THERE will not be economic or political health in Europe until we have faced and dealt with the German problem. Neither Britain nor France, war-weary, in financial straits and preoccupied with domestic and empire problems, can shoulder the major part of the burden of making a settlement in Germany. The United States is the only western Power which has the capacity, if it has the will, to take the lead and to see the task through. The performance of this task demands American initiative, ingenuity and money in large amounts. The money is not charity; it is part of the cost of World War II. It is also an investment in our own future welfare and security.

Germany must be dealt with in the framework of Europe. If the settlement is to bring economic health to Europe, it must advance the economic stabilization of all of Germany's neighbors and help them to face their common economic problems together. If it is to bring political health to Europe, it must contribute to a reduction of the political tension on the Continent and between the Powers outside the Continent which are hardly less concerned with the future of Germany than are that country's immediate neighbors.

In laying plans to deal with Germany we face these problems and contradictions:

1. If Germany is to be solvent and self-sustaining, and hence is to cease being an object of outside charity, she will, by implication, be industrially prosperous. But the prospect of a prosperous Germany arouses fears of a Germany that may again be militarily powerful and dangerous.

2. Germany's industry is necessary for Europe, and must be fitted into the European economy. But the natural pattern to follow, i.e., integrating the industry of western Germany chiefly into western Europe, will arouse Russia's suspicions that preparations are being made to use Germany against her. Similarly, the absorption of the industrial capacity of prewar eastern Germany (Silesia, etc.) into the Soviet sphere of influence will raise apprehensions in the west of a substantial strengthening of the military potential of Soviet Russia.

3. Democracy cannot be inculcated in a society which is starving and hopeless. But we have historical grounds for fearing that as soon as Germans begin to hope, they will hope for a new Greater Reich.

4. Everyone wants Germany to be "democratic." But the very definition of the word democracy is in dispute between Soviet Russia and her western allies.

Any settlement has its risks. No hazards are greater, however, than a continuance of the present process of disintegration in Germany—political, material, social and spiritual—and of the rivalry among the occupying Powers which has accelerated that process. The following objectives and measures are suggested as elements in a constructive German policy.


Germany should be disarmed and both forbidden and prevented from manufacturing any arms or instruments of war. She should be allowed no military force or military organization except necessary police. She should be prohibited from manufacturing aircraft of any sort, and restricted as to the amount of aviation equipment she may import for domestic transport use. The manufacture of any synthetic product should be limited to types and amounts which would not tend to create a war potential (admittedly not easy to define concretely in the case of oil, rubber, etc.). The great industrial area of the Ruhr should be subject to special control, as indicated below.

Mass armies cannot continue in occupation of Germany indefinitely without the deterioration of their morale, and without reinforcing the feeling of the German people that the occupying forces have lifted from their shoulders the responsibility of doing anything to help themselves. The occupation as now practised should be terminated by all the occupying Powers, perhaps even before a treaty is ratified. This emphatically is not to say that military controls, policed by an adequate constabulary, should not be continued, in addition to political and economic controls.

These controls should be supplemented by an enforcement agreement among the Allies along the lines suggested by former Secretary of State Byrnes, covering a period of 25 or 40 years. We must frankly recognize, however, that controls enumerated in treaties have only the virtue of defining the intentions of the contracting Powers and formulating their agreements. They will be effective only if the Powers have the determination to live up to their agreements and continue to be willing to enforce the controls. Adequate safeguards against German rearmament were written into the treaty after World War I. Germany was able to arm for new aggression because the Allies were divided among themselves and were unwilling to assume the burden of enforcing the treaty by timely action.

The restriction of Germany's industry to a point where she would not be self-supporting would not by itself answer the security problem. Industries can quickly be rebuilt for war purposes, as experience has proved in the past. What will constitute armament in the atomic age cannot be foreseen.


A program of complete deindustrialization, even if practicable, is inconsistent with other Allied aims. If Germany's industry were destroyed, it could make no contribution to the restoration of European or world economy; and Germany herself would remain a burden. Germany must have a viable economy, which means she should have a decent standard of living, regain the hope of improvement through her own efforts and produce enough exports to pay for necessary imports. German industry should be subject to the controls cited above, but not to arbitrary limits in permitted fields of production. The German economy should be so organized as to enable the German people to earn their own way in the world and to contribute to the restoration of European economy.

