Our comments in Red.

The black text is Henry Morgenthau Jr, US Treasury Secretary 1944.

"Under the Nazis, German business assets abroad never were considered as the private property of their owners but as a weapon of economic aggression, political intervention or military preparation for the German state.

The state decided just what business its citizen might keep abroad. Then the state told him what to do with it. One group would be kept operating at enormous loss (met by domestic subsidies) to draw a foreign nation's economy or part of it under German influence. Another would be commanded to use its funds for propaganda, espionage, sabotage, bribery or some- other form of political penetration. Still another would be the medium for stockpiling materials needed in the coming war — oil, rubber, nickel,tungsten, etc.

The effect of this was so obviously dangerous that six months before Pearl Harbor, on my
recommendation to President Roosevelt, the Treasury "froze" all German assets in this country. Most of the other American republics followed our example for their own protection from the Nazis.

As one specific example, the production of magnesium in the
United States was limited by cartel agreements so that even under the spur of the defense emergency our output had gone up from 2,500 tons to only 5,680 while the Germans were turning out 19,000 tons. It was this sort of thing which prompted the Kilgore Committee to declare:

"Almost immediately, as a consequence of this unholy alliance between Germany and the cartelists, Germany's plans for economic warfare, aimed at ultimate world domination, were expanded. The German Government became a silent partner in the multitude of cartel agreements among German, American, British, French and other concerns with which German industry had established cartel relations.
Under cover of cartel agreements, Germany penetrated the economy of other nations, including the United States. Using their cartel affiliates or subsidiaries, German industrialists built up a network which impaired the production of other nations, obtained sources of foreign exchange for Germany, gathered economic intelligence and spread German propaganda."

The notion that German heavy industry is indispensable to the well-being of Europe is a myth sedulously nurtured by German propaganda over many years. Among those who are trying to keep it alive today are the men who did business with the German cartels in the past, to the profit of themselves and the ruin or near ruin of their own countries.

Germans dominated the cartels and used them for war, not because they were wiser or stronger or wealthier but because they concentrated on building for aggression. German members, who virtually had their government as a silent- senior partner, were mainly bent on carrying out that government's aggressive policies. Other nationalities joined the cartels for strictly business reasons. The German was linked with his government in a campaign of economic conquest. The American, at the other extreme, was frequently defying his government and in any case concerned solely with the cartel as a means of making money or consolidating industrial power. Therefore the German had a clear field for deploying industry as an auxiliary of the Army. Their colleagues in other countries were usually satisfied with profits, freedom from competition at home and at most a share of foreign markets on a comfortably arranged basis to keep prices up.

Besides the usual clauses limiting production and market territories, American Bosch had to pay such high royalties to Germany for fuel injection pumps and nozzles that in 1939 it wrote the parent company:
"The production of Diesel engines during the past year has declined greatly.... The fundamental problem affecting the further development of Diesel engines in our country today ... is almost entirely one of price."
But Bosch of Stuttgart kept the royalties so high that American manufacturers preferred gasoline engines. By 1941 this so seriously hampered our Navy in its building program that on June 19 it pleaded for a "second source of supply." American Bosch had no right to license any other firm to make the vital fuel injection pumps. It had to ask Germany for permission to give this aid to the American defense program!

In 1942 one of the reasons given for the success of the U-boats against our shipping was our hopelessly inadequate Diesel engine production. Germany had barred us from going into large-scale manufacture of an essential anti-submarine aid.

At a whole series of vital points, American production for war was hampered as it had been for peace by the dominant position of German heavy industry. It happened in optical goods, in synthetic rubber, in tungsten carbide for machine toots, in atabrine to fight malaria, in high octane gas, in the new explosive tetracene, in magnesium and beryllium and plexiglass.

If Germany could fit the industrial powers of the United States into her pattern of world conquest, it is easy to guess how completely she could control nearer and weaker neighbors. But we do not need to guess. We know.


