Helping Postwar Germany Back on Its Feet

At the end of WWII, Germany was a wasteland. Its crown cities were bombed to the ground; its factories and infrastructure in ruins; its populace scrounging for food and living in shacks.

But if they expected any sympathy from the victorious allies, they were badly mistaken.

"Germany is in debt to all those nations whose industries it plundered during the war," Sir Brian Robertson, the deputy British military governor, said in a radio address at the time.

The conquering allies -- Russia, Great Britain and the United States -- began to dismantle German companies in an effort to bring the country's industry back to the level it was at in 1932. A total of 1,800 factories were packaged and taken away, all in the name of reparations.

But a conflict soon arose between the three powers. Whereas Great Britain and the US wanted Germany to begin sustaining itself, Stalin was adamant about making the Germans pay for the war they started.

The birth of planned economies in the east

At the same time, the Soviets began recruiting German political supporters for their plans for a planned economy. In Berlin's communist-controlled municipal assembly socialist Josef Orlopp called for the nationalization of large companies - an idea strongly supported by the Soviets.

"The bill at hand … aims at placing common interests and the people's political will over entrepreneurs' private capitalist power," Orlopp said.

The Allied powers had agreed to treat Germany as an economic entity at the war conference in Potsdam. But Russian moves soon indicated different intentions. Though the Allied powers had agreed to treat Germany as an economic entity at the war conference in Potsdam, the Soviets had their own plans.

Beginning in the summer of 1945, the Soviets began expropriating the owners of large estates. Their land was redistributed to small-scale farmers and refugees who at a later stage gave in to government pressure to form large collective farms. Industrial companies were nationalized.

Dismantlement and reparations led to a rapid decline of the economy in the Soviet occupied zone

Germany allowed to help itself

The Americans and the British followed this development with suspicion, as they did the control the Soviet Union had begun to exert over central and eastern Europe. In an attempt to stop communism from expanding the US then made a 180 degree turn on their approach to postwar Germany.

In a historic speech, US Secretary of State James F. Byrnes on Sept. 6, 1946 encouraged Germany to help itself back on its feet.

"The American people want to return the government of Germany and the people of Germany to win their way back to an honorable state among the free and peace-loving people of the world," Byrnes said.

The first step on this path was the reconstruction of the German economy. In this context the American occupying force made the other Allies an offer to participate in unified economic zones in Germany.

By Jan. 1, 1947 the British and the Americans had merged their occupying zones to what was to be called the "Unified Economic Area." The Germans called it the "Bi-Zone." More than two years later the French zone joined, and the tri-zone was formed.

The Marshall plan - political divide

Just five months later, US Secretary of State George C. Marshall (photo) called for American assistance in restoring the economic infrastructure of Europe. Western Europe responded favorably, and the Truman administration proposed the Marshall Plan legislation.

The resulting Economic Cooperation Act of 1948 aimed at restoring European agricultural and industrial productivity. It was also designed as an anti-communist measure. Western Germany received $1.5 billion to rebuild coal and steel production, power generation and other industries. The Soviets ordered the Eastern European countries, who were also offered economic help, not to accept any.

The turning point in the two halves of Germany was reached in 1948. In the Soviet zone, the government introduced a centralized planned economy as well as a new East German currency. In the west, new bank notes -- the Deutsch Mark -- were also handed out.

The country's economic divide was complete. Only one year later the political divide followed, with the founding of two, separate German states.