Economic Ideas and Government Policy: Contributions to Contemporary Economic History

By Alec Cairncross | Go to book overview
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6

INDUSTRIAL RECOVERY FROM WAR

A comparison of British and German experience*

It would be difficult to find a more striking contrast among industrial countries than that between the relative position of Britain and Germany in 1945 and forty years later in, say, 1985. At the end of the war Germany was in chaos. Industrial production was down to about a quarter of the prewar level, large imports of food were necessary to provide inadequate rations, and exports were almost negligible. There was an acute shortage of coal, steel and electric power and extensive damage to the whole system of transport and communications. It was not until the end of 1950 that industrial production recovered to the prewar level and not until the following year that the current account was in balance.

The United Kingdom, on the other hand, was able to change over to a peacetime footing comparatively smoothly and with only a slight drop in employment and output. Industrial production by 1946 was as high as in 1938 and rising quite fast. The balance of payments by 1948, although showing a high deficit with dollar countries was in even larger surplus with non-dollar countries. If one takes a year like 1951 when Germany was well on the way to recovery, industrial production in the United Kingdom was still roughly 70 per cent higher than in Germany whereas in 1986 it was no more than about half of Germany’s. Similarly, whereas in 1951 British exports were more than double Germany’s, by 1986 British exports of manufactures were less than half.

These figures speak for themselves. They demonstrate a startling difference in economic performance even if one leaves completely out of account the phenomenal recovery of Western Germany in the three years after the currency reform of 1948. The difference in pace was already evident by the mid-1950s although at that stage it was not yet clear whether the rate of growth of the German economy would subside to a much lower level as the process of taking in slack and making up arrears in the technique of production came to an end.

* Paper presented at a conference of the Prince Albert Society in Coburg in September 1987 and included in The Race for Modernization (K.G. Saur, 1988).

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