In 1926 an international steel cartel was organized. At the time, Germany produced only 2½ per cent more pig iron than France. The cartel agreement fixed the quota of each member, and each was to pay into a common pool one dollar for every ton it produced. But for every ton produced over the quota, the producer had to pay by way of a fine an extra four dollars a ton. The French very thriftily kept within their quota and even cut production a bit now and then to save the dollar a ton. The Germans, on the other hand, seemed to have gone on a spree. They regularly exceeded their quota and cheerfully paid the fine. In one year it amounted to about $10 million for 2,500,000 tons excess production. But it turned out that the Germans knew what they were doing. After a few years they argued plausibly that their increased capacity was so great that it entitled them to a bigger quota. Their increased capacity — second only to that of the United States by then —gave them the power to beat their European rivals over the head to get what they wanted. Their pig iron quota was raised, and by 1938 German steel production was 23,200,000 tons while France droppedto 6,200,000.
Without the cartel deal, the two countries would normally have developed along about the proportions of 1926.

Germany could get away with it in part because German cartel members were part owners of all the important steel and chemical companies in Europe.
It was the same steel cartel that showed how an industry can be strangled at birth in a little European country. Shortly before the outbreak of the war, Greece was planning to build steel mills of her own.

Germany not only refused to supply any equipment after having gained a predominant place in the Greek economy, but used her influence to keep other members of the cartel from doing so. In a letter from the German Steel Cartel to the international body, appears this paragraph:

"We have left no stone unturned in order by all means to prevent the establishment of an iron industry in Greece."

German cartelists prevented the growth of French dye industries and blocked the establishment of a French synthetic oil industry. French industrialists were permitted to make money, but their country was fatally weakened both in the useful crafts of peace and the grim necessities of war. Through all this growth of German power—achieved because the German government joined the German cartelists in an unequal economic battle against foreign industries—there grew up a legend that Germany was a huge and essential and irreplaceable market for the raw materials of Europe. Yet the figures show she was even less of a factor as a buyer than as a supplier. Almost no one in Europe would miss her heavy industries as a market.

By slowly de-industrialising other European nations by stealth (including 'cuts' imposed on Eurozone countries - crushing their economies, rather than growing them), as well as market aggression (such as the Bombardier/Siemens Train debacle), the benefit to Germany is two-fold; Short-term, (1)Germany becomes cash rich - (2) she grows her ability to switch to a war-footing, as the UK for example, with no metal industry to speak of, would no longer be able to produce war material to sufficiently compete. Consider the German influences that really kicked in during the 70's, crushing the few remaining metal-based industries in Britain. The remainder, like Rolls Royce, purchased by Germany outright.

Other nations would be receiving German steel, German railway cars, German machines, German trucks and buses, German electrical goods, German textiles, German chemicals. They would become so dependent upon German industry that they would never be able to break away, and would find themselves helplessly caught in the German net as soon as the newly powerful Reich felt strong enough for another fling at war.

Now consider post-war developments such as allowing Germany to re-arm, re-gain control of Ruhr Coal etc, bearing in mind these comments by Morgenthau in 1945;

The danger to America and the world is not to be found in these arguments so much as in the fact that some of those who put them forward press them without much real belief in their truth. If they avowed their actual motive, the people could be relied upon to repudiate the program promptly. Americans know that it is Germany they have had to fight twice in a quarter of a century, not Russia. They know that our soldiers were killed and our civilians torpedoed by Germans, not Russians. They know that our own industries have been hog-tied by German cartels, not Russian. They know that plans for the subjection of the Western Hemisphere were laid by Germans, not Russians.

It is a rather lame apology to say that these facts should not be aired in public because the Russians might learn how certain officials of the United States Government are thinking. Such disclosures, it is said, might endanger our relations with Russia at a critical moment. But the Russians are quite well aware of this attitude on the part of some of our own and our Allied officials. In daily dealings between governments, such a fundamental point of view soon makes itself evident.

