Cold War Austria: Immediate Post-War Economic Sitution (1945-47)

Figure 1.--Austria was not as heavily bombed as Germany during World War II because of its location abnd because it was not as industrialized. The country was, however, much smaller than Germny abnd both Vienna and Innbsbruck were targetted. In addition there was considerable damage in eastern Austria where the Soviets invaded, especially Vienna. Econmists at the time believed that it would take a generation for Germany to recover. This photograph was taken in Vienna during 1953. We see children playing in the rubble still left fromn the War.

Austria as in Germany experienced severe economic problems in the final months of the War and immediately following the War. Fir the most part the German public (including the Aystrisns) were spared the horrors of war until the final year of the War. Occupied countries were exoploited to keep the Germans fed. The damage in the last year if the WAr was enormous. Austria was not a heavily indutrialized country like Germany. The principal target for the Allied strategic bombing campaign was German war industries. Austrian cities were bombed, but not as heavily as German cities because of the lack of heavy industry. The primary target was Vienna. Innsbruck was alsp bombed because it was a tranbsport hub supplying Germn forces in Italy. The economy made some progress, but the Austrians faced major problems. The Austrian economy, including USIA enterprises (companies seized by he Soviets), were reporting output of about 60 percent of pre-Anschlus levels, but production of consumer goods fell below the average only a little over 40 percent. [Lewis, pp. 141–42.] The most severe problem was food, but it was scarecely the only problem. Coal which at the time drove the economy another mjor problem. And severe problems persisted for 3 years. Austrians faced starvation. The basic problen for post-War Austria was that some 65 percent Austrian agricultural output and nearly all of its oil field were locatef in the Soviet zone and the Soviets were not motivted to share. This meant that food was simply not available within the Western zones to feed the population. Austrians survived (1945 and 1946) on a near-starvation diet, and daily rations were still under 2,000 calories (until late 1947). [Lewis, p. 142.] And after the stunning failure of Communist candidates in elections, the Soviets set about using their control of domestic food production to take control of the country. Initially UNRRA provided most of the Austrian food relations. UNRRA was a United Nationa Agency, but at this earky stahe, irt mean mostly American food deliveries. UNRRA provided nearly 65 percent of Austrian food rations (March 1946 to June 1947). [Lewis 2000, p. 143.] A drought worsened the situation, reducing both farm harvests and hydroelectric electrical generation which was important in Austria (1946). The food situation was only managed by massive American food assistance. The United Nations Relief and Rehabilitation Administration (UNRRA), primarily funded by the United States also provided food shipments. When this ended, other American efforts kicked in. The U.S. government began shipments of $300 million in food aid. Austria was part of the U.S. Government Aid and Relief in Occupied Areas (GARIOA) program. Food was the major problem, but not the only economic problem. Another problem was policies implemnted in the Soviet Zone. Rather than promote recovery, Soviet authoriuties after the failure of Communist candidates in November 1945 election launched a massive wave of seizures, essentially enforced reparations. The post-War Potsdam Agreement permitted confiscation of 'German external assets' in Austria. The Soviets used the rather vague language to seize industrial infrastructire of value in their occupation zone. [Bischof 2009, pp. 176–177.] Within a year, the NKVD oversaw the dismantling and shipped back to the Soviet Union that has been valued at some $0.5 billiom. [Bischof 2009, p. 175.] This also occurred in Germany proper. It has been questioned how much of these reprations were actually reassembled and put to productive use by the Soviets. American High Commissioner Mark W. Clark resisted Soviet seizures and reported on them to the State Department. As a result the seizures were largely limited to the Soviet occupation zone.