Reparations. Germany has a duty to help repair the damage she has wrought. But two factors conditioning this duty are her capacity to pay reparations and the effect such payment would have on the European economy. Any final settlement should readjust the Potsdam Agreement and put a substantial end to reparations in the form of plant and equipment. (An exception, of course, would be the equipment of arms plants, which are to be banned in Germany entirely. Also there may be excess scrap, machine tools and the like which might still be taken. The restitution of all looted property should, in addition, be completed.)

Reparations from current production might well be considered as an alternative to reparations from capital assets, but with due consideration for the fact that Germany's exports should meet her requirements for financing essential imports. To some extent, also, German labor might be employed in the production of reparations goods within Germany, especially in fabricating finished products from raw materials furnished by reparations creditors. Reparations from current production of heavy industry might tend to stimulate German heavy industry artificially to an undesirable point. But the same danger would not exist in the case of reparations in the form of consumer goods.

The possibility that Germany might furnish manpower to help in restoring the regions she devastated should also be considered. But this would have to be worked out on a basis which would avoid the forms of economic slavery for which the Nazis justly incurred world obloquy. The labor of prisoners held after V-E day might well be credited on reparation account.

A limit should be set to reparations, both as to time and amount. Payments should not continue after the period of European reconstruction; and if they were limited as to amount, this would hold out hope to Germany of an earlier termination as a reward for effective performance. At the end of a definite period, say 10 to 15 years, any reparation settlement now reached should be reviewed.

The Ruhr and Upper Silesia. The Ruhr should be given a special status and its industries should be operated, under an appropriate allocating authority, for the benefit of Europe, including Germany. The chief countries to consider, with Germany, should be those most naturally integrated economically with the Ruhr: France, Belgium and Holland in first line, and secondarily Italy, the Scandinavian countries, Switzerland and others.

The political separation of the Ruhr from Germany would have unwelcome political consequences. It would lead to irredentism in Germany, and would increase the tensions among the Powers administering the area. It would also leave Germany in an impossible economic situation. But some form of international control is desirable, in the interests of security and of European economic reconstruction. What form should this international control take? The question raises difficult practical problems. The operation of the Ruhr iron, steel and coal industries by nationals of foreign countries which produce and sell the same products would create conflicts of interest. Obviously, the Ruhr should not be allowed to become the stepchild of the heavy industry of France or Britain. A formula must be devised to provide a measure of security control, insure the proper development of the Ruhr's resources, and effect a fair distribution of its products. The task obviously is difficult; but the fact that no wholly acceptable plan has yet been found is not proof that none can be produced.

German finances. The restoration of German economy and the revival of foreign trade will not be fully effective without a drastic currency reform and the establishment of a foreign exchange rate. The oversupply of currency is a major cause of economic stagnation. The excess of money over goods, and the lack of confidence in the currency, reduce the incentive to work; wages will buy too little. Drastic financial reforms which go to the heart of the structure of property ownership cannot be carried out, even on restricted scale, without affecting all property relationships. An attempt to introduce such reforms in only one or two zones, the British and American for example, not only would encounter great practical difficulties, but might prejudice eventual unification with other zones.

The solution of these problems, however, cannot safely wait till the laborious process of negotiating and ratifying a treaty has been completed. A drastic modification of present occupation policies is required. Any reconciliation between Soviet and western ideas in the fields of banking, currency and ownership of property is so difficult to attain that it may be necessary to try to find a modus vivendi by setting up a German financial authority with power, within certain limits, to determine fiscal policy. This suggests that the German settlement may prove to be, of necessity, a series of agreements, the first of which might deal with urgent practical problems, such as the financial one, even before the whole treaty structure has been put together.


