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The Morgenthau Plan and the Marshall Plan

J. Bradford DeLong: Comment on Albrecht Ritschl on the Morgenthau and Marshall Plans: University of Pennsylvania Social Science History Seminar: November 2, 2012:

Let me pick up on some threads we’ve already heard this afternoon.

Let me provide a complementary, but I think supportive, perspective on what was going on with Morgenthau versus Marshall in Washington DC in the three or four years after World War II. Possibly my story will have some lessons for the present and the future. But possibly it will not.

Perhaps the most fruitful way to look at the debate between Morgenthau and Marshall that was carried on--largely below the surface, largely without explicit confrontation--at the end of WWII is that it was an attempt to figure out how to resolve call it two historical problems: the problem of European military culture, and the problem of modern industrial war.

First, consider the problem of Europe--the problem of what Mark Mazower has called The Dark Continent. The problem is that Europe appears to have a particularly baneful historical military culture. And it appears or at least appeared as of the mid 20th century that this was a problem of two millennia's standing.

Elsewhere in the world you had destructive war. You had other military cultures that would pillage, burn, and leave nothing but rubble behind. Consider the Mongols: you had that one chance to surrender to the Mongols when summoned to do so. If you did not, then you were badly out of luck: you had to, in the words of Cersei Lannister, win or die. But among the high agrarian civilizations of Eurasia outside of Europe such military cultures these were the exception. in Europe they were closer to being the rule.

Typically wars were ways that relatively small elite groups cemented their control or lost control over governance and jurisdiction. The whole point is not to kill off the peasants and the merchants: they are going to pay your taxes and support you in the style to which you hope to become accustomed. This is true whether you are in Cordova or Algiers or Cairo or Baghdad or Delhi or Beijing. War is an elite enterprise, and mass destruction and depopulation is simply not on the menu.

Europe tended to be somewhat different. War tended to be short-term bloodier for the elites--more decisive and more costly battles, as stressed by Victor Davis Hanson in his absolutely superb The Western Way of War. And decisive defeat tended to be much more likely to be catastrophic not just for military-political elites but for the agrarian and mercantile populations they ruled.

Prophet Samuel's beef with King Saul was that he had enslaved and not killed the virgin daughters of the Amelekites, and that he had taken their herds rather than slaughtering them to feed the kites. The original "Carthaginian peace" was the enslavement or slaughter of the entire Carthaginian population.

In the 2nd century BC, the Kimbri and the Teutones crossed the Rhine River and headed south into the warm sun of the Rhone valley to pillage, burn, conquer and perhaps settle. There is a titanic decade-long struggle that depopulates the entire valley before their armies are smashed by the New Model Roman army of Gaius Marius, six times consul, and their surviving dependent a enslaved. In the 1st century BC it is Gaius Marius's great nephew Gaius Julius Caesar who marches north to conquer Gaul and then crosses the Rhone to pillage, burn, and on the hopes of his adoptive collaterals conquer and settle. Of the ten million inhabitants of Gaul alive at the start of Julius Caesar’s conquest, the ballpark recent estimates I’ve seen is that one million were dead and one million were enslaved by the time a Caesar was ready to make his military bid for supreme power in Rome. .

Ever since then, no century has passed without one if not two or three or more armies crossing the Rhine River to pillage, burn, etcetera--until now. Come next March it will be 68 years since an army has crossed the Rhine under arms. That is an excellent achievement for the post-WWII post-Marshall world.So far we are doing good. We would like that to continue.

We like to pretend that Adolf Hitler's Karl May-inspired dreams of the rapid demographic replacement of the populations of eastern Europe by a rapidly-expanding ethnic German population were an anomaly. And they were an anomaly. But not as much of an anomaly as we would wish.

It was Arthur Wellesley who commanded that not an edible calorie be left between the Portuguese-Spanish border and his position outside Lisbon at Torres Vedras--and Portugal was Britain's ally. It was Louis XIV whose marshals decided to protect their right flank as they moved north into Holland by devastating the Rheinish Palatinate so that no army could cross it and survive. It was Count Tilly whose--Catholic--army for some reason decided to massacre the inhabitants of Magdeburg, a city dedicated to the Virgin Mary.

Why a Catholic general would allow his troops to massacre a city dedicated to the Virgin Mary has always left me extremely puzzled.

Further on back in time, we find Geoffrey Chaucer's Canterbury Tales. Chaucer paints a picture of a well-dressed, civilized, cultivated, and admirable young squire. And then he writes about how this model of courtly courtesie "had been some time in chevachie/In Flanders, in Artois, and Picardie/And borne him well, as of so little space/In hope to standen in his lady's grace". Chevauchee: "chevauchee" means that the British army comes to to France and starts burning things and killing people and animals. They keep burning things and killing people and animals until the French knights come out of their castles and are stupid enough to charge uphill against British archers standing behind sticks.

