‘It should be brought home to the Germans that Germany’s ruthless warfare and the fanatical Nazi resistance has destroyed the German economy and made chaos and suffering inevitable and that the Germans cannot escape responsibility for what they have brought upon themselves. Germany will not be occupied for the purpose of liberation but as a defeated enemy nation’. Or, as Morgenthau himself put it, ‘It is of the utmost importance that every person in Germany should realize that this time Germany is a defeated nation.’
The point, in short, was to avoid one of the major mistakes of the Versailles Treaty, as it seemed in retrospect to the policy makers of 1945: the failure to bring home to Germans the extent of their sins and the nemesis visited upon them. The logic of this initial American approach to the German question was thus demilitarization, denazification, deindustrialization—to strip Germany of her military and economic resources and re-educate the population. This policy was duly applied, at least in part: the Wehrmacht was formally dissolved (on August 20th 1946); denazification programs were set in place in the US-occupied zone especially, as we saw in Chapter Two; and strict limits were placed upon German industrial capacity and output, with steel-making particularly severely restricted under the March 1946 ‘Plan for the Level of the Post-War (German) Economy’.
But from the outset the ‘Morgenthau strategy’ was vigorously criticized within the US Administration itself. What good would be served by reducing (American-controlled) Germany to a virtually pre-industrial condition? Most of pre-war Germany’s best agricultural land was now under Soviet control or else had been transferred to Poland. Meanwhile western Germany was awash in refugees who had access neither to land nor food. Restrictions on urban or industrial output might keep Germany prostrate but they wouldn’t feed it or rebuild it. That burden, a very considerable one, would fall on the victorious occupiers. Sooner or later they would need to offload this responsibility onto Germans themselves, at which point the latter would have to be allowed to rebuild their economy.
To these concerns, American critics of the initial US ‘hard’ line added a further consideration. It was all very well forcibly bringing Germans to a consciousness of their own defeat, but unless they were given some prospect of a better future the outcome might be the same as before: a resentful, humiliated nation vulnerable to demagogy from Right or Left. As former President Herbert Hoover expressed it to Truman himself, in 1946, ‘You can have vengeance, or peace, but you can’t have both.’ If, in American treatment of Germany, the balance of advantage swung increasingly to ‘peace’ this was largely due to the darkening prospect for US-SOVIET relations.
Among a restricted circle of Washington insiders, it was obvious from the outset that the incompatibility of Soviet and Western interests would lead to conflict and that clearly delimited zones of power might be a prudent solution to post-war problems. This was the view of George Kennan. Why, he wrote on January 26th 1945, ‘could we not make a decent and definite compromise with [the USSR]?—divide Europe frankly into spheres of influence—keep ourselves out of the Russian sphere and the Russians out of ours?… And within whatever sphere of action was left to us we could at least… (try) to restore life, in the wake of the war, on a dignified and stable foundation.’
Six weeks later a more pessimistic and implicitly confrontational response to Soviet actions in eastern Europe was proposed to President Roosevelt in a memo from Averell Harriman, the US ambassador in Moscow: ‘Unless we wish to accept the 20th century barbarian invasion of Europe, with repressions extending further and further in the East as well, we must find ways to arrest the Soviet domineering policy… If we don’t face the issues squarely now, history will record the period of the next generation as the Soviet age.’
Harriman and Kennan differed implicitly on how to respond to Soviet actions, but they did not disagree in their account of what Stalin was doing. Other American leaders were much more sanguine, however, and not just in the spring of 1945. Charles Bohlen, another US diplomat and the recipient of the Kennan letter quoted above, believed in the possibility of a post-war settlement based on broad principles of self-determination and Great Power cooperation. Recognising the need to maintain Soviet cooperation in working out a solution in Germany itself, Bohlen and others—like the post-war Secretary of State James Byrnes—placed their faith in Allied military occupation of the former Axis states and their satellites, together with free elections along the lines adumbrated at Yalta. Only later—after observing the workings of Soviet power under the auspices of Allied Control Councils in Romania and Bulgaria especially—did they accept the incompatibility of these goals and come to share Kennan’s preference for the realpolitik of separate spheres.
One ground for initial optimism was the widely held view that Stalin had no interest in provoking confrontation and war. As General Eisenhower himself put it to President Truman and his Joint Chiefs of Staff in June 1946, ‘I don’t believe the Reds want a war. What can they gain now by armed conflict? They’ve gained just about all they can assimilate.’ In a limited sense Eisenhower was correct: Stalin was not about to go to war with the USA (although the reasonable conclusion to be drawn, that the Soviet Union thus had an interest in cooperating fully with its erstwhile ally, did not in fact follow). And in that case the US, which had a monopoly of atomic weapons, risked little by keeping communications open with the Soviet Union and seeking mutually compatible solutions to common problems.
Another element in US policy in the initial post-war period were the new international institutions that the Americans had helped bring about and whose success they sincerely desired. Of these the United Nations, whose Charter was ratified on October 24th 1945 and whose General Assembly first met in January 1946, is obviously the best known; but it was the financial and economic agencies and agreements associated with ‘Bretton Woods’ which perhaps mattered more to policymakers at the time.
The economic meltdown of the inter-war years seemed to Americans especially to be the root source of the European (and world) crisis. Unless currencies were convertible and nations stood to benefit mutually from increased trade, there was nothing to prevent a return to the bad days of September 1931, when the post-World War One monetary system fell apart. Led by Maynard Keynes—the moving spirit behind the July 1944 meeting at the Bretton Woods conference center in New Hampshire—economists and statesmen sought an alternative to the international financial system of pre-war days: something less rigid and deflationary than the gold standard, but more reliable and mutually sustaining than a floating-rate currency regime. Whatever this new regime was to be, it would need, Keynes argued, something resembling an international bank, functioning rather like the central bank of a domestic economy, to administer it: to maintain the fixed exchange rate while at the same time encouraging and facilitating foreign exchange transactions.
That, in essence, is what was agreed at Bretton Woods. An International Monetary Fund was set up (with US cash) ‘to facilitate the expansion and balanced growth of international trade’ (Article I). The initial Executive Board, modeled on the UN Security Council, had representatives from the US, UK, France, China and the USSR. An International Trading Organisation was proposed, which would eventually take shape in 1947 as the General Agreement on Trade and Tariffs (later the World Trade Organisation). Members agreed to tariff and other concessions for contracting partners, as well as codes for trade practices and procedures for handling breaches and disputes. All of this was in itself a dramatic break from earlier ‘mercantilist’ approaches to trade and was intended, in due course, to inaugurate a new age of open commerce.