Lyla Lindsey
Austria's economy before World War II was battered by the effects of World War I, including the abolition of the gold standard in 1914, a balance-of-payments deficit, and increased money supply due to central bank credit provision. The country experienced economic stagnation, political dictatorship, and intense Nazi propaganda in the lead-up to World War II. After the Anschluss in 1938, Austria's economy was integrated into Nazi Germany, and the country faced the confiscation of Jewish-owned businesses and assets.
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What You'll Learn
Austria's economy was battered by World War I
In the aftermath of World War I, Austria became an independent republic. The provisional National Assembly chose the name German-Austria, indicating the desire for a territorial merger with Germany, or the "big brother." This desire was partly due to economic concerns, as Austria's economy was struggling after the war. The St. Germain Peace Treaty of 1919 prohibited the merger, but the idea remained popular, and in 1921, unofficial votes in Tyrol and Salzburg showed overwhelming support for the union.
Despite the economic challenges, Austria was a relatively prosperous country during the interwar period compared to other successor states of Austria-Hungary. However, the economic situation in the early post-war period was difficult, and the country experienced financial crises in the 1920s and the Great Depression in the early 1930s.
In 1938, Austria was annexed by Nazi Germany, becoming known as the Anschluss. This marked the end of the Austrian currency, the schilling, which was reintroduced after World War II. During World War II, Austria was divided into four occupation zones by the Allies and was heavily impacted by the Soviet occupation, with the Red Army committing crimes, including looting and rape.
After World War II, Austria achieved sustained economic growth, with rebuilding efforts leading to high average annual growth rates in the 1950s and 1960s. The country also benefited significantly from the Marshall Plan, receiving nearly $1 billion in aid.
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The Austrian schilling was abolished in 1938
The Austrian schilling was first established in December 1924, with the first schillings issued in March 1925. The schilling was the currency of Austria from 1925 until it was abolished in 1938 following the Anschluss and Germany's annexation of Austria.
The Austrian schilling was exchanged at a rate of 1.50 schillings to one Reichsmark. This was in the wake of the country becoming a part of Nazi Germany, and the schilling was replaced by the Reichsmark. The schilling was reintroduced after World War II in November 1945 by the Allied Military. The Allies issued paper money in denominations ranging from 50 groschen to 1000 schillings. The first coins were issued in 1946.
The Austrian schilling continued to be the currency of Austria from 1945 until 1999 when it was replaced by the euro. The schilling continued to circulate until 2002 when it was officially replaced by the euro. The euro was introduced at a fixed parity of €1 = 13.7603 schilling.
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Austria was occupied by the Allies in 1945
Austria's economy suffered in the aftermath of World War I, with the First Austrian Republic inheriting a battered economy. The abolition of the gold standard in 1914, the need to import food and fuel, and the use of deficit spending to finance food subsidies all contributed to economic woes.
Fast forward to 1945, and Austria was occupied by the Allies and declared independent from Nazi Germany on April 27, 1945, marking the end of its recognition as part of Nazi Germany since the Anschluss in 1938. This occupation by the Allies, including the United Kingdom, the Soviet Union, the United States, and France, lasted until July 27, 1955, when the Austrian State Treaty came into force.
During the occupation, Austria was divided into four zones, with Vienna also being subdivided. The Soviet occupation of Austria began in 1941, and they committed various crimes, including looting and sexual violence against women. The Soviets also expropriated Austrian economic assets, dismantling and shipping industrial equipment worth around US$500 million to the East. The Soviet conduct in Austria, while intense, is debated among historians as not being as severe as in Germany.
The Western Allies, including the Americans and the British, arrived in Austria in April and May 1945, respectively. The Americans provided substantial aid through the Marshall Plan, which contributed to 14% of Austria's national income in 1948-1949. However, their planners neglected certain industries, contributing to rising unemployment. The British, meanwhile, moved into Austria at the end of the war, becoming part of the occupation force.
