Industrial Plans For Germany - Moderation of Policy

Moderation of Policy

Beginning in mid-1946 American and British policy towards the German economy began to change, illustrated by Byrnes's September speech restatement of policy on Germany (also known as the "Stuttgart speech" or "Speech of hope"). According to Dennis L. Bark and David R. Gress in A history of West Germany the Morgenthau Plan came to be seen as inflicting undue hardship, and so the approach was shifted, over time, to one encouraging German economic expansion. As part of this, the allowed levels of industrial capacity were raised.

According to Vladimir Petrov in Money and conquest: allied occupation currencies in World War II the reason for the change in US occupation policy was almost exclusively based on economic considerations. Although a large part of the occupation costs were placed on the German economy, the US and the U.K were increasingly forced to supply food imports to prevent mass starvation. According to some historians the US government abandoned the Morgenthau Plan as policy in September 1946 with Secretary of State James F. Byrnes' speech Restatement of Policy on Germany. Others have argued that credit should be given to former US President Herbert Hoover who in one of his reports from Germany in 1947 argued for a change in occupation policy, amongst other things stating:

"There is the illusion that the New Germany left after the annexations can be reduced to a 'pastoral state'. It cannot be done unless we exterminate or move 25,000,000 people out of it."

Worries about the sluggish recovery of the European economy (which before the war was driven by the German industrial base) and growing Soviet influence amongst a German population subject to food shortages and economic misery, caused the Joint Chiefs of Staff, and Generals Clay and Marshall to start lobbying the Truman administration for a change of policy. General Clay stated

"There is no choice between being a communist on 1,500 calories a day and a believer in democracy on a thousand".

In July 1947, President Harry S. Truman rescinded on "national security grounds" the punitive occupation directive JCS 1067, which had directed the US forces of occupation in Germany to "take no steps looking toward the economic rehabilitation of Germany designed to maintain or strengthen the German economy." It was replaced by JCS 1779, which instead noted that "n orderly, prosperous Europe requires the economic contributions of a stable and productive Germany." Nevertheless, General Clay needed over two months to overcome continued resistance among his staff to the new directive, but on July 10, 1947, it was finally approved at a meeting of the SWNCC. The final version of the document "was purged of the most important elements of the Morgenthau Plan."

The restrictions placed on German heavy industry production were thus partly ameliorated, as permitted steel production levels were raised from 25% of pre-war capacity to a new limit placed at 50% of pre-war capacity.