17

Double-Think on Denazification

The United States and other Allies agreed at the Potsdam Conference in August 1945 that Germany’s industrial power had been integral to Nazi crimes and to Hitler’s regime. Thus, the Allied occupation government in Germany would substantially reform the whole structure of the German economy, carry out denazification, break up the entrenched system of business cartels, and eliminate the Hitler era’s version of a military-industrial complex. The threads with which Germany’s economic elite and state had entwined one another during the Hitler years were to be broken forever.

The Allies publicly resolved jointly to ban all German production of weapons, ships, airplanes, and other “implements of war.” German manufacturing of chemicals, steel, machine tools, “and other items directly necessary to a war economy” was to be rigidly controlled and limited to the nation’s peacetime needs.1 Germany was also to pay substantial war reparations to each of the countries it had damaged. The largest share of the reparations was to go to the USSR, which had paid the heaviest price at the hands of the Germans, but each of the Allies—Britain, France, Belgium, and even colonial India—were to get a piece.

Detailed provisions specified the means for international cooperation in bringing accused war criminals to trial and purging Nazis from “public and semi-public office and from positions of responsibility in important private undertakings.”2 Written criteria distinguished major criminals from small fry. There were five basic categories of Nazi offenders, and the Potsdam agreements laid out a framework of procedures for handling each of them. The Allies publicly renewed their commitment to implement the Moscow Declaration of 1943 and to return accused Nazi criminals to the countries seeking them for trial.³ Further, the Allies concurred that “major war criminals whose crimes … have no particular geographical localization”—the high command of the German state, Nazi party, and SS, for example—were to face joint international trials.⁴ National courts of the Allied countries and Allied military courts in occupied Germany were to try the second echelon of accused war criminals.

Importantly, Nazis accused of “analogous offenses” to war crimes, such as extermination of Jews and atrocities against civilian populations, would be tried before Allied courts in occupied Germany. Each Ally promised to arrest and intern German “key men,” including corporate leaders instrumental in Hitler’s rule. Finally, all of the Nazi party’s rank-and-file members were to be removed from offices of responsibility or influence, except in cases where party membership had been purely nominal.⁵

Despite the scope and specificity of this agreement, the conflict within the U.S. government over denazification of German industry intensified, rather than attenuated, in the wake of the Potsdam meeting. Before August 1945 was out, U.S. occupation officers sympathetic to rapid restoration of German industry organized an administrative attack on the stronghold of anti-Nazi hard-liners in the U.S. military government. That conflict soon spilled over into conflicts among the U.S., France, and the USSR.

The political issue was already explicit: “Major Scully denounced the denazification program as ‘witch hunting,’ and Lt. Col. Auffinger [chief of U.S. efforts to denazify German banks in Land Württemburg-Baden] declared that it would drive the German people into the hands of the Communists,” reported a memo concerning one August confrontation. “Col. Auffinger explained further his opposition to the program: we did not fight this war to destroy one dictatorship and build up another; we must preserve a counter-balance or bulwark against Russia.”6

Colonel Robert Storey, the U.S. executive trial counsel at the International Military Tribunal and a senior aide to Robert Jackson, had “passed the word down that the denazification directive was to be relaxed,” Auffinger continued. Sympathetic U.S. officers promulgated this “relaxation” largely by word of mouth during the summer of 1945, but this rumor network had considerable effect. The hard-line U.S. officers targeted in Auffinger’s attack resigned before the year was out, despite the fact that it was their position in the denazification debate, not Auffinger’s, that the President of the United States had publicly endorsed at Potsdam.