The narrowing of Germany's borders during the period of occupation has aggravated the German economic problem. The loss of the food-producing areas in the east, and the transfer of Germans from the Polish-occupied areas and Czechoslovakia, have accentuated the food shortage. The amputation of the important coal and industrial areas of Silesia and the Saar has weakened Germany's ability to produce exportable goods to balance her essential imports. Upper Silesia and the Saar accounted for some 15 percent of Germany's prewar industry, and some 20 percent of her coal.

While no legally binding decisions have yet been taken as to any of Germany's prewar boundaries, certain commitments have been made which, in conjunction with a new situation existing in the east, do not, as a practical matter, leave the United States with free hands. 1. The northern half of East Prussia, including Koenigsberg, has, in effect, been promised to the Soviet Union. 2. The Poles occupy the area eastward of the Oder-Neisse line and have evacuated a substantial part of the Germans in Pomerania, eastern Brandenburg, Upper and Lower Silesia, and East Prussia. The United States has agreed to support a revision of Poland's frontiers with Germany. The extent of the revisions is to be determined at the peace settlement. 3. The special claims of the French on the Saar have been recognized by ex-Secretary Byrnes at Stuttgart.

The following comments may be made on the principal territorial issues. The Saar should be dealt with in a manner to take account primarily of the economic interests and needs of France. The French might well hesitate, however, to assume political responsibility for some 900,000 Germans in the area; these may today lean toward France to escape the German chaos, but tomorrow they could prove a most troublesome element in the French body politic. The border adjustments desired by the Netherlands, Luxembourg, Belgium and Czechoslovakia should be examined to ascertain the true basis of each claim, i.e. whether it involves a rectification of frontier justified on economic grounds, or a disguised annexation of a substantial area for strategic or other less justifiable reasons.

The crux of the territorial problem lies in the east. History will probably decide that the Soviet Union has been pressing Poland farther to the west into Germany than is in Poland's own interest. Recollection of the historic partitions of Poland makes us fearful that there may be another. If she annexes all of the German areas east of the Oder-Neisse, Poland will place herself in a difficult position vis-à-vis the future Germany. Furthermore, Soviet Russia would then have a rich prize to offer Germany to lure her into the Russian camp—the restoration to Germany of her ancient frontiers in the east. Similarly, Russia could hold this as an ever-present threat over any Polish government. The possibility of the coercion of Poland, crushed between Germany and the Soviet Union, is so great that emphasis should be laid on the fact that, once a treaty has been signed, any further modification of the frontiers must have the consent of all the signatories, not merely those whose frontiers are involved.

The desirability of retaining within Germany part of the agricultural areas of Lower Silesia, Pomerania and eastern Brandenburg has already been suggested by ex-Secretary Byrnes. East Prussia and Danzig (except, of course, for the Russian Koenigsberg area), would be added to the prewar Polish territories. There are strong arguments in favor of assigning Upper Silesia to Polish sovereignty, but consideration should be given to working out a special status for its industrial area.

It would be a mistake to assume that we have no right to an influential voice in determining the eastern frontier of Germany. The United States has stated that it would stand by its agreement regarding the cession to Russia of the Koenigsberg area, and the revision of Germany's eastern frontier in Poland's favor; but the extent of these revisions and the status of Silesia remain to be determined.

The industrial area of Upper Silesia is of importance not only to Poland and Russia, but also to the Danube Basin and other parts of Europe. In the interest of the unification and restoration of European economy there should be an examination of the question whether the Upper Silesian industries and coal, like those of the Ruhr, can serve a broader purpose than could be achieved under the exclusive management and control of a single Power.


If a new constitution is to endure, its terms cannot be forced upon the German people from outside. There are two things, however, that can be done.

During the period of occupation we can guide and direct the trends. In the American zone this has been done by developing Laender Governments, and the system now is being followed in the British and French zones. This leads in the direction of a decentralized Germany. (Under any federal setup, of course, the dissolution of Prussia should be confirmed, and stress should be laid on a maximum of cultural autonomy in the states.) In the second place, we can and should set forth in the treaty certain minimum requirements, possibly in the form of a bill of rights, to which any future constitution must conform. In this way we can stipulate that the essentials of a democratic government must be maintained, with freedom of speech, freedom of assembly, freedom of elections, the immunities of the individual, and the like. Failure to maintain these principles would then constitute a violation of Germany's international obligations. The German constitution ought to make any repetition of what happened in Germany in the early days of the Hitler régime a matter of international concern and a German breach of an international obligation.

