_ Antony P. Mueller, economist, University of Erlangen-Nuremberg, professor, Brazilian Federal University UFS, member, Ludwig von Mises Institute, senior fellow, American Institute of Economic Research (AIER). Munich, 30. October 2022.*
The consequences of the current energy transition and the de-industrialization of Germany are reminiscent of the American Morgenthau Plan of 1944. In addition to territorial fragmentation, it planned the transformation of Germany into an agricultural state. Ten to twenty million human sacrifices would have been accepted, according to this proposition. The Morgenthau Plan was officially dropped only in 1947 and replaced in 1948 by the Marshall Plan Assistance. What were the objectives of the Morgenthau Plan and why was it replaced by a policy of reconstruction?
Germany must perish!
With the founding of the German Empire in 1871, the “German Question” arose. The united Germany under the leadership of Prussia was viewed with suspicion from all sides. The industrialization of Germany progressed in leaps and bounds, and industrialization also meant increased military power. Around 1900 it was already foreseeable that the German Reich would surpass all of its neighbours in terms of industrial production. Only the US grew faster while the UK was falling behind.
After the defeat in World War I, Germany was branded as the sole culprit and faced with high reparation payments. But even that could not prevent economic recovery. After the end of the hyperinflation of 1923 through a currency reform, Germany experienced an amazing boom phase until the stock market collapsed in 1929.
With the onset of the Great Depression, however, the inflow of investments from the United States stopped and Germany fell into a deep economic crisis with high mass unemployment. However, in 1935 the economy emerged from the depression again. Unemployment receded and industrial production soon returned to previous levels.
The Americans only entered World War II after the Japanese attack on Pearl Harbor (December 7, 1941) and Germany’s subsequent declaration of war on the USA (December 11, 1941). As with the United States’ entry into World War I, the 1940s saw strong opposition to war participation. As in the preparations for the First World War, a gigantic propaganda apparatus had to be set in motion for the American entry into the Second World War in order to demonize Germany and the Germans. The state propaganda controlled from Washington received powerful support from the film industry. A book published in 1941 summed up the aim of the propaganda effort: “Germany must perish”.
American war aims
The National Socialists in Germany pursued goals that were inimical to people and life, and they used brutality and violence as a means of achieving these goals. Ludwig von Mises (1881 – 1973) knew the barbaric ideology of the Nazis and their inhuman anti-Semitism and he analysed and named this in detail (see, for example, Mises, Omnipotent Government (1944), pp. 114, 139, 178, 192 et passim). But ending Nazi tyranny was not the only war goal of the Americans, or not of all Americans.
The Morgenthau Plan was presented on 1 September 1944 in an atmosphere prepared by years of media propaganda. It was developed by the US Treasury Department headed by Henry Morgenthau Jr. (1891-1967). However, the main author of the draft was Harry Dexter White (1892–1948), who was later revealed to be a Soviet spy. It was also the latter who decisively led the negotiations at the Bretton Woods Conference in 1944 to shape the post-war monetary order. The Morgenthau Plan and the design of the international financial system as agreed upon at the Bretton Woods conference must be seen together.
Franklin Delano Roosevelt (1882–1945), who took up his first presidency in 1933, managed to be re-elected three times, although his administration had failed by any means to end the Depression. At 19 percent unemployment in 1938, it was almost as high in the late 1930s as it was at the beginning of the depression.  The fact that mass unemployment fell in the early 1940s was not due to Roosevelt’s economic policy, which was a disaster, but to mobilization and the associated forced conscription in the course of preparations for war.
What Harry Dexter White envisioned as the author of the Morgenthau Plan was the creation of a new world order based on the alliance between the USA and the USSR, which had been forged during the war years and which was to be continued even after the end of the war. According to Harry Dexter White, in order to help world communism to victory, Germany had to be eliminated as an economic and geopolitical factor – just like Great Britain, by the way. In accordance with his communist world view, Dexter White built on the fact that a complete socialist planned economy could be established in peacetime in the USA on the basis of the existing wartime economy.
Harry Dexter White’s ideas were not as adventurous as they might seem from today’s perspective, because not only was the US Treasury Department riddled with Soviet spies and communist sympathizers, the same was true of the US State Department and generally of large parts of President Roosevelt’s administration.
In diesem Kontext gesehen ging es darum, dem Sozialismus unter der gemeinsamen Führung der USA und der UdSSR zum Sieg zu verhelfen, wobei die UNO dafür den institutionellen Rahmen bilden sollte. Zu diesem Zweck musste östlich der Sowjetunion Japan ausgeschaltet werden und westlich des neuen sozialistischen Riesenreiches nicht nur ganz Osteuropa unter die Fittiche der UdSSR kommen, sondern auch Westeuropa.
Roosevelt’s hegemonic aspirations included not only eliminating Japan and Germany as rivals, but also eliminating Britain’s role as a maritime colonial power. England’s claims as a partner were already crushed at the Bretton Woods conference, and instead the former great power was humiliated as a petitioner for US loans. In this sense, the plan was directed not only against Germany, but against the whole of Europe. Western Europe, including Britain, was to be ripened for the adoption of a socialist economic system under Soviet rule. What happened in Eastern Europe after the war was originally planned for Western Europe as well.