It is a point of view to which we can trace many of the mistakes of "the long armistice." At the Paris peace conference in 1919, the assembled statesmen displayed an almost hysterical fear of Russian Communism. They were afraid Soviet armies would come bursting forth from Russia in every direction, although almost any impartial, informed man could have seen clearly that the Russians were having all they could handle at home.

The fear of Russia had a good deal to do with modifying Allied terms in favor of Germany.

This bogey of Russia played into the hands of the German aggressors from then on. Yet the Allies had been forewarned, as we have been forewarned. As early as 1915, one of Germany's principal psychologists and philosophers, Hugo M√ľnsterberg, wrote:

In the perpetual striving of the nations there came one historic moment in which the two great antagonists, England and Russia, necessarily had a common wish, the crippling of Germany. That one common impulse brought them together for one day's common work (it took four years). But if the sun were setting over their common success, the next morning would necessarily find them the old embittered enemies.... Never would Germany's power be stronger than in the hour in which it had to decide whether Central Europe ought to go with England against the Russian Empire or with Russia against Great Britain. To cripple Germany means to hasten the hour in which this battle between England and Russia must be fought, and compared with that fight, the war of today may appear only as the preamble. 

This is a German tune that was played with monotonous regularity—and almost as monotonous
success—by the empire, the Weimar Republic and the Third Reich right up to Hitler's cry of November 12, 1944:

"Today, too, many foreign statesmen, parliamentarians and party politicians, as well as economists, have realized the necessity of saving Europe from the Bolshevik monster. Practical results, however, can be achieved only if a strong European power succeeds in organizing this common struggle for life or death, overruling all theoretical hopes, and in waging it to a successful conclusion. This can be done, and will be done, only by National Socialist Germany."
By 1944, even Hitler had worked this line too hard to command belief. But in the past it had served his turn. It brought him some of his most notable triumphs, culminating in the Munich appeasement. It failed to work at last when Russia and her present Allies joined to crush the real danger, but men with Munich minds—and they include some high in Allied councils—are as gullible as ever. Their point of view is no less dangerous to free nations now than it was in 1938, for it can destroy an essential pillar of peace, the continued cooperation of the United States, Britain and Russia.

The test of the effectiveness of this propaganda will come in our treatment of Germany. Our Allies will rightly regard this as a much more realistic preview of our intentions than anything public men may say. If our policy is designed to buttress Germany as a bulwark against Russia, it will do more to breed another world war than any other single measure we could adopt in the whole conduct of our foreign affairs.

The Germans are not a highly original people in the realm of ideas. We can expect them to continue to use the Communist scare which has served them so well in the past. They never lose sight of the fact that a really demilitarized, de-industrialized Reich will have no stakes with which to buy into the game of power politics. But a strong Germany could not only get into the game; she could force the rest of the world to play it no matter how much against the will of all peoples. If we build up Germany as a strong bulwark, we can expect her to play off Russia against the western Allies, offering the might of Central Europe at auction to the highest bidder. We would never be sure whether the Germans would fight with Russia against the United States or with the United States against Russia. Probably she would be fighting alone, or with such smaller satellites as she could force into lier orbit through the influence of her industrial power. But certainly she would be fighting, and for world domination again. We would simply have repeated with even less excuse the most fatal blunders of the past.
That point of view was widely held by a variety of statesmen between the 1918 armistice and the outbreak of war in 1939. Nor can it be spoken of entirely in the past tense. Today it motivates a goodly proportion of those who expound the view that a strong Germany is an advantage to her recent enemies in the West.
As a result, the people could find themselves at odds with Russia over a point which this self-styled superior wisdom has not allowed them to understand, while at the same time Germany would have been permitted to recruit her strength for another era of aggression and war.

"If... we are so stupid as to let Germany train and equip a large army and again become a menace to the world, we would deserve the fate which such folly would bring upon us."

So wrote the gentle and wise Colonel House in 1919.

To "train and equip a large army" add the phrase "or build a strong heavy industry" and the words are as true today as we now know them to have been then.

