Postwar Reconstruction

1. Postwar Reconstruction Domestic Politics

2. 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

3. 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

4. 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

5. 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)

6. 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

7. 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

8. 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

9. 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

10. 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

11. 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

12. 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

13. 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