European Economics World War II

European Economics World War II

World War II was considered the biggest and costliest war in history in terms of both lives and money (Institute of Electrical and Electronics Engineers 2007). In a short period of six years, approximately 50 million died in battle or as a result of concentration camps, bombings, starvation and disease. Others were displaced and left to become refugees. Billions of dollars worth of property were lost along with artistic and architectural masterpieces. The War was so vast that it involved almost every country in the world. But the only two warring sides were the Allies and the Axis. The Allies or Allied Powers were the United States, Great Britain and the Commonwealth, China and the Soviet Union. The Axis Powers included Germany, Japan and Italy. Of the many and complex causes, a major one was the global depression in the 1930s, which produced worldwide political unrest and urged radical political reforms. At that time, the demand for reform put the National Socialist Party, or the Nazis, into power in Germany. Its leader, Adolf Hitler, promised the German people a better economy and the renewal of German pride. Germany's defeat in World War I and the change in national borders in Europe badly injured that pride. The desire to restore it went as far as calling for the unification of ethnically German people and the "purification" of the German race. This act of "purification" resulted and culminated in the Holocaust. It was the wholesale arrest and execution of Jews, homosexuals, Gypsies, and political dissidents. Unification meant expansion beyond Germany's borders with the annexation of Austria in 1938 and the occupation of Czechoslovakia the following year. Other European countries attempted to negotiate so as to appease Hitler and thus to prevent war. But it was to no avail. Germany invaded Poland in September 1939, leading Britain and France to declare war (IEEE).

In the meantime, another set of events was taking place in another part of the world. Japan had become an ally of Germany, although they shared few military or political objectives (IEEE 2007). Hoping to acquire territories in Southeast Asia, Japan invaded China. Now threatened by severe trade sanctions imposed by the U.S. In response to the initiative, Japan attacked the naval base at Pearl Harbor in Hawaii on December 7, 1941. The U.S. was soon at war with both Japan and Germany. The U.S.S.R. joined the Allies because of Germany's violation of their non-aggression pact only six months earlier. The Allies started their counteroffensive by attacking German forces in Africa in 1942 and then in the Pacific. On D-Day, the Allies entered German-held France in the famous Normandy invasion in June 1944. They joined the Soviets in taking Berlin in the spring of 1945. With Hitler defeated, the Allies concentrated on the Japanese who were beaten and driven back to their homeland. President ordered the dropping of an atomic bomb in Hiroshima on August 6, 1945 to prevent more casualties. Despite the terrible consequences, the Japanese refused to surrender. Another bomb was dropped at the city of Nagasaki three days later, forcing the Japanese to surrender on August 14 and ending World War II (IEEE).

Improved military technology accounted for the unprecedented scale and destruction of World War II (IEEE 2007). Submarines, tanks and aircraft had limited use during previous wars. But in World War II, they were larger, faster and deadlier. Their torpedoes destroyed ships through the War. Aircraft and tanks also became two of the most important types of weapons. Both warring forces developed bigger bombers, which could deliver more bombs. Aerial bombing became an especially important form of warfare, which changed war and the world forever (IEEE).

Inflation was rampant in Germany after World War I (Kershaw 1999). One consequence was the putsch of 1923, a gun-battle of only half a minute, which killed 14 putschists and 4 policemen. One of the fatalities, Scheubner-Richter, was only a foot away from Hitler, the would-be Fuhrer of Germany. As embodied in his work, "Mein Kampf," his idea did not only consist of short-term objectives but was a mission of long-term future goals. It was the national salvation of the German people through the removal of the Jews and the securing of living space in the East. These aims blended with the notion of a heroic leader and a dynamic world-view. Hitler often spoke about his mission, his life work and crusade. He said he saw the hand of Providence in his work and mission. He spoke against what he perceived as the "bastardization of culture, morals and blood" as undermining the worth of the individual. He set a specific value on the German people and could not see them at an equal level with 70 million Negroes. Hitler announced that he would assume supreme leadership on September 1, 1930. Reich President Hindenburg rejected Hitler as Reich Chancellor. The people had to choose between the Communists and the National Socialists, who were vulgar and distasteful but who stood for German interests. They chose the latter (Kershaw).