War Damage

Austria as in Germany experienced severe economic problems in the final months of the War and immediately following the War. Fir the most part the German public (including the Austrisns) were spared the horrors of war until the final year of the War. Occupied countries were exoploited to keep the Germans fed. The damage in the last year if the WAr was enormous. Austria was not a heavily indutrialized country like Germany. The principal target for the Allied strategic bombing campaign was German war industries. Austrian cities were bombed, but not as heavily as German cities because of the lack of heavy industry. The primary target was Vienna. Austria was byond the reach of Allied bombers until 1943 when the Allied invasion of Italy allowed them to establish an air base at Foggia (October 1943). The bombing, however did not bgin until 1944, mostly after D-Day (June 1944). Vienna was bombed 52 times during the War, primarily by the United States Air Force. Some 87,000 houses were destroyed about 20 percent of the city. Only a hand full of vehiles survived the bombing. An estimated 3,000 bomb craters pocketed the city. The famed Schwarzenberg Palace was bombed but rebuilt after the War. Bridges were destroyed and sewers, gas and water pipes had badly damaged. The other major target of the strategic bombing cmpaign was the transport system which was largely wrecked. Allied bombers hit Innsbruck in western Austria before Vienna (December 1943). Innsbruck was an importnt transport hub where four rail lines (Arlbergbahn from the west, Mittenwaldbahn from the north, Westbahn from the east and Brennerbahn from the south), converge. Innsbruck was a railroad supply center for German forces fufgrting the Allies in Italy. Much of the war damage was in eastern Austria where the Soviets entered the country and met Germnan resistance, especially in Vienna. There was only minmimal resistance to the Americans who entered eastern Austria fromn the north and south. The damage to Austrin fatms was minor, althoug thecwar losses affected the rural workforce. The destruction of the transport system. however, meant that supplies needed by the farmers could not be delivered. The damage to infrastructure meant that it was also difficult for farmers to get their food harvest into the cities. The NAZI war economy operated by seizing food from occupied people. As the occupied countries were liberated this was no longer possible and in the last year of the War serious food shortages developed throughout the Reich. The Allied bombing and damage to the transport system only worsened the food situation. Austrians survived on a 'near-starvation diet' with daily rations remaining below 2000 calories (1945-46). [Lewis, p. 142.] Austria is one of the foremost producers of hydroelectric power in Europe. Austria had small oil fields. There was also some coal production and coal was the primary fuel for industry and home heating. The country's coal was mostly imported from Germany. The destruction of the transport system cut off Austria from neeed coal imports. The Americans who occupied southern Germany had to restore the rail routes and ship in Germn coal on easy credit terms.

Econmic Situation

The economy made some progress, but the Austrians faced major problems. The Austrian economy, including USIA enterprises (companies seized by he Soviets), were reporting output of about 60 percent of pre-Anschlus levels, but production of consumer goods fell below the average only a little over 40 percent. [Lewis, pp. 141–42.] The most severe problem was food, but it was scarecely the only problem. Coal which at the time drove the economy another mjor problem. And severe problems persisted for 3 years.

Weather

The weather did not cooperate with European recovery. Weather often comes in cycles. The 1944-45 winter was severe, making the fighting in the Bulge campaign especially difficult. A 1946 drought not only adversely affected farm harvests, but also electrical power generation. Hydroelectric power generation was very important in Austria and with low water levels, power generation fell. This was followed by the severe 1946-47 winter in the midst of a coal shortage trughout Europe becuse of the war. Coal production was still at a fraction of pre-Wr levels but the cold weather increased demand. This was followed by a failure of the potato crop (summer 1947). The potato harvest was only 30 percent of pre-War lebels. [Lewis, p. 143.] This was a disater because potatoes were at the time supplying a substantial part of the overall caloric intake. Austria does not have large flat areas where grain can be grown. Potato farming was a different matter. The winter affected a substantial part of the European continent. Many other European countries reported similar cold periods and heavy snowfalls, including Britain, Central Europe, and the southern Baltic region. Fortunately coal production had begun to recover, although not back to normal. We note programs to assist Austrian children. The same occurred after the difficult period following World War I, although at that time, weather was not such a factor.

Food Crisis

During the War, NAZI Germany mintained food supplies by seizung food in occupied countries and shipping it to the Reich. This of course ended as NAZI Germany (which included Austria) collapsed. Austrians faced starvation. The basic problen for post-War Austria was that some 65 percent Austrian agricultural output and nearly all of its oil field were locatef in the Soviet zone and the Soviets were not motivted to share. This meant that food was simply not available within the Western zones to feed the population. Austrians survived (1945 and 1946) on a near-starvation diet, and daily rations were still under 2,000 calories (until late 1947). [Lewis, p. 142.] And after the stunning failure of Communist candidates in elections, the Soviets set about using their control of domestic food production to take control of the country. Initially UNRRA provided most of the Austrian food relations. UNRRA was a United Nationa Agency, but at this earky stahe, irt mean mostly American food deliveries. UNRRA provided nearly 65 percent of Austrian food rations (March 1946 to June 1947). [Lewis 2000, p. 143.] A drought worsened the situation, reducing both farm harvests and hydroelectric electrical generation which was important in Austria (1946). Chancellor Leopold Figl, who the Soviets grugingly accepted managed to work out a compromise between the Chambers of Labor, Trade and Agriculture (CLTAF) and the Austrian Trade Union Federation (ÖGB). This managed to address the food crisis through strict regulation of both food and labor markets. The ÖGB agreed to limit wage increases were limited and the CLTAF limited food prices--beginning a price-wage agreements. This would be the basis for a consensus between elected and non-elected political elites that developed as part of post-war Austrian democracy--the Austrian Social Partnership and Austro-corporatism. [Bischof et al. 1996.] The food situation worsened as a result of the severe winter (1946–47) and a disastrous summer (1947). Potatoes were an important part of the Austrian diet. A relatively small area of agricultural land is suitable for grain farming. And the 1947 potato harvest was only 30 percent of the pre-war harvest. [Lewis, p. 143.] And to make matters worse: UNRRA ended aid shipments, inflation increased, and State Treaty talks failed because of Soviet intransigence. Food simply ran out (April 1947). The government was unable to find the food necessary to distribute needed rations. The result was inevitable. A violent food riot rocked Vienna (May 5). [Lewis, p. 47.] The Communists were responsible for the violent tyrn. After having filed miserabky at the balot box, they rurned to violence, seeing tht Austrians were turning to the West. Another food riot in Bad Ischl turned into a pogrom targeting Jews (August 1947). [Berg, p. 165.] Workers complaining of food shortages stagd strikes British-occupied far western Styria (Novemnber 1947). [Lewis, p. 148.] Chancellor Figl charged that the food riots were a failed communist effort to stage a coup. Historians debate this, but the Communists were clearly trying to stir up troble as Austrians look increasingly to the West. And staged riots were a common mechnisms the Soviets used in both Eastern Europe and Western Europe (France and Italy) to seize power. The differene with the rest of eastern nd cntrl Europe was that in Austria the Western Allies were present.

