DP1809 | Winning the War, Losing the Peace? Britain's Post-War Recovery in a West German Mirror

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This paper places Anglo-German growth after World War II in a long-term comparative perspective. Reviewing explanations of why post-war Germany is more dynamic than Britain, we evaluate arguments stressing institutional change, catching-up, and country-specific long-term experience. Examining competition policy and macroeconomic demand management, we find only a limited role for institutional changes and an impressive degree of institutional continuity in each country. Likewise, in inter-temporal perspective the scope for catching up between Germany and Britain is unimpressive. We find growth and productivity differences to be rooted in each country?s starting position relative to its own steady state. During the 1950s, the British economy grows along a steady state established between the wars, while the German economy experiences a very pronounced rebound effect from the war shock. After its return to the steady state, German growth performance is very similar to that of Britain and by no means more impressive.