Rapid transformation swept through Germany from Hitler's take-over of power on January 30, 1933 up to its crucial consolidation and extension from August 1934 after the death of Reich President Hindenburg (Kershaw 1999). Within a month, civil liberties, protected by the Weimar Constitution, were decimated. The most active political opponents were either imprisoned or thrown out of the country. The Reichstag surrendered and gave Hitler control of the legislature. Powerful trade unions were abolished. All opposition parties were either suppressed or disbanded. In January 1934, the sovereignty of the Lander was formally dissolved. The last threat of opposition within his own movement was thoroughly and ruthlessly eliminated on June 30, 1934. Hitler's concept of a German society was one where old class privileges would be non-existent. He saw it as a race, not as a class and conceived of conquest, rather than economic modernization. It was consistently founded on war in establishing dominion. His government set up the first concentration camp to house those arrested as Communists and Socialists in Dachau on March 22, 1933 in a former powder mill. The Reichstag, as a democratic body, voted to dissolve itself on March 23, 1933. The Zentrum, the last political party besides the NSDAP, on July 5, 1933 also dissolved itself. The force sterilization of those who had hereditary illnesses was applied even to chronic alcoholism. Hitler found his measures justified in serving what he perceived as the upholding of nationhood. On the deadly event of June 30, 1934, called the Night of the Long Knives, many of Hitler's opponents, some of them mistaken, were murdered. Hitler's regime vastly depended on what each of his followers thought was how he should work towards the Fuhrer's desire. Hitler was not immediately involved in disputes. He lay outside but at the center of the machinery of the entire regime. The necessary outcome of his regime was a high level of governmental and administrative disorder (Kershaw).

Joseph Stalin was the Soviet Communist leader and head of the U.S.S.R. from the death of Vladimir Illich Lenin in 1924. Born in Gori, Georgia, Stalin as a child, had to share the poverty experienced by most peasants in Russia at the end of the 19th century (Spartacus 2002). As the leader of the Soviet Union, he continued Vladimir Illich Lenin's New Economic Policy. This Policy allowed farmers to sell food on the open market and employ people to work for them.

Farmers who expanded the size of their farms were called kulaks. In 1928, Stalin went after them for not providing enough food for industrial workers. He advocated the establishment of collective farms for small farmers to form large-scale units so that they could afford new machinery and increase production. But the farmers opposed the idea and preferred to farm their own land. This angered Stalin who ordered local communist officials to confiscate the lands of these farmers and used these lands to form new collective farms. Thousands of kulaks were executed, with five million more deported to Siberia or Central Asia. Of this number, a fourth died before reaching their destination. In 1927, Stalin's advisers told him that the modernization of farming in the Soviet Union would need 250,000 more tractors and more oil fields for necessary petrol, which would fuel the machines. Power stations also had to be set up to provide electricity to the farms. In order to modernize the economy, he introduced the first Five-Year Plan in 1928. The plan concentrated on the development of iron and steel machine tools, electric power and transport. He required workers to achieve 111% increase in coal production, 200% in iron production and 335% in electric power. His justification for the compelling demands was the need for rapid industrialization for the Soviet Union to defend itself against capitalist invasion from the West. In each factory, display boards were set up to show the workers' output. Those who failed to achieve the required targets were publicly humiliated. The inability of some workers to comply led to absenteeism. More repressive measures were introduced, such as records of tardiness, poor workmanship and charges of sabotage against the Five-Year Plan. Violators could be shot or sent to forced labor on the Baltic Sea Canal or at the Siberian Railway. Stalin's opponents argued that this inequality was an act of betrayal of socialism, which would create a new class system in the Soviet Union. His opponents could not deter him, so that in the 1930s, the gap between the wages of the manual laborers and the skilled laborers had increased (Spartacus).

Stalin's Five-Year Plans were aimed at building the industrial might of the Soviet Union (Kreis 2000). Targets or quotas were constantly announced to give an illusion that the Plans were working. Before one Five-Year Plan was finished, another Five-Year Plan would take its place. His totalitarian regime was a permanent revolution wherein rapid and sustained change would go on indefinitely. The individual would constantly strive for a goal set before him but which remained unreachable. This way, Stalin mobilized his society for continual effort. Stalin wanted to create a new kind of society and a new human personality. He also wanted to build a strong army and a powerful industrial economy. He succeeded in his goal. He built a new society, which existed up to the late 80s. But this society suffered from ruthless and unrestrained police terrorism. Initially inflicted upon the peasant or kulaks in the 20s and the 30s, this terrorism was then used on party members, administrator and then on ordinary people who deviated from the rule. Stalin systematically drained the Communist Party of his opponents (Kreis).

