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Formation of U.S. State Department Economic Foreign Policy for the Occupation of Postwar Germany, 1939-1948 Rick Jeffers University of Wisconsin-Milwaukee

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Formation of U.S. State Department Economic Foreign Policy for the Occupation of Postwar Germany, 1939-1948 Rick Jeffers University of Wisconsin-Milwaukee University of Wisconsin Milwaukee UWM Digital Commons Theses and Dissertations May 2015 Formation of U.S. State Department Economic Foreign Policy for the Occupation of Postwar Germany, 1939-1948 Rick Jeffers University of Wisconsin-Milwaukee Follow this and additional works at: https://dc.uwm.edu/etd Part of the Economic History Commons, and the United States History Commons Recommended Citation Jeffers, Rick, "Formation of U.S. State Department Economic Foreign Policy for the Occupation of Postwar Germany, 1939-1948" (2015). Theses and Dissertations. 884. https://dc.uwm.edu/etd/884 This Thesis is brought to you for free and open access by UWM Digital Commons. It has been accepted for inclusion in Theses and Dissertations by an authorized administrator of UWM Digital Commons. For more information, please contact [email protected]. FORMATION OF U.S. STATE DEPARTMENT ECONOMIC FOREIGN POLICY FOR THE OCCUPATION OF POSTWAR GERMANY, 1939-1948 by Rick Jeffers A Thesis Submitted in Partial Fulfillment of the Requirements for the Degree of Masters of Arts in History at The University of Wisconsin-Milwaukee May 2015 ABSTRACT FORMATION OF U.S. STATE DEPARTMENT ECONOMIC FOREIGN POLICY FOR THE OCCUPATION OF POSTWAR GERMANY, 1939-1948 by Rick Jeffers The University of Wisconsin-Milwaukee, 2015 Under the Supervision of Professor Winson Chu This study examines how a firm belief in the economic doctrine of multilateralism triggered a powerful policy-determining crusade within the U.S. State Department. This doctrine was fundamental to the establishment of postwar foreign policy toward Germany. It was present in 1939 during early planning meetings and lasted through to the 1948 division of Germany. The equitable application of multilateralism as a basis for foreign policy determination was not initially accepted by other sectors of the U.S. Government; but over the course of this period State Department officials were able to overcome intergovernmental resistance. Motives for postwar planning for Germany were based on concerns over the growth of economic nationalism, which had led to a dramatic decrease in international commerce during the 1930s. This paper follows the web of multilateral foreign policy implementation as it weaves it way through the early planning process, interdepartmental disagreements, severe problems during the military occupation, and finally an impasse with the Soviets over occupied Germany. ii Copyright by Rick Jeffers, 2015 All Right Reserved iii This work is dedicated to My wife Geri And sons Scott and Matthew I would like to thank my major advising Professor Winson Chu, along with Professor Aims McGuinness, and Professor Christine Evans for their guidance and support. I would also like to thank my wife Geri for her patience and help proofreading. I would like to acknowledge Scott Jeffers, Mathew Jeffers, and Mary Sigrist for their assistance with reading and editing, and Julie G. for her assistance in proofreading. I would also like to express my gratitude to Peter B. and Jonathan B. from the UWM Writing Center for their contribution to this project. iv TABLE OF CONTENTS List of Figures……….………………………………………………………………...vii List of Abbreviations…………………………………………………………………viii Introduction ......................................................................................................................... 1 Historiography ................................................................................................................ 4 Primary Sources ............................................................................................................ 12 Chapter Summaries and Related Secondary Sources ................................................... 13 Chapter I............................................................................................................................ 17 1939: An Assessment of Risk and Opportunity ................................................................ 17 The Growth of Economic Nationalism ......................................................................... 17 German Policy and Economic War............................................................................... 21 The Economic Consequences of a German Victory ..................................................... 28 What Was at Stake for the Postwar Period? ................................................................. 35 A State Department Consensus on How to Plan ........................................................... 37 Building a Multilateral World ....................................................................................... 43 Chapter II .......................................................................................................................... 45 1939–1944: Early Postwar Planning ................................................................................. 45 Two Agencies Set the Agenda ...................................................................................... 45 The CFR War and Peace Studies .................................................................................. 45 The ACPFP ................................................................................................................... 50 Policy Papers Produced by CFR and ACPFP Members ............................................... 53 Isaiah Bowman, the Attainment of American Economic Lebensraum ......................... 61 Sumner Welles, Europe, and Early Proposals for World Design ................................. 64 Early Perspectives on German Partition ....................................................................... 68 Department Rivals Push Back ...................................................................................... 71 v Chapter III ......................................................................................................................... 76 1944–1945: Interdepartmental Struggle ........................................................................... 76 The Treasury Department Offensive—August 1944 .................................................... 76 Treasury Department’s Position ................................................................................... 81 War Department’s Position ........................................................................................... 87 State Department’s Position .......................................................................................... 91 The President’s Influence over Planning ...................................................................... 98 JCS1067 and a Period of Deficient Planning .............................................................. 101 Chapter IV ....................................................................................................................... 105 1945–1948: The Occupation Period ............................................................................... 105 Redressing US Occupation Policy .............................................................................. 105 Eliminating German Cartels ....................................................................................... 116 Germany Moves Toward a Crisis. .............................................................................. 120 US Policy and the Division of Germany..................................................................... 127 A “West” German Recovery ....................................................................................... 131 Chapter V ........................................................................................................................ 133 1947–1948: An Integrated West Germany ..................................................................... 133 Introduction ................................................................................................................. 133 State Department Policy: 1947–1948 ......................................................................... 139 The European Recovery Program and West Germany ............................................... 148 Conclusion………………………………………………………………………………154 Bibliography……………………………………………………….…………………158 vi LIST OF FIGURES Map 1: Sumner Welles Map…………………………………………………………….73 Map 2: FDR Map………………………………………………………………………..74 Map 3: Treasury Department Map………………………………………………………75 vii LIST OF ABBREVIATIONS ACC Allied Control Council ACPFP Advisory Committee on Postwar Foreign Policies CEEC Committee of European Economic Co-operation CFM Conference of Foreign Ministers CFR Council of Foreign Relations EAC European Advisory Commission ERP European Recovery Program FRUS Foreign Relations of the United States Collection GATT General Agreements on Tariffs and Trade IAR International Authority for the Ruhr ITO International Trade Organization SHAEF Supreme Headquarters Allied Expeditionary Force viii 1 Introduction At the dawn of the twentieth century, Germany stood at the hub of a delicate commercial trade network that covered much of the world. World War One and, even more so, the Great Depression had shaken that structure until the final calamity struck in 1939, leaving a world barren and defaced. The post-WWII effort to rebuild this multilateral trade network was spearheaded by the US State Department. Their effort was unique; it called for a concerted large-scale effort by a victorious United States to partner with its wartime allies and drastically expand the international trading system with the intent of creating prosperity for all. Even the defeated
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