The Basic Economic Effects World War II Had on the Global Economy

World War II brought about untold changes not just to Europe but the entire world. This period marked a cultural and economic shift, and the recovery from that shift echoes to this day.

Economically, the period after the end of World War II was a time for moving from the industry of creation for the purpose of destruction and into the industry of creation for creation's sake, resulting in an attitude of exploring new technologies and business models previously unheard of.

In Europe, this shift is most clearly illustrated by the change in the gross domestic product (GDP) in the years immediately following the war.

A Quick Overview of GDP

The GDP is a numerical metric that measures all the finished products and services produced by a particular population, usually a single nation or collection of nations, such as the European Union. The GDP is calculated by adding the sum of all consumer spending, government spending, business spending, and total imports less total exports for the time period in question.

This metric is used to assess many aspects of a nation's economic health, including general growth patterns and standard of living. In years when the GDP is at an increase, the economy is understood to be growing, unemployment tends to be down, and exports tend to be up.

Post-War Economies

Even during wartime, American output steadily grew, as the physical damage done to the country was limited to Hawaii and some overseas military bases. This allowed Americans to buckle down and work on bolstering industry rather than having to focus on rebuilding what was lost.

Conversely, many countries in Europe suffered extensive damage to buildings and infrastructure, so the end of the war was a time for intensive rehabilitation.

However, the end of the war also marked the beginning of a period of expansive growth for Europe and other nations. For the second half of the 20th century, the United States, Europe, and Japan experienced amazing gains. In fact, GDP per capita in Europe tripled in the second half of the twentieth century following the war. America used its footing post-war to become a global superpower.

How It Happened

One of the theories behind what allowed such prolific growth in a region ravaged by war is that the end of World War II and the instability of the previous decades presented Europe with the opportunity for catch-up growth. Since the years between World War I and World War II were rife with global economic instability, Europe had not had time to implement many of the advancements pioneered in the U.S. and elsewhere.

Where Americans were developing new technologies such as nylon and Teflon and making important advancements in areas such as the automotive industry, many Europeans were still heating their homes with coal. Basically, the nonstop turmoil of the pre-war years left little time for advancement on the continent. However, once the war ended, all these new technologies and advancements in business and industry became available to economies newly able and ready to embrace them.

People who worked in wartime as soldiers and nurses now needed jobs, and American advancement during the preceding years provided the perfect blueprint for how to use this newly available workforce. This and other factors contributed to an upswing in the GDP of Europe that persisted well into the 1970s.