Hostname: page-component-7c8c6479df-p566r Total loading time: 0 Render date: 2024-03-27T17:47:42.542Z Has data issue: false hasContentIssue false

Becoming a State-in-the-World: Lessons Learned from the American Occupation of Germany

Published online by Cambridge University Press:  30 November 2012

Grant Madsen*
Affiliation:
Brigham Young University

Abstract

For students of American Political Development, the emergence of globalization and Americanization as themes of inquiry has spurred a growing interest in explaining America's rise as “a legal-economic and geopolitical hegemon.” An important episode in this rise came during the American occupation of Germany after World War II. In postwar Germany, America's military government realized that the American public remained unwilling to support (over the long term) the global projection of what Michael Mann has called “despotic power.” To achieve its fundamental goal of reorienting Germany toward a peaceful coexistence with the Unites States, military government turned instead to what Mann has called “infrastructural power” (power projected “through” society by state institutions). In pivoting from despotic to infrastructural power, three important consequences followed for the occupation. (1) Because it relied on the development of new infrastructures within a new German state, the occupation saw institutional “genesis” in which the Germans themselves influenced the pathway and timing of military government policy. (2) In creating new state institutions, military government performed “policy bricolage,” creatively reconstructing institutions “from” the ruins of war-torn Europe (as opposed to “on” its ruins). (3) Financial policy took a central place in military government's focus because it allowed for “increasing returns” in advancing military government's interests. Collectively, military government's experience provided lessons for an American state in the world.

Type
The Military in American Political Development
Copyright
Copyright © Cambridge University Press 2012

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1. Scholte, Jan Aart, Globalization: A Critical Introduction (Houndmills, Baskingstoke, Hampshire, UK: Palgrave Macmillan, 2005), 21CrossRefGoogle Scholar and Ali Khan, L., The Extinction of Nation-States: a World Without Borders (Boston: Kluwer Law International, 1996)CrossRefGoogle Scholar; See also (among many) Cable, Vincent, “The Diminished Nation-State: A Study in the Loss of Economic Power,” Daedalus 124, no. 2 (April 1, 1995): 2353Google Scholar; Schmidt, Vivien A., “The New World Order, Incorporated: The Rise of Business and the Decline of the Nation-State,” Daedalus 124, no. 2 (April 1, 1995): 75106Google Scholar; Strange, Susan, The Retreat of the State: The Diffusion of Power in the World Economy (Cambridge, UK: Cambridge University Press, 1996)CrossRefGoogle Scholar; Horsman, Mathew and Marshall, Andrew, After the Nation-State: Citizens, Tribalism and the New World Disorder (London: HarperCollins, 1994)Google Scholar; Bauman, Zygmunt, Globalization: The Human Consequences (New York: Columbia University Press, 1998)Google Scholar; Sassen, Saskia, Losing Control?: Sovereignty in an Age of Globalization (New York: Columbia University Press, 1996)Google Scholar; Giddens, Anthony, Runaway World (New York: Routledge, 2000)Google Scholar.

2. Smith, T. O., “Europe, Americanization and Globalization,” European History Quarterly 37, no. 2 (2007): 302CrossRefGoogle Scholar. For works in this vein, see Borgwardt, Elizabeth, A New Deal for the World: America's Vision for Human Rights (Cambridge: Belknap Press of Harvard University Press, 2005)CrossRefGoogle Scholar; De Grazia, Victoria, Irresistible Empire: America's Advance Through Twentieth-century Europe (Cambridge: Belknap Press of Harvard University Press, 2005)CrossRefGoogle Scholar; Berghahn, Volker R., “The Debate on ‘Americanization’ Among Economic and Cultural Historians,” Cold War History 10, no. 1 (2010)CrossRefGoogle Scholar.

3. Meunier, Sophie, “Globalization, Americanization and Sarkozy's France,” European Political Science 9, no. 2 (2010): 214CrossRefGoogle Scholar.

4. Novak, “The Myth of the ‘Weak’ American State,” The American Historical Review 113, no. 3 (2008): 758Google Scholar.

5. See Mann, Michael, “The Autonomous Power of the State: Its Origins, Mechanisms, and Results,” in States in History, ed. Hall, John A. (Oxford: B. Blackwell, 1986)Google Scholar.

6. U.S. Department of State, “JCS 1067/8,” 26 Apr. 1945 in Foreign Relations of the United States: Diplomatic Papers, European Advisory Commission, Austria, Germany (Washington, DC: U.S. Government Printing Office, 1945) 3:487Google Scholar (hereafter FRUS).