American Food Aid

Unlike the countries occupied by the NAZIs, the Allies did not adopt policies to starve people. Rather they provided food to prevent starvation. The food situation in both Germany and Austria as well as the liberated countries. was only managed by massive American food assistance. Not all of the food came from America, but a very large proportion of the food did. This was the case in during nd afyter World War I, and continued to be the case in World War II. The prgrams involved were different, but the source was the same--primrily the United States. There were several programs to feed Europe. The United Nations Relief and Rehabilitation Administration (UNRRA), primarily funded by the United States also provided food shipments. It was created to aiud the victimes of Axis aggression, but after the War assisted Austria as well which was designated as a victim. When this ended, other American efforts kicked in. The U.S. government began shipments of $300 million in food aid. Austria was part of the U.S. Government Aid and Relief in Occupied Areas (GARIOA) program. This was a program specifically designed to feed people in the firmer Axis countruies Germany/Austria and Japan. Italy was treated as more like a victim of the Axis. In addition to Government aid, there was the private CARE Program (1945-46). Individual Anericans contributed money to finance food packages to starving Europe. During the food crisis, the United States financed some 88 percent of Austrian food imports (1945-47) and 57 percent (1948). This was all before the American Marshall Plan. American aid and subsidies helped Austrians to get through the terrible hunger of 1947. It also is aood example of the double-edged sword of food relief. Providing large quantities of free or low-priced food lowers overall farm prices. This in turn impacted the incentive that high prices had on farmers to increase out out and delayed the recovery of Austrian agriculture. [Lewis, p. 143.] This would be the unitended dynamic that would affect American food aid progrms in the post-War era.

Energy

After food, the next most serious problems for Europens following the War was coal. It was used by both indudtry and for home heating. This was especially the case in Germany because destroying the transport system was a primary objective of the Allied strategic bombing campaign. It was not possible to destoy a coal mine from the air. It was possible to destroy the transport system connecting the mines to German factories and homes. This also affected Austria because Germany was the primary supplier. The primary fuel in Austria and much of Europe was coal. Austria had some coal mines, but relied on Grermsn mines for most of its cosl consumption. Oil and natural gas were not yet important industrial or home heating fuels. Austria has small oil fields. The destruction of the transport system cut off Austria from neeed coal imports. The Americans who occupied southern Germany had to restore the rail routes and ship in Germn coal on easy credit terms. [Gimbel]

Manufacturing

Food was the major problem, but not the only economic problem. Another problem was policies implemnted in the Soviet Zone. Rather than promote recovery, Soviet authoriuties after the failure of Communist candidates in November 1945 election launched a massive wave of seizures, essentially enforced reparations. The post-War Potsdam Agreement permitted confiscation of 'German external assets' in Austria. The Soviets used the rather vague language to seize industrial infrastructire of value in their occupation zone. [Bischof 2009, pp. 176–177.] Just what was a 'Germnan' assett was never clearly defined. Within a year, the NKVD oversaw the dismantling and shipped back to the Soviet Union that has been valued at some $0.5 billiom. [Bischof 2009, p. 175.] This also occurred in Germany proper. And Austrian assetts in Eastern Europe (mostly Czechoslovakia and Hungary) were usually seized as 'German' assetts. [Appelbaum, p.37.] It has been questioned how much of these reprations were actually reassembled and put to productive use by the Soviets. American High Commissioner Mark W. Clark resisted Soviet seizures and reported on them to the State Department. As a result the seizures were largely limited to the Soviet occupation zone.