The Allied Council of four military governors held its first meeting in Vienna on September 12, 1945, and the occupation continued until Austria regained its independence in 1955.
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Austria received nearly $1 billion through the Marshall Plan
The Marshall Plan, officially known as the European Recovery Program (ERP), was an American initiative to provide foreign aid to Western Europe. The plan was enacted in 1948 and lasted for four years, ending in 1952. The goal was to support the economic recovery of Western European countries after World War II, address food shortages, and prevent the spread of communism. Austria received nearly $1 billion in aid through the Marshall Plan, which played a crucial role in its post-war economic development.
During the period from 1948 to 1953, Austria received approximately USD 962 million from the United States as part of the Marshall Plan. This amount represented about 7.4% of the total Marshall Plan volume, which was around USD 13 billion. In per capita terms, every Austrian received $132, compared to $19 for Germans. In 1948-1949, the first two years of the plan, Marshall Plan aid constituted 14% of Austria's national income, the highest ratio among all recipient countries.
The Marshall Plan aid took the form of goods sold in Austria, with the proceeds invested in special accounts. These funds were then used to grant loans to Austrian businesses, primarily in the industrial sector, to promote growth, productivity, and employment. The plan was a success, contributing significantly to the post-war economic boom in Europe and laying the foundation for European unification. It also helped remove many causes of popular unrest in Austria, such as food shortages, that had shaken the country in 1947.
Additionally, the Americans refunded occupation costs charged in 1945-1946, amounting to around $300 million. Austria also received half a billion dollars in humanitarian aid. The Marshall Plan funds were instrumental in rebuilding Austria's economy, which had been affected by the war. The country's heavy industries quickly recovered, and the plan's focus on productivity and economic growth helped Austria achieve sustained economic growth in the post-war decades.
Overall, the nearly $1 billion in Marshall Plan aid played a pivotal role in Austria's post-World War II economic recovery and development, setting the stage for the country's future prosperity and integration into the European economy.
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Austria's economy grew rapidly in the 1950s and 1960s
During the post-war period, Austria's economy was heavily influenced by the Allied occupation, which lasted until the Austrian State Treaty came into force on July 27, 1955. The country was divided into four occupation zones, jointly occupied by the United Kingdom, the Soviet Union, the United States, and France. The occupation had a significant impact on Austria's economy, with each occupying power exerting its influence in different ways.
The United States played a crucial role in Austria's economic recovery through the Marshall Plan, which provided nearly $1 billion in aid. The first stage of the plan focused on stabilising food supplies and wages, while the second stage, which began in 1950, concentrated on improving the overall productivity of the Austrian economy. This aid was instrumental in removing the causes of popular unrest and setting the stage for economic growth in the 1950s and 1960s.
On the other hand, the Soviet Union's occupation had a more negative impact on Austria's economy. The Soviets engaged in the expropriation of Austrian economic assets, dismantling and shipping industrial equipment worth around $500 million to the East. Additionally, the Soviet occupation was marked by looting and crimes, including the rape of an estimated 70,000 to 100,000 women in Vienna alone.
Despite these challenges, Austria's economy flourished in the 1950s and 1960s. The country's largest firms were nationalised in the early post-war period, with the government playing a significant role in the economy through its state-owned industries. The service sector, particularly tourism, became an important contributor to Austria's GDP, and the country attracted foreign investment due to its access to the single European market.
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Frequently asked questions
Austria's economy was in a state of stagnation before World War 2. The country was also suffering from political dictatorship and intense Nazi propaganda.
Jews played an important role in Austria's economy and culture before World War 2. In 1938, Austria had a Jewish population of about 192,000, comprising around 4% of the total population. However, due to emigration, their numbers decreased to 57,000 by December 1939.
After World War 2, Austria's economy benefited from the Marshall Plan, receiving nearly $1 billion in aid. Heavy industries quickly recovered, and by 1951, they were operating at 150.7% of pre-war output levels. Austria also became a member of the European Union in 1995, which brought economic benefits and foreign investment.