The denazification that did take place in Germany was usually spearheaded by Germany’s Socialists, Communists, and some religious leaders, who had resumed limited legal political activities inside their country for the first time in more than a decade. “Almost without exception as Allied troops captured the larger German cities they were met by delegations of left-wing anti-fascists, ready with programs, nominees for office in the local administration, and offers of aid in the process of denazification,” remembered Gabriel Almond, a conservative sociologist who specialized in studying the European left. The anti-Nazi underground tended to be militantly left wing and based in the labor movement, Almond said, because few others had been willing to take the risks. Nevertheless, their “success … in preserving a corps of political leaders capable of giving German politics a new direction after the occupation cannot be doubted after study of the local leadership of the new [postwar] political parties,” he continued, citing examples from Hamburg, Bremen, Lübeck, Frankfurt, and other cities. The groups made “rapid strides in recruiting members and supporters.”⁷

The “Antifa” (antifascist) groups throughout Germany hastily organized local unions known as Betriebsrats (works councils) that took over management of hundreds of companies, particularly the larger factories. These committees then usually drove out the old boards of directors, Nazi-era personnel managers, Nazi Labor Front activists, and Gestapo informers.

This form of denazification proved to be considerably more effective than much of what was undertaken by the Allied military government, at least during the first year after the defeat of Hitler’s regime. A later U.S. Military Government survey of sixty major German companies employing a total of more than 100,000 workers found that virtually all of the denazification activities at those plants had taken place before the beginning of Allied denazification efforts in the German economy.8 Though the study did not say so directly, this could mean only one thing: The denazification work had been in the main carried out by the Antifa and Betriebsrats and by shop-floor purges of alleged Nazis.

But the radical politics of the Antifas disturbed Western military governments, which moved quickly to suppress the anti-Nazi groups under military regulations originally written to stamp out Nazi political activity. “Thus while the Antifa movement had some revolutionary potentialities, these were effectively restricted,” Almond notes with approval. “Allied policy … was to break the elan of the Antifas and place them under considerable restraint” from the very first days of the occupation.⁹ The U.S. and British occupation governments shut down the denazification work of the Betriebsrats by the summer of 1945, for the most part, and dispersed most of the more militant Antifa leaders by the end of the year.

Dillon, Read & Co. partner William Draper became pivotal to the semiclandestine shift in U.S. policy toward Germany that summer. By 1945, Secretary of War Stimson and Secretary of the Navy Forrestal (Dillon, Read’s former president) engineered Draper’s appointment as chief of the economic division of the joint Allied Control Council for Germany (the central occupation government at the time) and as director of economic policy for the German territories administered by the U.S. As such, Draper emerged as by far the most powerful U.S. industrial and finance official in occupied Germany, with overall authority for implementing JCS 1067 and other U.S. denazification programs aimed at German bankers and businessmen.

Draper was an imposing, broad-chested man with a bald pate and dark, bristling eyebrows that emphasized his high forehead. Prior to the war, he had been corporate treasurer at Dillon, Read and an officer of the German Credit and Investment Corporation of New Jersey, a Dillon, Read-sponsored holding company that specialized in international investments in Hitler-era Germany.¹⁰ He prided himself on his willingness to make tough, even brutal decisions to protect his vision of the common good. The Draper family owned textile mills, patents on textile equipment, and a substantial share of the international trade in fibers. Their New England mill towns featured “model” workers’ communities where the company enforced a Draper family formula of no unions, proper sanitation, and good behavior.11 Draper’s social philosophy, in short, shared many of the same roots as that of the new “non-Nazis” in Aachen described by Padover.

Draper’s 1945 decision concerning rations for German coal miners illustrates the point. “The Ruhr mines had to be mined if we were going to get the factories started,” Draper remembered during a later interview, “and we found that the miners couldn’t mine coal on 1,560 calories [per day, the official ration in 1945], or even 1,800. So one of the first steps we took was to raise the calorie level for the miners to 4,000 calories, against great protest, obviously. Then the next step we had to take was to search the miners when they went home every night, because they were dividing their 4,000 calories with their families. Well, from the humanitarian point of view that’s fine, but it couldn’t work, and so we had to strip them of food and they had to eat it themselves.…”¹²

