Luther: After the dominion and power of the Pope has ceased the people despising the true doctrine are now changed into irrational animals and beasts

Here's a Luther quote from the book, Henry O'Connor, Luther's Own Statements Concerning His Teaching and Its Results: Taken Exclusively from the Earliest and Best Editions of Luther's German and Latin Works (1884), p. 55-56.

"After the dominion and power of the Pope has ceased . . . the people, while despising the true doctrine, are now changed into mere irrational animals and beasts; … the number of holy and pious teachers becomes constantly less" [Walch. I. 615].

This quote pops up every once in a while. It's typically used by Rome's defenders as proof of the failure of the Reformation (or something like Luther's regrets or concession to the failure of the Reformation, etc. example #1, example #2). O'Connor uses it to describe the "Results of Luther's Teaching," specifically the "Moral Results" that there was a "Lower State of General Morality."

Luther's Own Statements Concerning His Teaching and Its Results is an old small anthology of Luther quotes peppered with vilifying commentary from O’Connor. In an early edition of this work, the author was so sure of his effort he originally titled the book, "The Only Reliable Evidence Concerning Martin Luther." The author claims to have compiled the quotes from the original sources: “Nearly two-thirds of the matter contained in this pamphlet is taken from the original editions of Luther’s own Works, as published in Wittenberg, under the very eye of the Reformer of Germany himself”(p. 3) He says “I have taken special care not to quote anything, that would have a different meaning, if read with the full context”(p.5).

Documentation
The footnote "Walch. I" refers to the first volume in a set of Luther's works published between 1740-1753 by Johann Georg Walch (Auslegung des ersten Buches Mose, Erster Teil, 912 Seiten). Page 615 can be found here (see top of second column on the top right for page numbering). The text reads:

This paragraph is from Luther's lectures on Genesis 5:2 (1535-1536). Technically, Luther did not write this text. The editors of LW state,

[T]he work is not a product of Luther’s pen or even a transcript of his lectures; it is a transcript that has been reworked and edited. From the instance of other commentaries, where we have both the lecture notes and the printed version, it is evident that the editors of Luther’s Biblical commentaries allowed themselves greater liberties in preparing his lectures for publication than the modern conventions of editing and publishing would justify. Where we have only the printed version, therefore, we have reason to be on the lookout for marks of redactorial additions and changes (LW 5:x]

The text has been translated into English  in LW 1:336.


Context

The Glory of the Cananites

But the Cainites, too, had their glory: the wisest men in every field of human endeavor and the finest hypocrites, who were the instigators of very much trouble for the true church and in various ways maltreated the holiest patriarchs, so that we deservedly count these among the holiest martyrs and confessors. As Moses stated above, the Cainites immediately began to be superior in number and in activity. Although they were compelled to show respect to their father Adam, they tried in various ways to oppress the church of the godly, especially after Adam, the first patriarch, had died. Therefore the Cainites accelerated the punishment of the Flood with their wickedness.

But this power and malice of the Cainites was the reason why the holy patriarchs taught their church so much more zealously and carefully. How many important sermons do we suppose were delivered by them in that entire course of years, when Adam and Eve told about their first state and the glory of Paradise, and gave admonitions to be on guard against the serpent, who through sin became the cause of so many evils! How careful shall we suppose them to have been in explaining the promise concerning the Seed; how sensible in cheering the hearts of their people that the latter might not become discouraged by the grandeur of the Cainites or by their own afflictions!

All these details Moses passes over, both because they could not be written down on account of their profusion and because their disclosure is reserved for that day of glory and deliverance.

Thus although the Flood was a most horrible event, nevertheless Moses’ description of it is very brief; for he wanted to leave it to men to ponder over events of such magnitude.

So in this passage Moses wanted to present briefly some picture of the first and original world. It was very good. Nevertheless, it had a large number of very wicked men, so that only eight souls were preserved in the Flood. What do we suppose will happen before the Last Day? For now, when the Gospel has been brought to light, so many despise it that it is to be feared that they will shortly predominate and fill the world with their errors, and the Word will be altogether suppressed.

Awe-inspiring indeed are the words of Christ when He says (Luke 18:8): “Do you think that the Son of Man will find faith when He comes?” And in Matt. 24:37 He compares the last times with the times of Noah. These are terrifying statements. But the smug and ungrateful world, the despiser of all the promises and threats of God, abounds with every kind of iniquity and daily becomes more and more corrupt. Now that the rule of the popes, who have ruled the world solely through the fear of punishment, is over, men, through their contempt of the sound doctrine, all but degenerate into brutes and beasts. The number of holy and godly preachers is on the decline. All men yield to their desires. But what will happen is that the Last Day will come upon the world like a thief (1 Thess. 5:2) and will overtake men who in their smugness give free reign to their ambitious desire, tyranny, lusts, greed, and all sorts of vices.

Furthermore, Christ Himself has foretold these developments, and so it is impossible for us to believe that He has lied. But if the first world, which had so large a number of most excellent patriarchs, became so pitiably depraved, how much more should we fear when the feebleness of our nature is so great? Therefore may the Lord grant that in faith and in the confession of His Son Jesus Christ we may as quickly as possible be gathered to those fathers and die within twenty years, so that we may not see those terrible woes and afflictions, both spiritual and physical, of the last time. Amen (LW 1:335-336).

Conclusion
Notice first how O'Connor set up the quote: "After the dominion and power of the Pope has ceased . . . the people, while despising the true doctrine, are now changed into mere irrational animals and beasts…" In context, O'Connor left out the middle part of the sentence continues, "who have ruled the world solely through the fear of punishment, is over...." It's interesting that he left out that part of the sentence which speaks negatively about the dominion and power of the Pope that ruled the world "solely through the fear of punishment."

Notice also that Luther's comment isolated by O'Connor finds its true theological meaning within the entire context. He begins by describing the state of the world before the Noahic flood.Only eight were saved by the ark. He concludes this section by biblically describing the world before the "Last Day." Destruction will come upon the world like a thief. "Terrible woes and afflictions, both spiritual and physical" will once again afflict the world in an all-consuming way similarly to the great flood.

O'Connor is correct that Luther saw the world as becoming worse because of the preaching of the Gospel. With this context though, we see again the reoccurring theme that Luther viewed his time period on the cusp of the return of Christ. In my explorations into Luther's theology I've never come across him stating the opposite- that because of the preaching of the Gospel, the world would become more holy and pious. For Luther, mankind has and will always oppose God's truth en masse and rebel against it, for that's what Satan and sin have always done in battle against God's word. Luther consistently held that the Gospel would find great opposition, and would be attacked from all sides. The Gospel would be used by the world as a licence to sin and all sorts of evil because of Satan. The Gospel would indeed make those of the world worse. But on the flip-side, the Gospel would also transform those whom God intended to redeem, and they are those who comprise the church, however few in number they may be.