​That’s the western way of war. By the start of the 20th century Europeans have become quite good at. That is a problem.

The problem acquires a second dimension at the start of the 20th century the problem of Europe's destructive war culture had acquired the second dimension of the problem of modern industrial war: mass mobilization, steel, and explosives meant that the costs of fighting a war escalated astronomically--and we are not even talking about nuclear weapons yet. Norman Angell in his Grand Illusion looked at the coming of modern industrial war. He concluded that it had taken the prospect of general war off the table. Colonial wars against those who could not deploy modern armies were certainly possible. Guerrilla wars of national liberation against foreign occupiers were certainly possible. But general war? Who could possibly be so stupid? Nobody.

People, Norman Angell wrote, no longer went to war to gain an extra province for their younger son to rule. People, Norman Angell wrote, no longer went to war pro majoram gloriam dei. And if you sought to gain control of resources that you could use, it was much much much cheaper to make stuff for export and then spend your money export earnings to buy stuff then to spend your wealth building a war machine and then spend the blood of your young men both in conquest and then in occupation.

By 1945 it was clear that Norman Angell had been totally, completely, hideously wrong. The German Nazi and the Japanese imperial elites had looked the cost of aggressive general war in the face and had pushed the button.

So, come 1945, the relatively large community of people interested in shaping American foreign policy under the Truman administration found themselves sitting in Washington. They looked across the Atlantic at their armies scattered from Prague to Copenhagan in the rubble of Europe. And they wondered just what they should do to try to diminish he chances that this would ever happen again. And the urgency of the task was amplified by the fact that in a world with nuclear weapons and long-distance bombers the simple fact that the United States is protected by two large oceans is no longer any protection.

And so, gradually, largely sotto voce, from 1945 to 1948 three positions on what to do next fought it out, bureaucratically, in Washington.

The first position was the Justice Department's position: do justice--fiat justitia, ruat caelum. There were an awful lot of really guilty people: crimes of genocide and of waging aggressive war worse than any previous crimes in human history carried out by hundreds of thousands if not millions who not only should have known better but did know better. They knew what they were doing: they listened to Heinrich Himmler tell them: "We are so good because we are so evil." And they applauded.

But going into Europe to try, sentence, and hang the guilty would have taken millions of judges and investigators a generation, if traditional legal processes were to be held to--and if you were not going to hold to traditional legal processes, what right did you have other than might alone? Moreover, even in 1945 Roosevelt's confidence that he and his successors could deal amicably and constructively with Stalin and his successors had already gone down the drain, the U.S. military greatly preferred the Fulda Gap and the Main River Valley as battlefields to Long Island, and America sought to use the technocratic expertise of the von Mansteins and von Brauns whom the Justice Department wanted to see at the end of a rope. Fiat justitia, ruat caelum was not going to win in Washington.

Moreover, the other two groups did not believe that doing justice would be sufficient. Hanging the evil struck them as a strategy that at most honored the dead, but did nothing to diminish the chances of another outbreak. People, the other two factions, held, are situational: put any human being in the right environment and they will surprise you with their honor and their charity. Put nearly any human being--or, rather, any male under 50 or so, when the testosterone levels drop--in the wrong situation, and they will do things that will make you wish you had Jack Nicholson in The Shining to deal with instead. You, these two groups of structuralists thought, had to get the social structure right for the future--and getting the social structure right for the future was more important for the future and a better memorial to the dead than putting as many of the guilty as possible at the end of a rope.

The first group of structuralists--of believers in base and superstructure: change the base and the rest will follow--was not Marxist, but I suppose it did contain the only real Marxist in Washington, Harry Dexter White at the Treasury. But they were materialists. They were believers in the material base and the ideological superstructure. Think of Alexander Gerschenkron moving from Berkeley to the Federal Reserve and then on to Harvard, and Gerschenkron's Bread and Democracy in Germany. Think of *Franz Neumann at the Office of Strategic Services, and his Behemoth. They were the source of and the faction that pushed the Treasury-centered Morgenthau Plan.

In their view, the structural problem was that the European way of war and modern industrial war triggered catastrophe when it interacted with the political economy of Germany. The problem was, in a phrase Gerschenkron liked to use, "the marriage of iron and rye" in first Imperial and then in post-Imperial Germany. The warrior aristocracy of Prussia was based on rents paid by a productive farming peasantry that would not successfully demand land reform, with the aristocracy's economic position secured and enhanced through service to the state--usually military service, although possibly bureaucratic--that would bring glory to the family and to the race. That was rye. Then there was iron: the industrial cartels that owed their secure economic position to the fact that they owned the capital and that they could call upon the authorities up to and including the imperial army to keep social democracy at bay.