7. Mann, Michael, The Sources of Social Power, vol. 2, The Rise of Classes and Nation-States, 1760–1914 (New York, Cambridge University Press, 1993)Google Scholar. Also Mann, “The Autonomous Power of the State.” See also Sparrow, Bartholomew H., From the Outside in: World War II and the American State (Princeton: Princeton University Press, 1996)CrossRefGoogle Scholar. Sparrow's notion of “resource dependence” in some ways fits my description of “constraints,” but runs contrary to the concept of bricolage I develop below.

8. “Job of Running Germany Harder than Expected,” New York Times, 10 June 1945, E3.

9. To Various Recipients,” Eisenhower, Dwight D., The Papers of Dwight David Eisenhower: The Chief of Staff, vol. 7 (Baltimore: Johns Hopkins Press, 1978), 612Google Scholar.

10. For an exploration of this theme that focuses on the American domestic scene, see Hogan, Michael J., A Cross of Iron: Harry S. Truman and the Origins of the National Security State, 1945–1954 (New York: Cambridge University Press, 1998)CrossRefGoogle Scholar.

11. It is worth noting that in this way Clay stumbled upon an insight within the occupation's setting that has become increasingly interesting to recent scholarship on postwar settlements, namely G. John Ikenberry's assertion that states that have just won wars attempt to “‘lock in’ a favorable postwar position” by showing “‘strategic restraint’ on their own power”: Ikenberry, After Victory: Institutions, Strategic Restraint, and the Rebuilding of Order after Major War (Princeton, NJ: Princeton University Press, 2008), xi and 6072Google Scholar.

12. Rodgers, Daniel T., Atlantic Crossings: Social Politics in a Progressive Age (Cambridge: Belknap Press of Harvard University Press, 1998), 502CrossRefGoogle Scholar. He continues that the “Americanization” of Europe proceeded on the heels of the Marshall Plan, as “teams of economists, cultural attachés, U.S. Information Agency administrators, and Central Intelligence Agency officials” installed an American ideology. See also Berghahn, Volker R., The Americanisation of West German Industry, 1945–1973 (Cambridge: Cambridge University Press, 1986)Google Scholar; De Grazia, Irresistible Empire.

13. See, for example, Hogan, Michael J., “Corporatism,” in Explaining the History of American Foreign Relations, eds. Hogan, Michael J. and Paterson, Thomas G. (Cambridge: Cambridge University Press, 2004)CrossRefGoogle Scholar; Hogan, Michael J., The Marshall Plan: America, Britain, and the Reconstruction of Western Europe, 1947–1952 (Cambridge: Cambridge University Press, 1987)CrossRefGoogle Scholar; Maier, Charles S., “The Politics of Productivity: Foundations of American International Economic Policy After World War II,” in Between Power and Plenty, ed. Katzestein, Peter J. (Madison, WI: University of Wisconsin Press, 1978)Google Scholar; Djelic, Marie-Laure, Exporting the American Model: The Post-war Transformation of European Business (Oxford: Oxford University Press, 1998)CrossRefGoogle Scholar.

14. Schwartz, Thomas A., “‘No Harder Enterprise': Politics and Policies in the German-American Relationship, 1945–1968,” in The United States and Germany in the Era of the Cold War, 1945–1990: A Handbook, ed. Junker, Detlef et al. (New York: Cambridge University Press, 2004), 36Google Scholar.

15. See, for example, Abelshauser, Werner, Wirtschaftsgeschichte Der Bundesrepublik Deutschland (1945–1980) (Frankfurt am Main: Suhrkamp, 1983)Google Scholar and Abelshauser, The Dynamics of German Industry, trans. by Antal, David R. (New York: Berghahn Books, 2005)Google Scholar. Also, Milward, The Reconstruction of Western Europe, 1945–51; Hollander, Understanding Anti-Americanism: Its Origins and Impact at Home and Abroad (Chicago: Ivan R. Dee, 2004)Google Scholar. For an important exception to this claim, see Djelic, Marie-Laure and Quack, Sigrid, “Overcoming Path Dependency: Path Generation in Open Systems,” Theory & Society 36, no. 2 (2007): 161–86CrossRefGoogle Scholar. Suri's, JeremiLiberty's Surest Guardian: American Nation-Building from the Founders to Obama (New York: Free Press, 2011)Google Scholar, gestures toward historical contingencies but does not fully explore the critical junctures explored in this article (see especially Suri's chapter 4).

16. Paul Pierson, “Increasing Returns, Path Dependence, and the Study of Politics,” The American Political Science Review 94, No. 2 (2000): 253Google Scholar. See also Paul Pierson, “Not Just What, but When: Timing and Sequence in Political Processes,” Studies in American Political Development 14, no. 1 (2000)Google Scholar; James Mahoney, “Path Dependence in Historical Sociology,” Theory and Society 29, no. 4 (2000)Google Scholar.