The Mindset
Germans were not so much uneducated as they were elaborately and deliberately miseducated. The medieval belief that war was not only the sole profession fit for a gentleman but that it was also the best trade for a common fellow survived in Germany long after it had been outmoded in all the rest of Europe that passed for civilized. It survives today. To that belief was added and is still added a sedulously fostered conviction that the German is not only a better man than any foreigner, other peoples have indulged the same conceit— but that the German is destined to rule over the inferior people, too. The conception of that rule as a civilizing mission was notable by its absence. Germany was to dominate the world with lash and club for the sole comfort and enrichment of Germans.

The Nazis pushed these theories further in practice than any of their predecessors, but they could not have done it without the generations of preparation. The German people had to be cultivated intensively for nearly two hundred years before they could produce those finest Nazi flowers—the gas chambers of Maidaneck and the massacre of Lidice. It would be a highly reckless gamble to act on the wishful thought that the blood of nearly six years of war has not only fertilized this soil but changed its character. For the traditional German will to war goes back as far as our own traditional will to freedom.

While Americans were debating the rival political philosophies of Jefferson and Hamilton, and deciding that they preferred the greater promise of democracy, Germans were reading a complete
preview of the Nazi regime. It was 1800 and the United States was enjoying the hottest presidential campaign of the new century, but Johann Gottlieb Fichte had just anticipated Hjalmar Schacht with a book called "The Closed Commercial State". Briefly his program called for a planned economy, barter trade with other countries, blocked currency, concealed inflation, ersatz materials. The objective was Lebensraum, and to get this German living space, Fichte called for intensive armaments, the occupation of desirable territory and the transfer of populations. In a Europe dominated by Napoleon, this could be confused with patriotism, but it did not die with the French dictator.

In the next generation, while the British people were concerned with no political subject so much as the Reform Bill, which finally passed in 1832, Germans were studying Hegel. This paladin of German philosophy taught that the state was the most perfect manifestation of God in the world of men; that the Prussian state was the noblest expression of that heavenly mandate, and that its emergence was the culmination of the historical process.

During this period and for many years afterward, the German people's resources for war and conquest were ridiculously inadequate to the grandiose tasks for which they were being prepared. France, England, Russia, Austria were the big powers, and even Prussia could not at the time be considered in the first rank. But German teachers continued to preach a gospel of war and racial superiority. As Heine said, they were in no hurry. About the middle of the century one of the Germans whose words were most widely quoted was Johann Wappaus, a geographer. He was instilling into the German people a belief that the Latin, Negro and Indian races were quite incapable of any sustained effort unless driven to it by their superiors "through the weight of an iron will or the foreman's lash."

Wappaus left no doubt that both the will and the lash should be German. Consider German treatment of Greece in 2012.

"For us Germans the abolition of war can become possible only—if at all—when the German Reich,
that is, the Pan-German Reich in the widest sense, has become the Super-State, the supreme power, in the world."

As a new century was ushered in, most peoples of the world were hoping it would be one of profound peace. But the German Admiral von Tirpitz was talking earnestly about the possibility of seizing a naval base for Germany in the Caribbean. The Pan-German leader, Dr. Wintzer, spoke about protecting the interests of Germans overseas, referred magniloquently to "the universal mission of the German race" and demanded that Germans everywhere recognize their "duty to work for a policy of systematic expansion."  Hence as previously mentioned, right the throught the 20th Century, German international businesses are doing thebidding of the German state, for German economic-imperial ambitions.

Hitler;Sudetenland in 1938;
"A defeated nation can even better than a victorious nation be trained and prepared for the day of final victory. It may happen that I cannot win victory at once in this coming war; we may be forced to interrupt it. Then we will all be back underground. But after some years, when the weak and inefficient democracies will have utterly failed to solve the world's postwar problems, then we will suddenly break loose from underground and our stupefied enemies will discover all too late that millions of their own youth, misguided by weak education, disappointed by democracy's failure, will be on our side. Victory in this Third World War will be quick and easy."

