent. Military and political activitiesin the Soviet Union which were characterized by annexing of states incentral and Eastern Europe and a challenges to the westerncapitalistic philosophies perpetrated by the united states was anindication that the Soviet Union swiftly recovered from the economicimpacts of the war. Therefore, while other economies in WesternEurope suffered for up to half a century, due to the impacts of thewar, the Soviet economy suffered in the short term (Harrison, 2010).

Betweenthe end of the First World War and the beginning of the Second WorldWar, the German economy flourished under the leadership of AdolfHitler. By late 1930s, the German economy was one of the largesteconomies in the world. This resulted into emergence of ambitiousmilitary and political activities that led to the Second World War.Due to its significant role in the war, Germany together with itsallies such Japan had the most devastating and far reaching economicchallenges as a result of the war. Technically, the German economycollapsed at the end of the war. This is because of the amount ofresources and manpower that was allocated to the war by the Naziadministrators. Additionally, the Paris Peace Treaty of 1947 resolvesthat Germany should repatriate some of the European powers such asthe United Kingdom, Soviet Union and France (Harrison, 2010).Therefore, while other European nations concentrated on rebuildingthe economy, Germany had an extra financial obligation. As a result,even after Germany surrendered, global powers mainly the UnitedKingdom and the United States continued to pursue the Germans forintellectual reparation. This resulted into harvesting of Germantechnologies and knowhow amounting to over 120 billion dollars in thecurrent rate. This meant that the German economy would takesignificantly more time to recover from the impact of the war sinceit had lost patents to its technologies. Other Germans allies such asItaly suffered similar fates, which had devastating effects on theeconomy (Harrison, 2010).

Additionally,due to the role of the Nazi Germans in the Second World War, theworld powers led by the United States made a deliberate move tosabotage the German economy after the war. This was part of theindustrial disarmament plan which aimed at deindustrialization ofGerman to reduce its ability to wage another war in the future. Thus,no financial or economic help was supposed to be offered to theGermans for nation rebuilding. The only international aid that wasavailable to the Germans was food aids to mitigate starvation, but atthe minimum (Harrison, 2010). The destruction and relocation ofproduction units crippled the German economy. Although the industrialdisarmament plan was dropped after it became evident that therecovery of the European continent was dependent on thereconstruction on the German industrial economy, the damage hadalready been done. The benefits the German economy had a hugeinfluence on economic recovery in Germany. Although Germany is one ofthe largest economies in the modern world, the economic impacts ofthe war are very evident (Harrison, 2010).

Theeconomic effects of the Second World War on the European continentresulted into a balance of economic powers in the European continent.It also initiated talks among leaders in the continent and beyond onnecessary measures that need to be take to avoid globalconfrontations in the future. This led to the established of regionaland international political and economic blocs such as the precursor of the European Union (Foley, 2000). Uniting different countries andeconomies in the European continent was viewed as an essential aspectof ending the Second World War. there was no doubt the League ofNations was ineffective in dealing with conflicts between nations andthus, its inability to prevent the second world war. The economic andpolitical costs of the war opened new possibilities in internationalcooperation. It was generally agreed that the League of Nations wassignificantly weak, economically and politically, to deal withinternational conflicts. Economists have also identified the effectsof the great depression in the 1930s and economic frustrationsassociated with it could have been a major cause of the war. Thus,while the European continent, together with the United States wasconcerned about the economic impacts of the war, dealing with social,political and economic factors that resulted into the war becamenecessary. For example, if the European economies and the UnitedStates were united, they could have avoided the great depression,which was caused by shut off international trade and tariff barriers.The economic implications of the war brought to the limelight theneed for more economic and political cooperation and integration(Foley, 2000).

Thisfirst attempt to enhance economic cooperation in the post war Europewas the Atlantic Charter. The charter was adopted by 26 countries,mainly in Europe and North America. The main theme in the charter wasa pledge by the member nations to promote social and economicconditions in the region and the world with an aim of endingaggression and subjugation. This charter also enhanced freedom in theoceans and promoted free trade. Although the agreements in thecharter were not binding, they formed some of the foundations of postwar economic and social agreement that have had direct impacts onEuropean continent. The creation of the United Nations and itsvarious arms as well as the European Union is some of internationalinstitutions that were formed to deal with international aggressionsand prevent future wars. The World Bank and the internationalmonetary fund had huge impacts in the economic reconstruction of theEuropean continent (Foley, 2000).

Anotherimportant aftermath of the Second World War in the European economicfabric has been the role of the United States. By the end of the war,it was evident to the United States that economic prosperity of theUnited States dependent on a vibrant global economy, especially inWestern Europe. Additionally, the United States and its philosopherswere faced with an eminent threat from the Soviet Union in the postwar era. Thus, the economic recovery programs in the Europeancontinent market the entry of American influence in the Europeancontinent. The change in foreign policy by the United States towardsWestern Europe, mainly through the European recovery programs has farreaching economic impacts. For example, the “InternationalAuthority for the Ruhr” was an initiative of the United Statesinterventions in Europe aimed at controlling the industrialdevelopment in Germany after the war. This authority together withother regional collaborative initiatives formed the pillars of theEuropean Union. Up to date, the influence of the United States in theEuropean economy is enormous. The United States remains one of thebiggest economic allies and trading partner of many Europeancountries (Lowe, 2013).


Themost important legacy of a war is its impacts on the economicsystems. Since they disrupt economic activities and destroyproperties and capital resources, armed conflicts have far reachingimpacts on the economy. These are some of the important lessons thatthe European continent learned from the aftermath of the Second WorldWar. The economic gains that had been accumulated by the Europeannations in the late 19thcentury and the early 20thcentury were reduced to ashes during the war. The continent sufferedmassive casualties, destruction of units of production, disruption ofeconomic activities and huge debts. Some of the European nationsinvested significant part of their resources to the war.Consequently, they took several decades to recover from the war. Thewar also transformed economic and political relations in the Europeancontinent. This resulted into enhanced regional and internationalcooperation and establishment of regional and internationalinstitutions such as UN and EU to prevent similar conflicts in thefuture.


Black,J. (2003). WorldWar Two: A Military History.New York, NY: Routledge.

Harrison,M. (2010). Theeconomics of World War II: six great powers in internationalcomparison,Cambridge: Cambridge University Press.

Foley,B. (2000). Europeaneconomies since the Second World War.New York: St. Martin`s Press.

Lee,L. (2007). WorldWar II in Europe, Africa, and the Americas, with general sources.Westport, Conn.: Greenwood Press.

Lowe,K. (2013). Savagecontinent: Europe in the aftermath of World War II.London: Viking.

Kesternich,I. et al. (2014). The Effects of World War II on Economic and HealthOutcomes across Europe. TheReview of Economics and Statistics,96(1), pp 103-118.