17. Levi-Strauss, Claude, The Savage Mind (Chicago: University of Chicago Press, 1968)Google Scholar. See also Vanevenhoven, Jeff, et al., “Varieties of Bricolage and the Process of Entrepreneurship,” New England Journal of Entrepreneurship 14, no. 2 (2011)CrossRefGoogle Scholar.

18. Baker, Ted and Nelson, Reed E., “Creating Something from Nothing,” Administrative Science Quarterly 50, no. 3 (2005): 329–30CrossRefGoogle Scholar.

19. Mann, Michael, The Sources of Social Power, vol. 1, A History of Power from the Beginning to A.D. 1760 (New York: Cambridge University Press, 1986), 169–70Google Scholar.

20. Mann, “The Autonomous Power of the State,” 114.

21. Mann, The Sources of Social Power, 1:170.

22. Mann, The Sources of Social Power, 2:59.

23. Mann, “The Autonomous Power of the State,” 116. As evidence for this claim, Mann notes that “neither attained as high a level of social mobilization during the Second World War as the ‘despotically weak’ but participatory Great Britain.”

24. Levi-Strauss, The Savage Mind.

25. See, for example, Baker and Nelson, “Creating Something from Nothing”; Baker, Ted, “Improvising Firms: Bricolage, Account Giving and Improvisational Competencies in the Founding Process,” Research Policy 32, no. 2 (February 2003)CrossRefGoogle Scholar; Baker, Ted, “Resources in Play: Bricolage in the Toy Store(y),” Journal of Business Venturing 22, no. 5 (September 2007)CrossRefGoogle Scholar; Garud, Raghu, “Bricolage Versus Breakthrough: Distributed and Embedded Agency in Technology Entrepreneurship,” Research Policy 32, no. 2 (February 2003)CrossRefGoogle Scholar; Garud, Raghu, “Path Dependence or Path Creation?The Journal of Management Studies 47, no. 4 (June 2010)Google Scholar; Vanevenhoven, “Varieties of Bricolage and the Process of Entrepreneurship.”

26. Vanevenhoven, “Varieties of Bricolage and the Process of Entrepreneurship,” 63, 53–4. In this way, bricolage complicates arguments that employ resource dependence as an organization principle (see Sparrow, From the Outside in: World War II and the American State).

27. Jacobs, Meg and Zelizer, Julian E., “The Democratic Experiment: New Directions in American Political History,” in The Democratic Experiment: New Directions in American Political History, eds. Jacobs, Meg, Novak, William J., and Zelizer, Julian E. (Princeton, NJ: Princeton University Press, 2003), 5Google Scholar.

28. Stark, David, “Recombinant Property in East European Capitalism,” The American Journal of Sociology 101, no. 4 (1996): 995CrossRefGoogle Scholar. Stark's notion echoes Alexis de Tocqueville's analysis of the French Revolution. See Tocqueville, The Old Regime and the Revolution (Chicago: University of Chicago Press, 1998)Google Scholar.

29. Ziemke, Earl Frederick, The US Army in the Occupation of Germany, 1944–1946 (Washington, DC: Government Printing Office, 1975), 820Google Scholar.

30. Stimson, Henry Lewis and Bundy, McGeorge, On Active Service in Peace and War (New York: Haper, 1948) 553–54Google Scholar.

31. See Eisenberg, Carolyn Woods, Drawing the Line: The American Decision to Divide Germany, 1944–1949 (Cambridge: Cambridge University Press, 1996), 2066CrossRefGoogle Scholar. See also, Blum, John Morton, From the Morgenthau Diaries (Boston: Houghton Mifflin, 1959)Google Scholar.

32. See Borgwardt, A New Deal for the World: America's Vision for Human Rights, 207: “The Morgenthau Plan shared a certain reformist sensibility with the New Deal.”

33. See Gramer, Regina Ursula, “From Decartelization to Reconcentration: The Mixed Legacy of American-Led Corporate Reconstruction in Germany,” in The United States and Germany in the era of the Cold War, 1945–1990, ed. Junker, Detlef et al. (New York: Cambridge University Press, 2004)Google Scholar.

34. Elsey, George M., An Unplanned Life: a Memoir (Columbia: University of Missouri Press, 2005), 67Google Scholar.

35. Blum, From the Morgenthau Diaries, 127.

36. Truman, Harry S., “Joint Report with Allied Leaders on the Potsdam Conference (August 2, 1945),” in Public Papers of the Presidents of the United States: Harry S. Truman (Washington DC: Office of the Federal Register, 1945), 185–86Google Scholar. The Potsdam Agreement also allowed for the development of “peaceful domestic industries”—but the term “peaceful” was interpreted narrowly to include any industry that had not aided the Nazis or the war effort (in short, almost no industry).