Rye needs aggressive war to ideologically legitimate their right to draw wealth from the state as its crucial defenders. Iron needs rye to defend its property, and possibly war is good for its own sake to distract giddy and otherwise social democratic minds with foreign policies. After all, if worst came to worst perhaps you could fend off social democracy by engaging in a crusade to the east to bring civilization to the Russian steppe--or "civilization". I remember having my heart broken back when I was 19 or so when I was doing reading for a course Jeff Weintraub was teaching--and I read Karl Leibknecht on the floor of the Reichstag, begging his fellow deputies at the end of 1914 not to do this because Germany of all nation was most unsuited for the historical task of bringing civilization to Russia. And as this month is the 70th anniversary of Stalingrad, we should pause to note that.

These are, I think, the intellectual conceptual origins of the Morgenthau Plan. The Morgenthau Plan was never a settled blueprint. It was a sense that the two large materially-based social power formations in Germany--rye and iron--have to be crushed and eliminated in order to solve at least the German part of the dual problem of modern industrial war and the European way of war. Rye--the Junkers--had already been dealt with by turning Prussia over to Stalin. Iron--heavy industry--remained.

Decartelization and deindustrialization to turn the Rhineland into a place where people would make precision instruments and cuckoo clocks--to return to the vision of Germany as it was in the days when it was the French who were regarded as the mean and militaristic ones and the Germans as the devotees of literature and education--seemed, to those in this faction, a no-brainer.

But the Morgenthau Plan ran into oppostion elsewhere. It ran into opposition from the Department of State, which very soon wanted a rapidly-growing Germany to fit into its plans for economic restructuring, and for a Europe-wide continental market that would do many of the good things that the continent-wide market did for America in the late 19th and the early 20th centuries. And there was War--or soon Defense--which wanted if the balloon went up to fight the Russians in the Fulda Gulf and in the ruins of Wuerzberg rather than fight them on the beaches of Long Island. Defense, especially, wanted Albert Speer's war industries there to provide them with logistical support. And defense wanted General Guderian and Field Marshal von Manstein advising them about what might come as well.

The State and Defense positions win entirely and utterly and completely over the Treasury-based Morgenthau Plan. We get the Marshall Plan instead. I am still not sure why. A bunch of it is that Marshall and Acheson are better bureaucratic warriors than are their Treasury counterparts. Some of it is that Dean Acheson meets Harry Truman when he comes back from losing the 1946 congregational election, while Harry Dexter White does not. A bunch of it is the human imperative of providing relief and seeking rapid economic recovery--which means rebuilding the old division of labor if you want to get it accomplished rapidly. A bunch of it was simply luck.

But whatever the causes, Washington goes for European economic integration, rapid economic recovery, the reintegration of Germany into Europe in its industrial-heavy economic role, and the rapid drive for prosperity. This turns out to be a wild and extraordinary success. Both of its best work. The bet on social democracy at home, among the governments of Western Europe--the willingness to let the Marshall Plan money flow rapidly at least to governments that were either not social democratic enough or too social democratic--is a success. (Paul Hoffman loved to threaten Clement Attlee with cutbacks in his next Marshall Plan allocation if Attlee proceeded to take more of what Hoffman thought unwise ito enlarge the state sector of the British economy further.) And the bet on an open and trading European and global economy was a success as well--bolstered by a United States taht was willing to be the importer of last resort from western Europe and that did not worry too much about inflation.

How many comparisons and analogies should we draw between today, post-World War II Marshall Plan reconstruction, and the post-World War I view that the proper restoration of economic health required that debt burdens be paid and moral hazard be guarded against? The question of whether the analogies between the present and the past and between different pieces of the past are valid is a knotty one. Should we draw lessons from the different results following from the return to the gold standard at the parity of $4.86 to the pound after World War I and the Marshall Plan after World War II?

Today Washington at least is strongly opposed to austerity, to guarding against moral hazard as job #1, to deflation, and to worrying too much about confidence in the currency. When Undersecretary of the Treasury Lael Brainard speaks, she calls for pro-growth policies and symmetric adjustment in Europe. When Tim Geithner speaks, he tells the Europeans to be more aggressive in leveraging up their recovery and rebuilding funds and spending them than he dared to do himself in 2009 and 2010.

Northern Europe, though, hears calls for pro-growth policies very differently than they are meant in Washington. Symmetric adjustment says that there has to be significantly higher than 2% inflation in the northern half of the Europe so that with deflation in southern Europe the continent as a whole hits its 2% per year inflation target. And pro-growth policies require a willingness by northern Europe to become an import of last resort--to play the role that the US played in the 1950s and 1960s. until Richard Nixon got a tired of losing too much hard currency and slammed it down in the early 1970s.

Which way will it go? I have no idea. How actual valid are all these historical analogies? Again I am uncertain.

But I do very much want to thank Albrecht for taking such a convicting and thorough wrestle with such a complicated and hard set of problems.