With the help of old traditions and the patterns set by the occupying Powers, it should not be impossible to guide the course of events in Germany so that the Germans themselves would adopt a federal form of government which reserved to the people of the states of Germany all powers not specifically confided to a central government. The powers of the central government would include: limited powers of taxation; control of commerce and transportation; the regulation of exports and imports; post and communications; banking and currency; foreign policy; and a limited police force to carry out these responsibilities. Also, it would presumably be necessary to have a central legislative body, which might include representatives elected by the people of the states according to regulations prescribed by the states, as well, possibly, as a senate composed of representatives chosen by the legislative bodies in the states. Political and cultural life, however, should develop around the separate states.

The degree of decentralization which is wise and practicable is a matter on which many Americans familiar with conditions in Germany are in disagreement. Some feel that the economic unity essential to Germany necessitates a more centralized government than the one just described, and that a federal political structure would help to perpetuate Communist influence in the federal states of eastern Germany and might encourage reaction in a state like Bavaria. Finally, those who oppose decentralization feel that it would be a delusion to believe that a federal Germany would be any more peaceloving or in practical fact any weaker militarily than a unitary Germany.

To the writer, however, the arguments in favor of a thoroughgoing political decentralization of Germany seem compelling. We can have more hope of developing a program of reeducation if we work with the German people in several smaller political units than in a great unitary state. The power complex of the Germans tends to run riot if given a vehicle through which to express itself. Historically the German people made their best contribution to western civilization in a decentralized confederation. This was a time for them of relative contentment, of peace and cultural progress. When Germany was a unitary Prussianized state, she repeatedly brought war and catastrophe to herself and Europe. Finally, if we are to build up a European union or any form of closer economic community among the states of western Europe, there would be great danger in taking Germany into it unless she were decentralized and federalized, and unless there were a resolute determination that she must remain so; for a strong, centralized Germany would overshadow any other single member of the union in population and potential power and hence would be viewed with apprehension as almost certain to control the union.

These differing views regarding Germany's political future, however, have certain points of common agreement, as mentioned above. Those who minimize the importance of decentralization agree nevertheless that it is wise to build up the cultural autonomy of the German states and give them a certain degree of political self-government. The advocates of decentralization recognize that there must be no trade barriers as between the states of a federation or confederation, and that there must be some form of central administration to ensure this.

There has been disagreement as to where the capital of the new Germany should be. The obvious disadvantages of locating the central government of a federal German state in the old Prussian capital of Berlin have led to the suggestion that this devastated city on the eastern fringe of the new Germany should remain a monument to the frustrated ambitions of the Kaiser and Hitler, and that the capital should be moved westward. Frankfurt might be a suitable site; but if Russian agreement to this could not be secured, then a city of western Saxony or Thuringia might be chosen.

What are we to do if our negotiations fail and Russia remains on the Elbe? We would then seem to have no alternative but to build up the economic life of western Germany as best we can, and integrate it into western Europe. There is no reason why we should not make this clear. Soviet willingness to negotiate an overall German settlement would probably be expedited by the realization that an alternative course of action is open to us, that we would not react to Russian delaying tactics by passively allowing western Germany to disintegrate.


The defeat of Nazism has removed one of the obstacles to the democratization of Germany; but it has not created a democratic Germany. Nor is there much basis for the belief that democracy will develop in Germany under present conditions of defeat, hunger, idleness and despair. One way to help create the conditions in which democracy could take root is to give a hope of decent livelihood to the mass of Germans. This, of course, will not be enough alone, as the aggressiveness of a comparatively prosperous Germany under William II and Hitler proved. But it nevertheless is one essential step.