37. “Germany Without Illusions,” The New Republic, 30 Oct. 1944, 555.

38. FRUS 3:487.

39. Ibid., 485.

40. Ibid., 493.

41. United States Army Service Forces, Information and Education Division, Pocket Guide to Germany (Washington: U.S. Govt. Print. Off., 1944), 4Google Scholar.

42. “City of Death,” Time, Monday, 16 July 1945.

43. “Germany Faces the Winter,” The Economist, 14 Sept. 1946.

44. Clay, Lucius D., “Conditions in Germany, 7 May 1945,” The Papers of General Lucius D. Clay, ed. Smith, J. E. (Bloomington: University of Indiana Press, 1974), 1:12Google Scholar.

45. “Awesome & Frightful,” Time, 5 Nov. 1945.

46. Buchanan, Tom, Europe's Troubled Peace, 1945–2000 (Malden, MA: Blackwell Pub., 2006), 29Google Scholar.

47. Keegan, John, The Second World War (London: Hutchinson, 1989), 592–94Google Scholar.

48. Buchanan, Europe's Troubled Peace, 30.

49. “Interview with General Lucius Clay: Interview #16” conducted by Jean Edward Smith (February 5, 1971), Lucius Clay Oral History, Dwight D. Eisenhower Presidential Library, Abilene, Kansas (DDEPL); Clay, Lucius D., Decision in Germany (Garden City, NY: Doubleday, 1950), 21Google Scholar. See also Smith, Jean Edward, Lucius D. Clay: an American Life (New York: H. Holt, 1990)Google Scholar: “[Clay's assistant William] Whipple complicates Clay's often stated rationale that his primary interest in German recovery was to reduce the drain on the American taxpayer … 'But I do not believe that was his primary reason … He simply didn't like to see the Germans starving'” (338). Nearly all revisionist literature on the early Cold War follows Morgenthau's logic. Either it largely downplays the suffering of the Germans or dismisses the possibility that military government might have found this suffering intolerable. Instead, revisionists argue that military government used the suffering as a “smoke screen” for an ideologically driven effort to capture German industry for use in the Cold War that they initiated (for the best recent summary of these views, see Eisenberg, Drawing the Line). By contrast (and more recently), some human rights theorists have argued that the Allied failure to better feed the Germans amounts to war crimes (see Wiggers, Richard Dominic, “The United States and the Refusal to Feed German Civilians after World War II,” in Ethnic Cleansing in Twentieth-Century Europe, eds. Várdy, Steven Béla et al. (New York: Social Science Monographs, 2003))Google Scholar.

50. “Interview with General Lucius Clay: Interview #16,” DDEPL, 521.

51. Kluge, Ulrich, “Agriculture and European Recovery Program,” in American Policy and the Reconstruction of West Germany, 1945–1955, eds. Diefendorf, Jeffry M. et al. (Cambridge: Cambridge University Press, 1993), 157Google Scholar.

52. Marshall, Barbara, “German Attitudes to British Military Government 1945–47,” Journal of Contemporary History 15, no. 4 (1980)CrossRefGoogle Scholar.

53. Clay, The Papers of General Lucius D. Clay, 1:47.

54. Kluge, “Agriculture and European Recovery Program,” 158.

55. “Interview with General Lucius Clay: Interview #16,” DDEPL, 529.

56. See Clay, Decision in Germany, 15.

57. Clay, “3. Conditions in Germany, 20 April 1945, From Clay for Byrnes (Letter),” The Papers of General Lucius D. Clay, 1:6.

58. “Interview with General Lucius Clay: Interview #16,” DDEPL, 529. Before war's end, military planners had anticipated this problem and questioned the effectiveness of rigorous denazification. In September 1944, a group meeting designed to work out newly conquered parts of Germany took up this question. Assistant Secretary of War Jack McCloy explained, “We can't undertake to eliminate immediately every member of the Nazi Party.” “Why not?” asked Morgenthau. “Because there are too many of them,” answered McCloy. “There are all sorts of grades but one way or another they are all affiliated with the Nazi Party,” he continued. Getting to his point, he explained, “We have a real manpower job … We are going to run an entire nation and we haven't the officers to do it, nor have we immediately the means of finding out who the other [qualified non-Nazis] are. You have a practical problem to deal with.” “You don't mind if I don't agree with you?” demurred Morgenthau (Senate Committee on the Judiciary, Morgenthau Diary (Germany), vol. 1 (Washington, DC: Government Printing Office, 1967): 559–60Google Scholar).