Life in the Soviet Union was characterized by constant propaganda and indoctrination (Kreis 2000). There were purges and trials. Party members lectured to workers in factories and peasants in the field, complemented by media accounts of endless socialist achievements and the evil of capitalism. Art, literature, film and science were all subjugated to the goals of the Party. Stalin ordered the intellectual elite to become "engineers of the human souls" and "craftsmen of culture." He wanted Russian nationalism to be glorified and capitalism to appear and be accepted as the greatest evil. He projected Ivan the Terrible and Peter the Great as his forerunners. He wanted to rewrite history so that he could control the future by controlling the past and the present. Although he hardly appeared in public, his presence was felt everywhere. In general, life in Soviet Russia was hard. The standard of living went down in the 30s despite Stalin's claim of success in modernizing the nation with his Five-Year Plans. The Russian masses had black bread and wore shabby clothes. There were constant food shortages, heavy taxes, poor housing and in short supply. Nonetheless, the average Russian was sold to an ideal of building the world's first socialist society as capitalism began to fall in the West. The Soviet worker received social benefits, such as old pensions, free medical services, free education and day care facilities. Unemployment was technically wiped out and there was some promise of personal achievement. Advancement required specialized skills and a technical education. Stalin's envisioned rapid industrialization under his Five-Year Plans needed vast numbers of experts, technocrats, skilled workers, engineers and managers. This was why the State offered economic incentives to those who would serve it faithfully. The unskilled had to contend with low wages. The Soviet State motivated the growing technical and managerial elite with high salaries and special housing. This elite merged with the "engineers of the human mind" and produced a new social class in a supposedly classless society. Stalin's paranoia and ego mania, deceptions and the purge trials of the 30s would lead to the near destruction of Soviet Russia. Three years after his death, Nikita Krushchev, in his secret speech in 1956, acknowledged the terror, criminality and totalitarian regime of Joseph Stalin (Kreis).

Stalin's predecessor, Vladimir Lenin, concluded that a modern economy required a high degree of power at the center (Kreis 2000). Although the Bolsheviks pledged the self-determination of almost half of the Russian population, Lenin felt that such a policy seriously threatened the survival of the Soviet government. The broken promise of self-determination was only one of the reasons for the resulting unpopularity of Lenin's government in Russia. Lenin's New Economic Policy also allowed some freedom of internal trade and some private commerce and re-established state banks. Factories with less than 20 workers were denationalized but could be reclaimed by former owners. Stalin later supported Lenin's policy as long as only one party state existed. Through this single political party, the government could allow the introduction of small-scale private enterprise. He emphasized that the New Economic Policy was a special policy of the proletarian state intended to only tolerate capitalism while keeping key positions reserved for the proletarian state (Kreis).

Despite the terror and criminality of Stalin's totalitarian regime, it pales in comparison with that of Nazi Germany (Kreis 2000). The Nazis utterly destroyed all independent organizations, mobilized the economy and undertook the systematic extermination of the Jewish and other non-German peoples. It abolished all strikes and unions as illegal. It incorporated all the members of professionals organizations, such as doctors, lawyers, professors and engineers in its Nazi-based organizations. Hitler delivered his promises of work and bread. He launched a massive public works program to lift Germany from the Depression. He rapidly constructed superhighways, office buildings, large stadiums and public buildings. But government spending was focused entirely on the military by 1936 in preparation for the coming War. Although unemployment fell from January 1937 to a year later, there was shortage of labor by 1938. The standard of living went up by 20%. Business profits finally increased. For those who were not victimized by the regime, Hitler's government provided greater opportunity and greater equality. The Nazis tolerated privilege and wealth when it served the Party. Nonetheless, Nazism was guided totally by the main ideas of Lebensraum and race. Hitler formed alliances with other dictators and began expanding. The War of 1939 broke out on account of Hitler's limitless ambitions. His aggression was so strong that nations needed to unite to destroy his growing empire. By the summer of 1943, Germany was in utter defeat and in utter ruins. The prosperity of the Reich was cut short. Stalin's Russia and Hitler's Germany rejected liberal ideas and subordinated everything to the State. They brutalized basic human rights. If Stalin was satisfied with extending control over the Soviet Union, Hitler's goal of territorial and racial aggression was without limit. It was Hitler who made the World War inevitable with France, Britain and Russia and, ultimately, with the United States (Kreis).

The economy of the United States of Europe lagged far behind after World War II and into the 50s (Eichengreen 2007). Its gross domestic product level was barely half American levels per person. The mass production methods in the U.S., which were introduced in the first half of the 20th century were just arriving in Europe at this time. Typical automobiles and modern household appliances in the U.S. were still few and exceptional in Europe. Even 50 years later, Western Europe was still far from the U.S. In terms of per capita GDP. But institutions of European integration wiped this difference in the quality of life so marked 50 years ago. They locked peaceful Germany into Europe so as to unleash its huge industrial might. It was something, which France and other European countries would not have allowed. These institutions created the Common Market, which in turn induced the huge expansion of trade and increased efficiency. Through the Single Market Program set up in 1986, these European institutions created a continental economy, which can now support global champion firms at a scale and a scope that could compete internationally. And with the introduction of the Euro, the inflation problem, which plagued Europe in most of the 20th century, disappeared (Eichengreen).