In the 75 years since the end of World War II, there has been a surge of global economic development. But despite this, the world is living a tale of two realities.
On the one hand, we have rarely been as well off as we are today. We live in a time of relative peace and absolute wealth. Compared with previous generations, many of us live long and mostly healthy lives. Our children get to go to school, even often college, and computers, smartphones, and other tech devices connect us to the world. Even a generation or two ago, our parents and grandparents could only dream of the lifestyle many of us have today and the luxuries that come with abundant energy, advances in technology, and global trade.
On the other hand, our world and civil society are plagued by maddening inequality and dangerous unsustainability. The COVID-19 public health crisis is just one event that demonstrates that not everyone gets the same chances in life. Those with more money, better connections, or more impressive ZIP codes were affected by COVID at far lower rates; they were more likely to be able to work from home, leave densely populated areas, and get better medical care if they did get infected. This is a continuation of a pattern that has become all too familiar in many societies. The poor are consistently affected by global crises, while the wealthy can easily weather the storm.
To understand how we got hereâand how we can get out of this situationâwe must go back in time, to the origins of our global economic system. We must play back the picture of post-war economic development and look at its milestones. The logical starting point for this is âYear Zeroâ for the modern world economy: 1945. And there is perhaps no better place from where to tell this story than Germany, for which that year was truly a new beginning.
Foundations of the Post-War Global Economic Order
Children like me, who started primary school in Germany in 1945, were too young to understand why the country they lived in had been at war before or why the next years would change so markedly. But we understood all too well that future conflict was to be avoided at all costs. As in the years following the First World War, âNie Wieder Krieg,â or âNever Again War,â became a rallying cry all over Germany. People had had enough of conflict. They wanted to rebuild their lives in peace and work together toward a better quality of life.
This would not come easily, in Germany or elsewhere. As World War II came to an end, the country lay in ruins. Barely a fifth of the historic buildings in Germany's main cities still stood. Millions of homes had been wiped out. Swabia, the region in southern Germany where I grew up, was no exception. In its most industrialized city, Friedrichshafen, almost every factory was razed to the ground. This included those of Maybach and Zeppelin, two legendary manufacturers of cars and aircraft whose production capacity had been used by the Nazi government for military purposes during the war.
It is one of my earliest memories, how on the roof of my parentsâ house, just 18 kilometers away from Friedrichshafen, we watched the fires that led to Friedrichshafen's destruction. We prayed that the raid would not also hit our hometown, and luckily it didn't, but 700 people died in the last raid of Friedrichshafen alone. I remember how my parents cried when they heard the news, knowing many people personally in this neighboring city. By the war's end, only a quarter of the 28,000 original inhabitants of Friedrichshafen remained.1 The rest had fled, disappeared, or died.
Ravensburg, where I lived, was one of the rare towns spared by Allied bombardment, a fate likely due to its lack of military-industrial capacity. But the consequences of war were all around us. By the end of the war, as the French Allied army moved in, Ravensburg had become a vast shelter for internal refugees, forced laborers, prisoners of war, and wounded soldiers.2 The chaos in the city was complete. The only silver lining at midnight on May 8, 1945, was that the war had truly ended. In Germany, we came to mark this moment as the âStunde Null,â or âZero Hour.â Historians such as Ian Buruma later referred to the year that followed as âYear Zero.â3 Germany's economy was a wasteland, and it could only hope to be allowed to begin again, with a clean slate.
The other Axis powers, Italy and Japan, faced similar challenges. The Axis nationsâ productive capacity had been decimated. Turin, Milan, Genoa, and other Italian cities had suffered extensive bombings, and Hiroshima and Nagasaki saw unparalleled devastation by atomic bombs. other European countries were also shell-shocked and went through an initial period of chaos. Further east, China and much of Southeast Asia were mired in internal conflicts. Economies in Africa, the Middle East, and South Asia were still shackled by colonial rule. The Soviet Union had suffered enormous losses during World War II. Only the economies of the Americas, led by the United States, had come through the war largely unscathed.
It was thus up to Washington and Moscow to lead the post-war era, each in its sphere of influence. In Swabia, then part of Allied-occupied Germany, the future depended in large part on the choices the United States would make.
America faced a difficult balancing act. It was determined not to repeat the mistakes from the Treaty of Versailles, which ended World War I. Signed in 1919, the Treaty of Versailles saddled the defeated Central Powers (Germany, Austria-Hungary, the Ottoman Empire, and Bulgaria) with an unbearable debt load. This curtailed their economic development and led to an erratic economic recovery, which planted the seeds for the Second World War.
After World War II, Washington took another approach. It wanted to revive the European economies that lay within its sphere of influence, including the parts of Germany under British, French, and American occupation. The United States wanted to promote trade, integration, and political cooperation. As early as 1944, America and its allies had created economic institutions such as the International Monetary Fund and the International Bank for Reconstruction and Development (now part of the World Bank).4 Over the decades that followed, they continued their efforts to develop a stable, growing economic system in West Germany and throughout Western Europe.
From 1948 onward, the United States and Canada also provided specific regional aid. Through the Marshall Plan, named after thenâUS Secretary of State George Marshall, the United States helped Western European countries purchase American goods and rebuild their industries, including Germany and Italy. Providing aid to former Axis powers was a contentious decision, but it was deemed necessary because without the German industrial motor, there could be no strong, industrial Europe. (The Organisation for European Economic Cooperation and Development (OEEC), the forerunner of the OECD, was an important administrator of the program.)
America did not limit its efforts to aid. It also encouraged trade by setting up European markets for coal, steel, and other commodities. That led to the creation of the European Coal and Steel Community, the embryonic form of what is now the European Union. In Asia, too, the United States provided aid and credit to countries including Japan, China, the Republic of Korea, and the Philippines. Elsewhere, the Soviet Union expanded its sphere of influence, promoting an economic model based on centralized planning and state ownership of production.
Local governments, industries, and workers also played a role in the reconstruction effort. For example, in 1947, the Zeppelin Foundation transferred almost all its assets to the city of Friedrichshafen5 in the hopes of reigniting a prosperous future for the Zeppelin companies and their workers. At the same time, Friedrichshafen's citizens worked long days to rebuild their homes. Women played a special role in this rebuilding and in much of the initial work of reconstruction. German magazine Der Spiegel later recalled: âWith so many men killed in the w...