59. See Mann, The Sources of Social Power, 2:59.

60. “Interview with General Lucius Clay: Interview #16,” DDEPL, 560.

61. FRUS, 3:488.

62. Ibid.

63. Clay, “Conditions in Germany, 3 September 1945, From Clay for McCloy,” The Papers of General Lucius D. Clay, 1:67.

64. See Leffler, Melvyn P., A Preponderance of Power: National Security, the Truman Administration, and the Cold War (Stanford, CA: Stanford University Press, 1992), 104CrossRefGoogle Scholar.

65. Fait, Barbara, “Supervised Democratization: American Occupation and German Politics,” in The United States and Germany in the Era of the Cold War, 1945–1990, ed. Junker, Detlef et al. (New York: Cambridge University Press, 2004): 58, 6263Google Scholar. I generally follow Fait's reasoning on the rationale behind the early democratization of the American zone. As she writes, “Clay had sound reasons for hastening the pace of democratization. First, he was convinced that the democratic way could not be taught as theory; it had to be learned by practice, the sooner the better. Second, Clay had a duty to the American taxpayer to reduce America's manpower commitment. This could be achieved only by allowing the Germans greater responsibility. As Clay saw it, however, the transfer of authority to German institutions was out of the question unless those institutions had first been democratically legitimized. And third, Clay felt that the policy being pursued by France made haste necessary,” (57).

66. This, too, is consistent with Mann's understanding of “infrastructural power.” As Mann explains, “Infrastructural power is a two-way street: It also enables civil society parties to control the state, as Marxists and pluralists emphasize.” Mann, The Sources of Social Power, 2:59.

67. See Clay, “Food Situation in U.S. Zone, 18 May 1946, From Clay Personal for Echols,” The Papers of General Lucius D. Clay, 1:208 and “Food Situation in U.S. Zone, 16 March 1946, From Clay Personal for Berry,” ibid., 1:179.

68. “Transfer from Karlsruhe to French Zone (From Clay Personal to McNarney),” ibid., 235.

69. See Krieger, Wolfgang, “Was General Clay a Revisionist? Strategic Aspects of the United States Occupation of Germany,” Journal of Contemporary History 18, no. 2 (1983)CrossRefGoogle Scholar.

70. “Internationalization of the Ruhr, April 1946,” The Papers of General Lucius D. Clay, 1: 196.

71. Clay, Decision in Germany, 280.

72. “Controls may be imposed upon the German economy only as may be necessary (a) to carry out programs of industrial disarmament and demilitarization, reparations, and of relief for liberated areas as prescribed by appropriate higher authority and (b) to assure the production and maintenance of goods and services required to meet the needs of the occupying forces and displaced persons in Germany, and essential to prevent starvation or such disease or civil unrest as would endanger the occupying forces.” (“Memorandum Regarding American Policy for the Treatment of Germany,” 23 March 1945, FRUS, 3:472).

73. This seemed to be in part because Douglas was the brother-in-law of Jack McCloy. (See Eisenberg, Drawing the Line, 67.)

74. “Interview with General Lucius Clay: Interview #17,” conducted by Jean Edward Smith (February 9, 1971), Lucius Clay Oral History, Dwight D. Eisenhower Presidential Library, Abilene, Kansas (DDEPL), 579. In short, McCloy advised Clay to take advantage of the flexibility McCloy himself had worked to include in the directive.

75. Eisenberg, Carolyn Woods, “U.S. Policy in Post-War Germany: The Conservative Restoration,” Science and Society 46, no. 2 (1982)Google Scholar: 28: “During the early fall of 1945 a staff of more than one hundred lawyers and economists was recruited [and] … placed in the Finance Division of the Office of U.S. Military Government (OMGUS) … Since the Treasury was sympathetic to the decartelization program, it had packed the Finance Division with like-minded people.”

76. See generally Joseph M. Dodge, “Reports from Germany,” German Assignment, Box 2: correspondence, Joseph Dodge Papers, Detroit Public Library, Detroit, Michigan (hereafter JDP).

77. Senate Committee on the Judiciary, Morgenthau Diary, 1610.

78. “The Honorable Joseph M. Dodge: resume,” “Dynamic Detroiter,” and “Biography,” JDP.

79. “Letter from Lucius Clay, 10 May 1945” and “Assignment, 1945,” German Assignment, JDP.

80. Dodge, “German Assignment,” 4, JDP.

81. “General Order No. 52, September 12, 1945,” German Assignment, JDP.

