What should be done with Germany after the war? The problem of how to handle a defeated Germany spawned intense and bitter debate within the highest levels of American government. The divisions only intensified as victory came into view. Treasury Secretary Henry Morgenthau’s plan was to remove all heavy manufacturing capabilities from the defeated nation. The Germans had launched two world wars, and it was time to ensure that they could never trouble their neighbors again. But given the widespread food shortages expected to come after the war, stripping the country of its factories and machinery would almost certainly lead to mass starvation, and everyone knew it. Morgenthau’s plan could only seem cruel. It was a modern-day version of a Carthaginian peace, and at the Treasury Secretary’s urging, President Roosevelt signed on. The problem was that most other members of the administration opposed Morgenthau’s plan, and they launched a rear-guard action to defeat it.

Both sides in the battle over postwar German policy shared the same ultimate objective: to reduce the likelihood of another world war. The question was how to achieve it. Both sides could make compelling cases. In Treasury Secretary Morgenthau’s view, future peace required the dismantling of Germany’s capacity to wage war. It was that simple. Remove their means of manufacturing the weapons of modern war, and the Germans could not threaten the peace. By contrast, War Secretary Stimson believed that peace required prosperity, and by forcing Germany to subsist at artificially low living standards, the Allies would breed resentments that would undermine stability. Morgenthau’s view was a negative conception of world order: disintegrate Germany from the calculus of great power politics, and the result would equal peace. Stimson’s view was more positive: reintegrate Germany into European recovery, and the Germans would become stakeholders in an interdependent world. Roosevelt’s advisors split down this divide. Their position depended in large part on what each believed about the German people, themselves.

War service completed Kindleberger’s intellectual formation, establishing him as fundamentally an intelligence analyst. First in London as Chief of the Enemy Objectives Unit, then on the Continent as advisor to General Bradley, and then after the war at the State Department working first under William Clayton on the reconstruction of Germany and then under George Marshall on the reconstruction of Europe, Kindleberger’s government service career provides a staffer’s eye view of the dramatic events of war and reconstruction.

Chapter 1 traces the development of Allied internment policy from 1943 to 1946. It examines the discussions and statements of the UK, USA, and USSR, including at their European Advisory Committee and in the Potsdam Agreement of 1945. It analyses arrest directives issued in 1944–5 by western military authorities and the Soviet NKVD and discusses the Allied Control Authority’s attempt to develop a detailed quadripartite policy in late 1945/early 1946. It shows that the British were more enthusiastic and that the ‘Morgenthau Plan’ was less significant for US policy than is generally believed. The chapter argues that security, punishment, political change, and reparatory labour all featured in Allied thinking and that internment was consistently conceived as an extrajudicial measure against targets defined largely by their positions in Nazi organizations, rather than by individual acts. The chapter identifies differences over the precise targets, with Soviet directives being more expansive than their western equivalents and calling for members of the SA, SS and other paramilitary organizations to be deported as POWs rather than interned in Germany. Comparisons with Austria reveal basic similarities for the western powers but a different Soviet approach of leaving denazification and internment to Austria’s provisional government.