Morgenthau Plan - Influence On Policy

Influence On Policy

The negative public reaction to the publishing of the Morgenthau plan had forced President Roosevelt to publicly shelve it, and he permitted no further planning for the occupation of Germany. With the death of the president before the end of the war, the plan as such never took effect. But since its ideas permeated parts of the American administration, especially Morgenthau's Treasury, it did influence subsequent American and Allied planning, most notably:

• the Potsdam Conference
• Joint Chiefs of Staff Directive 1067 (April 1945 – July 1947)
• The industrial plans for Germany. (Level of industry agreements)

JCS 1067 explicitly prohibited U.S. occupation authorities from providing any economic or reconstruction assistance of any kind to the German people, not even to maintain the current economic levels. U.S. occupation efforts were to be focused on denazification and the destruction of heavy industry war-production capability. In January 1946 the Allied Control Council set the foundation of the future German economy by putting a cap on German steel production, the maximum allowed was set at about 25% of the prewar production level. Steel plants thus made redundant were dismantled.

Also as a consequence of the Potsdam conference, the occupation forces of all nations were obliged to ensure that German standards of living were made equal to the level of its European neighbors with which it had been at war with, France in particular. Germany was to be reduced to the standard of life it had known at the height of the Great Depression (1932). The first "level of industry" plan, signed in 1946, stated that German heavy industry was to be lowered to 50% of its 1938 levels by the closing of 1,500 manufacturing plants

The problems brought on by the execution of these types of policies were eventually apparent to most U.S. officials in Germany. Germany had long been the industrial giant of Europe, and its poverty held back the general European recovery. The continued scarcity in Germany also led to considerable expenses for the occupying powers, which were obligated to try and make up the most important shortfalls through the GARIOA program (Government and Relief in Occupied Areas). In view of the continued poverty and famine in Europe, and with the onset of the Cold War which made it important not to lose all of Germany to the communists, it was apparent by 1947 that a change of policy was required.

The change was heralded by Restatement of Policy on Germany, a famous speech by James F. Byrnes, then United States Secretary of State, held in Stuttgart on September 6, 1946. Also known as the "Speech of hope" it set the tone of future US policy as it repudiated the Morgenthau Plan economic policies and with its message of change to a policy of economic reconstruction gave the Germans hope for the future. Herbert Hoover's situation reports from 1947, and "A Report on Germany" also served to help change occupation policy. The Western powers' worst fear by now was that the poverty and hunger would drive the Germans to Communism. General Lucius Clay stated "There is no choice between being a communist on 1,500 calories a day and a believer in democracy on a thousand."

After lobbying by the Joint Chiefs of Staff, and Generals Clay and Marshall, the Truman administration finally realized that economic recovery in Europe could not go forward without the reconstruction of the German industrial base on which it had previously been dependent. In July 1947, President Harry S. Truman rescinded on "national security grounds" the punitive JCS 1067, which had directed the US forces of occupation in Germany to "take no steps looking toward the economic rehabilitation of Germany." It was replaced by JCS 1779, which instead stressed that "n orderly, prosperous Europe requires the economic contributions of a stable and productive Germany."

The most notable example of this change of policy was a plan established by U.S. Secretary of State George Marshall, the "European Recovery Program", better known as the Marshall Plan, which in the form of loans instead of the free aid received by other recipients was extended to also include West Germany.

The Marshall Plan ... is not a philanthropic enterprise ... It is based on our views of the requirements of American security ... This is the only peaceful avenue now open to us which may answer the communist challenge to our way of life and our national security." (Allen W. Dulles, The Marshall Plan)