82. Eisenberg, Drawing the Line, 146–47.

83. Dodge, “German Assignment,” 2, JDP.

84. Ibid.

85. See Bernard Bernstein and Richard D. McKinzie, “Oral History Interview with Bernard Bernstein” (July 23, 1975), Harry S. Truman Presidential Library, Independence Missouri (hereafter HSTP).

86. United States Senate Committee on Military Affairs, Cartels and National Security: Report from the Subcommittee on War Mobilization to the Committee on Military Affairs, United States Senate, ed. Kilgore, Harley Martin (Washington: U.S. Govt. Print. Off., 1944), 7Google Scholar. See also Morgenthau, Henry, Germany Is Our Problem (New York: Harper & Brothers, 1945), 3338Google Scholar.

87. United States Senate Committee on Military Affairs, Subcommittee on War Mobilization, Elimination of German Resources for War. Part 8. War Department Testimony Hearings, Dec. 11, 12, 1945 (Washington: Government Printing Office, 1945), 1064Google Scholar.

88. Buchheim, Christoph, “The Establishment of the Bank Deutscher Länder and the West German Currency Reform,” in Fifty Years of the Deutsche Mark: Central Bank and the Currency in Germany since 1948, eds. Baltensperger, Ernst and Bundesbank, Deutsche (Oxford: Oxford University Press, 1999), 63Google Scholar.

89. “Letter to Joseph M. Dodge, May 10, 1945,” German Assignment, JDP.

90. See James, “The Reichsbank 1876–1945,” Fifty Years of the Deutsche Mark: Central Bank and the Currency in Germany since 1948, ed. Baltensperger, Ernst (New York: Oxford University Press, 1999): 3149Google Scholar; also Tooze, Adam J., The Wages of Destruction: the Making and Breaking of the Nazi Economy (New York: Viking, 2007)Google Scholar.

91. As quoted in Steitz, Walter, Quellen zur deutschen Wirtschafts- und Sozialgeschichte in der Zeit des Nationalsozialismus, 2 vols., Ausgewählte Quellen zur deutschen Geschichte der Neuzeit (Darmstadt: Wissenschaftiche Buchgesellschaft, 2000), 275Google Scholar.

92. As quoted in Tooze, The Wages of Destruction, 134.

93. “Letter from Joseph M. Dodge to Russell Nixon. November 8, 1945,” German Assignment, JDP. On this point, I depart most clearly from revisionist accounts of the German occupation. See Eisenberg, Drawing the Line, 146–47: “Bernstein's replacement was a long-anticipated, but nonetheless momentous change. For months, he had used his berth to lobby passionately for denazification, industrial disarmament, and economic decentralization.” On my account, Eisenberg et al. see in Dodge a “conservative restoration” largely because they ignore the importance of finance to economic concentration. See especially Gabriel and Kolko, Joyce (The Limits of Power: The World and United States Foreign Policy, 1945–1954 (New York: Harper & Row), 142)Google Scholar: “Essentially, Dodge, like Clay's top advisers, expected to work within the framework of Germany's prewar banking and industrial system.” In my view, Kolko gets the facts exactly backwards.

94. “November 2, 1945,” German Assignment, JDP.

95. “November 13, 1945,” “November 22, 1945,” and “November 27, 1945,” Ibid.

96. Buchheim, “The Establishment of the Bank Deutscher Länder,” 67.

97. “Letter to Gen. Lucius D. Clay, January 20, 1947” German Assignment, JDP.

98. Buchheim, “The Establishment of the Bank Deutscher Länder,” 68.

99. Ibid., 75.

100. Ibid., 73–75; also Gramer, Regina Ursula, “From Decartelization to Reconcentration: The Mixed Legacy of American-Led Corporate Reconstruction in Germany,” in The United States and Germany in the Era of the Cold War, 1945–1990, eds. Junker, Detlef et al. (New York: Cambridge University Press, 2004), 290Google Scholar.

101. Buchheim, “The Establishment of the Bank Deutscher Länder,” 70–80.

102. Clay, Decision in Germany, 334.

103. Most of the literature on this question suggests that Clay adopted a kind of American “corporatism” as a means to solving the economic problem. As Marie-Laure Djelic argues, by 1947 military government had decided to rebuild “a strong West German industry, along the lines of the American corporate model” (Djelic, Marie-Laure, Exporting the American Model: the Post-war Transformation of European Business (Oxford: Oxford University Press, 1998), 163CrossRefGoogle Scholar). See also Maier, “The Politics of Productivity”; Hogan, The Marshall Plan; Hogan, Michael J., “Corporatism,” The Journal of American History 77, no. 1 (1990)CrossRefGoogle Scholar. As I suggest in what follows, Clay largely concluded that German recovery did not require industrial restructuring (along American lines or otherwise) nor did concentrated industry prove antithetical to democratic institutions—with the exception of banking. Rather, once the financial system had been reset, the normal incentives of market economies would naturally revive a largely modern industrial base. As goods became available at real prices, the state would gain the confidence of the populace. Clay could therefore become increasingly agnostic about industrial reorganization.