The effort of denazification should be directed from now on primarily against those who exercised authority in the fields of government, business or the professions—the leaders of the masses rather than the masses themselves. The program to help the Germans reeducate themselves—and they will have to do it themselves if it is to take hold—should be vitalized. A first step is to open Germany more widely to the liberalizing influences of the west, for example, by removal of the restrictions on the entry of newspapers, periodicals and books in English, French and other languages, and in German translations.

From the outset of occupation, the United States has sought to introduce democracy at the "grass roots"—that is, to train the German people in political responsibility at the local and state level. This policy should be pressed with every means at our disposal. Probably the best achievement of our occupation has been the development of local self-government, and the help given to Germans in the setting up of their own Laender Governments. Encouragement has properly been given to the free play of party organizations of all political complexions, and to the formation of labor unions. We must look to the churches, to organized labor and to the few remaining political leaders of proved anti-Nazi antecedents for leadership in the process of establishing a basis for self government. The universities still suffer severely from the dearth of younger professors. It would seem wise to send professors from the United States, England and the western European democracies to help bolster education in the German universities; but the extent to which this can be done is probably limited. Selected German students and younger professors should also be given the facilities to study abroad; and, to encourage the emergence of democratic leaders in various fields, selected young trade union leaders, clergymen, writers and editors should be given the opportunity to make contacts in the United States and western Europe. Such matters are not part of a treaty, but attention to them is essential if there is to be even a slender chance that Germany will follow the path of democracy.

None of the occupying Powers should attempt to impose its particular social system, whether it be capitalism or Socialism. The Germans should be free to determine the measure of state or private ownership of industry which they consider appropriate to their economic position and social structure, so long as it is essentially democratic in its guarantee of human rights.


The German treaty will be formulated by the victors, and if the usual procedure were followed it would be submitted for signature and ratification to a new German Government, composed of the most reputable anti-Nazis we could find. But such a course seems most undesirable. The peace will not be a negotiated one; it will probably be much more of a diktat than the Versailles Treaty. Though the German individuals who signed the Treaty of Versailles were permitted to submit comments, which resulted in modifications, and were, indeed, permitted to denounce it before signing, they were nevertheless discredited in German eyes, and vastly weakened thereby in their later fight against Nazism. So were the political parties which accepted the treaty. Today an even less substantial basis for democracy exists in Germany than did in 1918, and what little there is should not be handicapped in this way.

Theoretically, then, the forthcoming drastic German treaty should bear the signatures of the heirs and successors of Hitler, men such as Doenitz and Papen. Since that is not in fact practicable, the treaty should simply be imposed by unilateral act of the victors. No German signatures would, in any event, give the agreement the characteristics of a binding contract, though any government which takes office in Germany must, of course, agree to be bound by the treaty as a condition of Allied recognition.


We should not look on the German problem merely as a factor in our relations with Soviet Russia. Nor will any settlement which may satisfy Russia and ourselves and lessen tension between us necessarily be a good one. We should view Germany first of all in its European setting. No solution which fails to take account of the needs of Europe will last. Secondly, whatever settlement is agreed on will be illusory if during the long months of negotiation we have been unable to prevent the German economy from disintegration. This will require the expenditure of money in large amounts—the money of American taxpayers—as well as a high degree of intelligent planning.

If the American people are to be asked to contribute additional funds to European and German restoration in order to see their war aims accomplished and in order to secure a chance of consolidating the peace, they are entitled to three assurances: first, that Germany will not be stripped of economically useful assets while we are donating supplies to her; second, that repayment for such advances will not be subordinated to the payment of reparations; and third, that the funds appropriated will be expended under a program of sufficient scope to justify the belief that it will accomplish its purpose.

Our stake in the restoration of European economy is so great that we, as a people, and our elected representatives, must ask for the same boldness of conception and power of execution in facing the German problem today that brought us victory in the fighting war.

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  • ALLEN W. DULLES, American member of the Preparatory Commission for the Disarmament Conference in 1926, and legal adviser to the American delegation at the Three Power Naval Conference in 1927 and at the Disarmament Conference in 1932 and 1933; representative of OSS in Central Europe, 1942-1945, and Chief of the OSS Mission to Germany after V-E Day.
  • More By Allen W. Dulles