Did you know that the Marshall Plan for Germany after the Second World War was only introduced after the first plan (the Morgenthau plan) was abandoned because it was deemed unworkable? The first plan called The Post-Surrender Program for Germany was the one that the US and Britain wanted to implement and it centered on the complete “pastoralisation” of defeated Germany.
Once the country was divided, the Allies wanted to turn the industrial western part of the country into a giant meadow. In fact, the Nazis were aware of the plan from 1943 and Goebbels used it to try to exalt the jaded German population in the west into one last desperate feat of resistance.
The plan, implemented from the end of 1945, involved dismantling large parts of German industry and shipping it to France and the UK. The idea was that Germany should never again have the industrial power to wage war because these people couldn’t ever be trusted again.
The main areas that were to be reduced to pasture were the industrial Ruhr Valley and manufacturing cities and towns such as Freiburg im Breisga in the state of Baden-Württemberg, which in 1945 was home to the three-year-old Wolfgang Schäuble. Imagine that little boy’s later life and career had the Allies stuck to this plan?
However in 1947, Harry Truman, the US President, surveyed the wasteland of Europe and concluded that the only way this plan could work would be to remove 25 million Germans – like the Schäuble family – from Germany because otherwise these idle people wouldn’t make model peaceful citizens and these people had to do something if the world was to be kept safe from the Germans.
His enlightened vision led to the Marshall plan, which involved the Americans actually supporting and rebuilding the very German industry which produced the weapons that killed hundreds of thousands of Allied soldiers a few years earlier.
In 1948, the Americans underpinned the creation of the Deutschmark, which eliminated all German domestic debt. The Americans facilitated the set up of the Bundesbank and then, in 1953, the Americans and the British oversaw the forgiveness of 50 per cent of all German external debt.
What’s more, the Allies deemed that German debt repayments could only be paid out of the German trade surplus, could never exceed 3 per cent of GDP and, in an inspired move, American contractors in Europe were obliged to buy a certain amount of industrial goods from German manufacturers to make sure that German industry recovered and that Germany had the hard currency to pay this much reduced national debt.
Ironically, the people who benefited most from these measures were Germany’s war generation who were given the chance of a clean slate. These people, like Wolfgang Schäuble, were not lumbered with the sins of their fathers and were given a chance.
Contrast this enlightened and ultimately highly successful approach to Germany’s debts and its economy with the German treatment of Greece.
The reaction to the Greek referendum last week was not to sit up and maybe listen to the Greeks but it was to engineer a run on the Greek banks. The chief baiter of Greece has been Wolfgang Schäuble, the little German boy whose life in 1947 was saved and prospects underpinned by enlightened Americans!
The Germans and their other vacuous pom-pom cheerleaders threatened the Greeks with being forced out of the euro. People panic if their savings are threatened. Threatening your nest egg is a form of aggressive financial warfare. It is a form of psychological terror because the real fear of a bank run is that you will be the last person in the queue at the ATM and every time someone takes money out, there will be a bigger chance that when you put your card in the ATM there will be nothing left. The panic is terrifying.
Contrast this nasty abuse of the average Greek via currency threats with the fact that Americans introduced and financed a stable currency for the Germans in 1947, thus eliminating a source of anxiety for the defeated German people. These were people like Wolfgang Schäuble’s mother with her three infants.
Remember this is the euro that was supposed to be irrevocable. Now it is a conditional currency. We should remember that, and that it is conditional on a set of rules that change when Germany wants them to.
The ECB acted as the executioner in chief here by strangling the Greek banks’ access to funding. As the Greek people panicked and tried to take their savings out of the banks, the ECB refused to replace the exiting money, ensuring that the banks couldn’t re-open.
Just consider this for a minute: have you ever heard of a group of peacetime countries actively trying to wreck another country’s banking system?
Have you ever heard of a central bank actively trying to make a banking system weaker not stronger?
The key mandate of a central bank is to protect the payments system of the currency it prints and the banks in that system. But here we have the ECB, in our name, destroying the average Greek business’ ability to trade. It is doing all this in an effort to turn Europe into a “creditors paradise” where all loans are made good irrespective of whether or not the loans were made responsibly or not.
No one is saying that successive Greek governments are not responsible for this mess. Countries go bankrupt slowly after years of mismanagement, but when we have bankruptcy, both the lender and borrower should pay. The latest austerity terms that the Greeks have been forced to accept today or face being ejected from the Euro will not help Greece grow. Everyone knows this.
So what is the point?
To answer this we have to consider what a crisis should be used for. You can use a crisis to do two things. The first is to identify the problems and solve them so that they don’t happen again. The second thing you can do is use the crisis to teach someone a lesson.
Germany is using this crisis to teach the Greeks a lesson. Germany knows the money is gone and will never be paid back, so it has to look tough to its electorate in order to be seen as in control. The entire Euro project has now being reduced to the politics of the next German election.
Imagine what sort of life Wolfgang Schäuble would have had if Harry Truman had taken that approach to Germany in 1947?