The hypothesis at the heart of this thesis is that long-term economic growth depends on the discovery and development of new ideas and technologies which enable innovation resulting in increased productivity. As technological innovation generally results from research processes instigated and performed by those with higher levels of education, it becomes important to analyse higher education as an economic actor as well as a symbolic institution of cultural and elite reproduction. The thesis compares the development of higher levels of human capital in East and West Germany over the period 1945 – 1990: states with two very different and competing myths of democratic legitimacy and radically opposed social, political and economic systems but both convinced that human capital development held the key to reconstruction and economic growth. In highlighting the imperatives for reform and outlining the main changes which took place in higher education within the strictures imposed by competing ideologies, the thesis assesses the effectiveness of human capital investment in terms of the success of the economic objectives identified by both countries. The thesis finds that the initial hypothesis is proven, albeit that its effectiveness was mitigated by a number of external economic shocks and internal social and political factors which, in the end, led to the demise of the East German regime.