Making Germany Safe for American Business: IG Farben, Decartelization and The Politics of De-industrializing Post War Germany 1945-1949

In 1944, Henry Morgenthau US Treasury secretary declared that a defeated Germany should lose much of its heavy industry. However, by 1947, western commitment to de-industrialise the Reich was abandoned; James Stewart Martin, in his influential book All Honourable Men, discussing the failure of US plans to democratise German industry, claimed, ‘we were not stopped by Germans but by American business.’ Martin blamed Wall Street’s pre-war ties to German industry for America’s inability to root out the Nazi’s industrial machine. In particular, he dammed his superior officer, General William Draper (a former investment banker) for his obstructionist attitude to the breakup of German economic power. A chief target of secretary Morgenthau’s de-industrializing plan was the German chemical colossus IG Farben, a hostility that predated the war. US officials had evolved a theory that German industry and IG Farben in particular, was a long-term supporter of German militarism, whether Prussianism, the Kaiser or Hitler and that all vestiges of it needed to be eradicated. Progressive ‘new dealers’ like Assistant Attorney General Thurman Arnold and his junior associate Joseph Borkin, saw themselves as the direct heirs of the 1890 Sherman Anti-Trust acts, using legal regulation to end corporate maleficence. Their aim was hardly socialist transformation, but to make capitalism better and more effective. These ideas also owed much to the American progressive political tradition, with its distrust of monopoly economic power and they achieved real force with the Morgenthau plan to pastoralise Germany, but crashed amid the reality of the burgeoning cold war; leaving West Germany to achieve a Wirtschaftswunder, led by the same industrial elite who had waged Hitler’s war. This paper examines why decartelisation in Germany was a relative failure, what the US wanted from the liquidation of IG Farben and why it too failed.