Germans will remember much more clearly how close they came to victory than how they came to be defeated. But even if they had not come so close, the will which has supported two world
wars with terrible tenacity and virtual unanimity will not be broken by a few disasters. Desire for war has been as firmly planted in the German as desire for freedom in the American. The process has been going on in both for about the same length of time. Few people would suggest that the German is the less stubborn of the two. Yet how many decades would a conqueror need to kill the spark of freedom in America? Optimists may hope that the extinction of Germany's lust for war could be accomplished in no longer a period. But if they are realists, too, they will not take a chance that it can be done any more quickly.

EVERY PROPOSAL SAVE ONE FOR blocking a new German war effort is predicated on the theory that Germany either hasn't really any will to war—it was all just a couple of mistakes—or else that the German will to war is so weak that it can be eradicated by one method or another before it has a chance to do any more harm. The one plan for peace which does not rest on any such shaky foundation is to deprive Germany of the power to wage effective modem war. The simple logic of this formula runs about as follows:

If Germany does not want to start another war in twenty or thirty years, it will be small hardship to deprive her of the means of doing so.

If Germany does want to start another war, no hardships that might prevent it would be too severe to impose.

In either case, Germany and the world will be a great deal safer and happier if the Reich loses her war potential.

She has not lost it yet. The vivid descriptions of the devastation wrought by Allied bombing and shelling served to obscure rather than paint the true picture. Miles of rubble and the twisted skeletons of buildings not quite leveled may be the appropriate tombstone of the Hitlerian madness. But they are not proof of German heavy industry's death. The bombs and shells made no more than a start on the job of destroying that; the Allies must complete the task with a thoroughness which should take no account of the momentary convenience of occupying authorities.

Germans did not even wait for the 1919 peace treaty to be ratified before they were preparing to scuttle those provisions of it which seriously interfered with their plans for another war. Those plans were based upon German supremacy in metals and metal products, in chemicals, in machinery of all kinds. Once they had that, they had supremacy in arms any time they wanted to convert to military purposes.

At least as early as 1920, the year the Versailles Treaty was ratified, the German industrialists began their campaign of building up heavy industries, using funds held abroad so that they escaped seizure and combining among themselves for bigger mergers. Typical of them, and one of the first, since it was organized in 1919, was the octopus-like I. G. Farben  which was soon to get back the patents seized by the United States during World War I. The president of the new colossus was Karl Bosch, inventor of chlorine poison gas, and the chairman was Karl Duisberg, the principal developer of ersatz products in Germany up to that time.

This and other combines had mapped out a program of reconstruction and expansion for their factories even before the defeated German troops had been demobilized. Their plans were under the supervision of the clandestine general staff, but the first task was simply to outbuild Europe in all heavy industry without worrying about specific application to war uses. Both the general staff and the German industrialists knew that conversion to war was a relatively easy matter once industrial capacity was achieved.

As early as 1924, the German government took a census of machine tools then in existence. From that date, all specifications for new machine tools had to be submitted to the Reichswehr so that the Army could be sure they were suitable for military purposes when the moment came to use them. The industry was expanded rapidly, until it too ranked second only to that of the United States.
Side by side with the development of heavy industry and as an indispensable part of that development, Germany expanded her industrial research facilities. Science was at work in factories all over the world, but in Germany it was virtually in the Army. Technical progress was directed by the general staff in great measure, and research for war was pursued under the guise of peace when that was necessary and quite openly when concealment ceased to be important.

Profiting by the experience of our failures in the past and our all too well-founded suspicions of the future, this should involve five sets of controls.
They should be aimed at:
1. Preventing the rise of any political movements in the military, Nazi or Pan-German tradition. (Failed)
2. Preventing the same influences from creeping into German channels of information and education. (Failed)
3. Preventing facilities for the production of armaments. (Failed in less than 4 years)
4. Preventing the transfer of a German nucleus for aggression to some other country where it could operate until a chance to repatriate it occurs, and suppressing those already established in countries that have been sympathetic to Nazism. (Failed - Argentina and Mid-East)
5. Preventing scientific and industrial research which could lead to development of new military techniques." (Failed in less than 4 years)