Provisions of the plan
The previously kept secret plan became known to the public through the publication of the book “Germany is our Problem” by Henry Morgenthau in 1945. Morgenthau, who has meanwhile retired from the Ministry of Finance after a long period of service (from January 1, 1934 to July 22, 1945), provides the context for his plan in this book. Accordingly, “there can be no peace on earth if aggressive states like Germany retain the power to attack their neighbours. It is not enough for us to say that we will disarm Germany and hope that they will learn to behave like decent people” (p. 3). Rather, facts are to be created. Therefore, Germany should be transformed into a country that is mainly characterized by agriculture (“pastoral in character”). (p. 50)
Morgenthau found the rationale for deindustrializing Germany to be that “longer than living people can remember” the greatest threat to peace around the world emanates from Germany’s lust for armed conquest. This desire finds expression in German heavy industry even more than in the military (p. 17 et passim). Therefore, Germany’s industrial potential must be reduced to half the production level of 1938 by destroying the relevant factories. “The Germans’ road to the peace leads to the farm.” (Morgenthau, p. 48))
The original plan was primarily devised by Henry Dexter White. Convinced that the United States, along with the Soviet Union, would gain full dominance over Germany, Dexter White set out to envision post-war Europe in his mind. Accordingly, Germany should be completely deindustrialized.
The “Memorandum – prepared by the Ministry of Finance” of September 1, 1944, marked as “Top Secret”, provides for the following measures on how Germany should be treated after its defeat.
- Demilitarization of Germany
- Division of Germany
- Internationalization of the Ruhr area
- Compensation and reparations payments
- Deindustrialization of the German economy
- Educational reform and re-education
- Redesign of the political system
It must be mentioned that the harsh treatment of Germany called for in the Morgenthau Plan was quite controversial. Even before the end of the war, the Western Allies were in favour of economic reconstruction. Their argument was that an economically strong Germany should serve as a bulwark against the Soviet Union, whereby it was to be integrated into an overall Europe that was to be created. Even though he approved the Morgenthau Plan at the second Quebec Conference in 1944 (probably to get further credits approved by the US Treasury), British Prime Minister Winston Churchill (1874-1965) tended rather to a united Europe including Germany, as reflected in his 1946 Zurich speech should confirm.
According to the Morgenthau Plan, Germany was to be completely demilitarized:
“The aim of the Allied forces should be to achieve the complete demilitarization of Germany as quickly as possible after the capitulation. This means the complete disarmament of the German army and the German people (including the withdrawal or destruction of all war material) and the complete destruction of the entire German armaments industry and those parts of the supporting industries that have no other justification.”
In the “Proposed Recommendations for the Treatment of Germany by the Cabinet Committee for the President” of September 4, 1944, which were drawn up on this basis, the goals relating to Germany’s economy were summarized as follows:
The primary goals of our economic policy are (1) to keep the standard of living of the German population at the subsistence level; (2) Germany’s position of economic power in Europe must be eliminated; (3) German economic power must be restructured in such a way that … Germany can no longer convert it to war production on its own.
In detail, the plan dealt with the division of Germany. According to the sketch attached to the original document, the Ruhr area was to be isolated, and the rest of Germany divided into a North German and a South German state.
In the Occupation Directive JCS 1067, the Morgenthau Plan became the guiding principle of occupation policy. In the years after the capitulation, factories were dismantled in the respective occupation zones and all attempts at economic recovery were stopped. Research institutes and company headquarters were systematically searched for technical trade secrets, and if found, these were confiscated.
The regulations were not relaxed until 1947. As American planning for a European economic recovery began, the restrictions were suspended and the new US Occupation Code, JCS 1067, was replaced by the new US Occupation Code, JCS 1779. In contrast to the first directive, which had prohibited all “steps towards the economic rehabilitation of Germany” or “to maintain or strengthen the German economy”, this now stated as a guideline that “an orderly, prosperous Europe should make the economic contributions of a stable and productive Germany requires”.
After the plan became public, opposition to its implementation grew in the United States. In Germany it served as propaganda evidence that the Allies were aiming for the total annihilation of Germany. One of the reasons for the stubborn resistance to the Allied invasion can be traced back to the expectation that there was no future for Germany anyway. Thus, the Morgenthau Plan prolonged the war and not only cost more lives on the German side.
With the onset of the Cold War, the United States identified the Soviet Union as its new enemy and accepted that without a German economic boom, there would be no prosperity in Europe. The US government recognized that without an economic recovery, it was only a matter of time before Western Europe would fall under Soviet dominance after Eastern Europe. As part of the political departure from the Morgenthau Plan, West Germany was also included in Marshall Plan assistance in 1948. The task now was to build up West Germany and thus Western Europe as a bulwark against Soviet communism.
The Morgenthau Plan and American occupation policies are a chilling lesson in politics. They show how quickly enemy can become friend and friend can become enemy. Politics is not about morality, but about tangible power interests. Those interests set the course, and as they change, so does the usefulness of certain alliances. The Morgenthau Plan also shows that human life is secondary to the state’s will to power. The real goal of the Morgenthau Plan was the establishment of communist world domination. To clear the way for this, Germany had to be gotten out of the way through deindustrialization.
As I explained in the article “Deindustrialization and a shrinking economy. Consequences of green economic policy”, there are plans for de-industrialization in Germany again today, albeit under different circumstances. There is talk of an “ecological war economy”, of a “circular economy” or “shrinkage economy”. In the article I prove that the economic consequences of an eco-socialist economic order would be catastrophic for people. Just as the implementation of the Morgenthau plan would have been catastrophic. The fact that today’s deindustrialization plans are ostensibly based on good intentions – in contrast to the Morgenthau plan – and the alleged averting of an even greater evil does not change these catastrophic economic consequences. And since the addressee of the eco-socialist plans is the state, i.e., ultimately the state monopoly on the use of force, it becomes clear that this new economic order should be implemented with coercion.
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* Translated and republished with kind permission of the author from the original publication at the Mises Institute.