104. Tooze, The Wages of Destruction, 295.

105. James, “The Reichsbank 1876–1945,” 39–40.

106. Tooze, The Wages of Destruction, 295–98.

107. See Baltensperger, Ernst and Bundesbank, Deutsche, Fifty Years of the Deutsche Mark: Central Bank and the Currency in Germany since 1948 (Oxford: Oxford University Press, 1999), 4142Google Scholar.

108. Colm, Gerhard, Dodge, Joseph, and Goldsmith, Raymond W., “A Plan for the Liquidation of War Finance and the Financial Rehabilitation of Germany,” Zeitschrift für die gesamte Staatswissenschaft 111 (1955): 207Google Scholar.

109. “September 17, 1945,” German Assignment, JDP.

110. “November 13, 1945,” Reports from Germany, German Assignment, Box 2: Correspondence, JDP.

111. John D. Hilldring, “Cable ‘Mission on anti-inflation,’ (January 25, 1946),” German Assignment, Box 1: Correspondence from Gen. Lucius Clay, JDP.

112. Lloyd, E. M. H., “Price Control and Control of Inflation,” The Review of Economics and Statistics 27, no. 4 (1945): 149CrossRefGoogle Scholar. Curiously, despite disagreeing on almost all other points, Milton Friedman concurred with Paul Samuelson and Robert Solow's view that economic knowledge in the immediate postwar lacked a clear understanding of inflation. See the introductory pages of Friedman as well Samuelson and Solow in: Samuelson, Paul A. and Solow, Robert M., “Analytical Aspects of Anti-Inflation Policy,” The American Economic Review 50, no. 2 (1960)Google Scholar; and Friedman, Milton, “The Role of Monetary Policy,” The American Economic Review 58, no. 1 (1968)Google Scholar.

113. “Reports from Germany,” German Assignment, Box 2: Correspondence, JDP. See also Bresciani-Turroni, Costantino and Sayers, Millicent E., The Economics of Inflation: a Study of Currency Depreciation in Post-war Germany (London: G. Allen & Unwin ltd., 1937)Google Scholar; Dupriez, Léon H., Monetary Reconstruction in Belgium (New York: Carnegie Endowment for International Peace King's Crown Press, 1947)CrossRefGoogle Scholar; Foa, Bruno, Monetary Reconstruction in Italy (New York: Carnegie Endowment for International Peace King's Crown Press, 1949)Google Scholar. In Dodge's notes he does not indicate whether he read the English translations of these works or had them summarized and translated while in Germany (or later). Contextually, though, it seems clear that he consulted them around the time of his assignment in Germany and that he referred to these as notes for devising policy. See “Notes on Inflation,” Budget Bureau, Box 10: Inflation, JDP.

114. Dodge, “Notes on Inflation” Budget Bureau, Box 10, Inflation, JDP.

115. Ibid., also “Address of the President: The Annual Convention of The American Bankers Association,” Detroit, Michigan, 28 Sept. 1948, Additional Papers, 8.

116. The Colm-Dodge-Goldsmith report remained top secret for several years after Clay received it. Gerhard Colm and Raymond Goldsmith had both emigrated from Germany before the war. An additional economist working for Dodge in the Finance Division, Taylor Ostrander, recommended them to help with it. A number of additional economists in the Finance Division also helped with the technical analysis that made up the appendices included in it. I focus largely on Dodge because his initial vision provided the outline of the report; in reality, though, the final Cold-Dodge-Goldsmith report reflected the work of many hands. See, for a full discussion of the report: Kindleberger, Charles P. and Ostrander, F. Taylor. “The 1948 Monetary Reform in Western Germany,” International Financial History in the Twentieth Century, ed. Flandreau, Marc, Holtfrerich, Carl-Ludwig, and James, Harold (Cambridge: Cambridge University Press, 2003)Google Scholar.

117. Colm et al., “A Plan for the Liquidation of War Finance,” 215, 207.

118. Colm et al., “A Plan for the Liquidation of War Finance,” 211–14. The report explained the reasoning for the ninety percent reduction: “The ratio of liquid funds in 1935 to national income in that year was approximately .60. If this ratio, which was a normal one for most pre-war years, were to be re-established in 1946, it would be necessary to reduce the sum of currency and deposits to about 20 billion DM. This represents a reduction of more than 90 percent in the present total of currency and deposits, it is an important reason for the recommendation in the present report that new currency be exchanged for old, in the ratio of 10 RM = 1 DM” (222).