Recovery

After the very difficult immediate post-War years, the Austrian economy began to recover, albeit slowly. There was, however, a serious shortage of consumer goods (1947). One assessment reports that production of conumer goods was only slight over 40 percent of preduction at the time of the Anschluss or 1937. [Lewis 2000, pp. 141–42.] Thanks to American food aid, the Austrians got theough the 1947 Food Crisis. Then with a combination of 1) the West German Germany curency reform, 2) American Marshall Plan, and 3) beginning steps toward European integration, Europe began to recover. Germany was the economic powerhouse of Europe. And the German Economic Miracle drove the economic recovery of Europe which affected Austria. National policies played a role, but small countries like Austria weres much affected by German developments as much as any domestic policies, at least to the extent that they could benefit. Thus the Allied western sector of Austria prospered much more than the Soviet eastern occupation zone. The Austrian economy, at least the westen sector along with German had begun to recover (early-1950s). Voralberg in the French sector had begun to benefit from Swiss tourists. The economy of the Soviet sector lagged behind the western sector. The school photo on the previous page is from Schwechat which was near Vienna in the Soviet sector. The Soviets imposed strict limitations on the population in their sector. Austrians there were not permitted even to go into Vienna without giving a reason to Soviet occupation authorities and getting their permission. Notice that most of the children in the school portrait didn't have shoes. In fact, children's shoes in Soviet sector were rare. Children might wear them when going to school and during the class, but the afternoon being free, children often took them off for activities. The rural setting of the school may also be a factor. A reader writes, "In Vienna 1953-55 I never saw school children without shoes, even in Soviet sector. At this time, leather pants (Lederhosen) were rather expensive. Many of these boys are wearing lederhosen which probably handed down from older brothers bought before the War." We suspect that shoes in Vienna were more common than in the counrtyside. And we have found many Austrian school images showing barefoot children. Voralberg in the French sector, for example, benefitted from Swiss tourists. The same did not occur in the Soviet sector where economic conditions continued to be very poor. The school photo here is from Schwechat which was near Vienna in the Soviet sector (figure 1). These people couldn't go into Vienna without giving a reason to Soviet occupatiomn authorities and getting permission. Notice that most of the children didn't have shoes. In fact, children's shoes in the Soviet sector were rare. Children might wear them at school and during the class, but the afternoon being free, children often took them off for activities. The rural setting of the school may also be a factor. A reader writes, "In Vienna 1953-55 I never saw school children without shoes, even in Soviet sector. At this time, leather pants (Lederhosen) were rather expensive. Many of these boys are wearing lederhosen which were probably handed down from older brothers bought before the War."

Sources

Applebaum, Anne. Iron Curtain, 1944-56 (Dounbleday: New York, 2012), 556p.

Berg, Matthew Paul. "Caught between Iwan and the Weihnachtsmann: Occupation, the Marshall Plan and Austrian Identity," in Günter Bischof, et al. The Marshall Plan in Austria (Transaction Publishers: 2000), pp. 156–84.

Bischof, Günter. "Allied plans and policies for the occupation of Austria, 1938–1955," in Rolf Steininger, et al. Austria in the Twentieth Century (Transaction Publishers: 2009). pp. 162–189.

Bischof, Günter et al. (1996). Austro-Corporatism: Past, Present, Future (Transaction Publishers: 1996).

Bischof, Günter. "Rebuilding Austria - The Marshall Plan," Austrian Press & Information Service in the United States--The Zine.

Gimbel, John. The Origins of the Marshall Plan (Stanford University Press: 1976).

Lewis, Jill." Dancing on a tight rope: The beginning of the Marshall Plan," in Bischof, Günter et al. The Marshall Plan in Austria (Transaction Publishers: 2000), pp. 138–155.

Nemschak, Franz. Director of the Austrian Institute of Economic Research--WIFO (1955).

Steininger, Rolf. Austria, Germany, and the Cold War: From the Anschluss to the State Treaty 1938-1955 (New York: Berghahn Books, 2008).

Petrov, Nikita. "The internal troops of the NKVD in the system of Soviet organs of repression in Austria. 1945–1946," in Günter Bischof et. al. New perspectives on Austrians and World War II (Transaction Publisher: 2009), pp. 250–276.

Wagnleitner, Reinhold. Coca-Colonization and the Cold War The Cultural Mission of the United States in Austria After the Second World War (Chapel Hill: University of North Carolina Press, 1994).

Created: 11:58 AM 12/5/2018
Last updated: 5:57 PM 12/5/2018