The Luger is a 1908 model. The Walther P-38 was not as well designed or made but more effective and cheap. Still pretty darn good. Interesting to note that often Germans were grabbing Russian weapons and Americans were grabbing German weapons and everyone was grabbing Czech weapons.
OP - much is due to the Marshal Plan wherein the victors realized that having exhausted and devestated economies in Italy, Germany and Japan was not in the world's best interest. Hence, huge investment in getting these economies back on their feet. Hence continued progress in R&D while some folks rested on their achievements and ta da, you have failure to progress and improve, comparatively speaking.