119. “Interview with General Lucius Clay: Interview #21,” conducted by Jean Edward Smith (March 3, 1971), Lucius Clay Oral History (DDEPL), 682–83.

120. “Letter from John C. de Wilde,” German Assignment, JDP: “You may have heard that thanks to a herculean effort of Ken Galbraith who got the acting Secretary to intervene with the Secretary of War, the War Department finally agreed to instruct Clay to go ahead with the CDG plan without alteration. Clay accordingly introduced the plan at the 73rd meeting of the Coordinating Committee on August 29, and it was referred to the Finance Directorate.” Dodge and Galbraith worked together through the summer on the currency plan (see also “Letter from Joseph M. Dodge to Dr. Gerhard Colm. July 1, 1946,” and “Letter to Gen. Lucius D. Clay, July 15, 1946,” JDP). It appears that Galbraith used much of what he learned from this experience in drafting his paper: Galbraith, John Kenneth, “Recovery in Europe,” in Planning Pamphlets (Washington: National Planning Association, 1946)Google Scholar.

121. See Clay, “Fiscal Reform (From Clay Personal for Echols),” The Papers of General Lucius D. Clay, 1:245.

122. Ibid, 1:246.

123. As quoted in LaFeber, Walter, America, Russia, and the Cold War, 1945–2002, Updated 9th ed. (Boston: McGraw-Hill, 2004), 58Google Scholar.

124. There is an extensive literature on this. See among many: Hogan, The Marshall Plan; Mausbach, Wilfried, Zwischen Morgenthau und Marshall: das wirtschaftspolitische Deutschlandkonzept der USA, 1944–1947 (Düsseldorf: Droste, 1996)Google Scholar; Hardach, Gerd, “The Marshall Plan,” The United States and Germany in the era of the Cold War, 1945–1990, eds. Junker, Detlef et al. (New York: Cambridge University Press, 2004)Google Scholar; Wala, Michael, “The Marshall Plan and the Origins of the Cold War”The United States and Germany in the era of the Cold War, 1945–1990, eds. Junker, Detlef et al. (New York: Cambridge University Press, 2004)Google Scholar.

125. Buchheim, Christoph, “From Enlightened Hegemony to Partnership: The Unisted States and West Germany in the World Economy, 1945–1948,” in The United States and Germany in the era of the Cold War, 1945–1990, eds. Junker, Detlef et al. (New York: Cambridge University Press, 2004), 259Google Scholar; Mierzejewski, Alfred C., Ludwig Erhard: a Biography (Chapel Hill: University of North Carolina Press, 2004), 67Google Scholar.

126. This episode, including the quotations, comes from Smith, Lucius D. Clay: an American Life, 484–5. See also Mierzejewski, Ludwig Erhard: a Biography, 69–70.

127. Ibid., 486.

128. “The New Rate” (broadcast, 21 June 1948), reprinted in Erhard, Ludwig, The Economics of Success (Princeton: Van Nostrand, 1963), 5051Google Scholar.

129. Buchheim, “The Establishment of the Bank Deutscher Länder,” 61.

130. Clay, “Conditions in Germany, September 18, 1948,” The Papers of General Lucius D. Clay, 2:858–59.

131. Giersch, Herbert et al., The Fading Miracle: Four Decades of Market Economy in Germany (Cambridge: Cambridge University Press, 1994), 42Google Scholar.

132. Mierzejewski, Ludwig Erhard: a Biography, 73; and Giersch et al., The Fading Miracle, 42.

133. Clay, Decision in Germany, 219–20.

134. See Pierson, “Increasing Returns, Path Dependence, and the Study of Politics.”

135. Giersch et al., The Fading Miracle, 41.

136. See Van Hook, Rebuilding Germany: The Creation of the Social Market Economy, 1945–1957, 4 note 5; Steege, Black market, Cold War: Everyday Life in Berlin, 1946–1949, 13.

137. Thomas A. Schwartz, “‘No Harder Enterprise,” 31.

138. Clay, Decision in Germany, 210, 214. In fairness, Clay also felt that these reforms were “given too much credit for the recovery which followed,” suggesting instead that these reforms were important precursors and compliments to the Marshall Plan. In short, the combination of banking reform, currency reform, and the integration of European markets in conjunction with economic aid all worked to bring about economic recovery in Germany (see pages 215–26).