According to his own account, William Draper never had any intention of implementing JCS 1067, the Potsdam agreements, or Washington’s other publicly announced policies on denazification and decartelization of German industry. Draper considered such programs to be naïve and counterproductive, and he obstructed them at every opportunity.¹³ He surrounded himself with like-minded aides to the degree that he could, and together they often succeeded in undermining reform and denazification of the German economy before it began. Draper’s factotum and electronic industries specialist was Frederick Devereux, a senior AT&T official specializing in that company’s political operations. His steel industry chief was Rufus Wysor, the president of the Republic Steel Corporation, which itself had a long history of cartel agreements of questionable legality with the German steel companies he was now overseeing. Wysor was particularly aggressive: “What’s wrong with cartels, anyhow?” he replied when confronted with his lack of progress in denazifying and breaking up German steel and coal combines. “Why shouldn’t these German businessmen run things the way they are used to?… German business is flat on its back. Why bother them with all this new stuff?”14 Other senior Draper aides shared roughly similar backgrounds and perspectives.

“It became evident to us very quickly that … the United States would have to support Germany for the rest of time, or as long as that policy [JCS 1067] stayed in effect,” Draper contended in a later interview. “And so, we had to wiggle here and waggle there and do the best we could without openly breaking our directive to permit the German economy to begin to function. We argued with this one and argued with that one here in Washington and in Germany, wherever we had the chance, and bit by bit, we recouped or revised the situation so that it became possible.

“We didn’t pay as much attention to it [JCS 1067] as perhaps we should from the point of view of military discipline. There were several efforts to pull me back [to Washington] and have me charged with not carrying out the directive. [But] General Clay always defended me. He knew perfectly well that such a policy couldn’t last just as well as I did. We fought it out and finally persuaded Washington.”¹⁵

Draper’s critics pointed to the tough language in the JCS 1067 order and to U.S. public commitments at Potsdam, arguing that Draper failed to implement the letter and the spirit of official policy. But what the critics did not understand was that the hard-line declarations of JCS 1067 were not in fact U.S. policy at all, despite what was said on paper. Here is how General Lucius Clay, the U.S. military governor in Germany, explained it in an interview some years later:

“JCS 1067 would have been extremely difficult to operate under.… It was modified constantly; not officially, but by allowing this deviation, that deviation, et cetera. We began to slowly wipe out JCS 1067, [which] prohibited us from doing anything to improve the German economy. It was an unworkable policy and … [it was modified] by gradual changes in its provisions and changes of cablegrams, conferences, and so on.” Clay was convinced that President Truman was on his side. “We had … a change of administration [after Roosevelt]. The people who had had the greatest influence and developed the occupation powers went out, and Mr. Truman’s administration came in,” Clay remembered. Truman never supported the hard-line approach, Clay continued. “He had nothing to do with its creation and I don’t think he ever believed in it.”¹⁶

What can be seen, then, was a tough policy on paper that was useful for pacifying public opinion in the West, for making promises to the Soviets, and for general public relations purposes. Meanwhile the upper echelons of the U.S. occupation government agreed as early as the summer of 1945 that a thorough denazification and decartelization of the German economy would never be attempted, regardless of what might be said for public consumption.

This institutionalized double-talk—even double-think, as George Orwell might have it—grew out of the splits inside the Roosevelt administration discussed earlier. Perhaps more fundamentally, it was a product of the division between mass public desire in the U.S. for harsh punishment of the whole structure of Nazism, on the one hand, and the U.S. economic and foreign policy elite’s determination to revive German markets and producing capabilities as quickly as possible, on the other. The revivalist point of view was buttressed at least in part by consensus among specialists and Western elites that there had been splits between businessmen and the state in Nazi Germany. Such schisms presented opportunities for the West, they reasoned, and made it easier for German industry to downplay its role in Nazi crimes.

Draper’s administrative techniques from the summer of 1945 on became a classic example of bureaucratic maneuver. He announced tough anti-Nazi measures in accordance with the official policy; then, shortly afterward he proclaimed success in carrying out those measures while at the same time undermining the very policies he publicly claimed to support.

That fall, for example, some Draper subordinates attempted to initiate a program to arrest and interrogate several hundred top German bankers and industrialists for the roles they had played during the war. This was not an indiscriminate program aimed at all German businessmen. It focused only on those who had thrived under National Socialism, or who had played some personal role in Nazi expropriation and looting. And the proposal did not call for criminal trials of these suspects: The aim was simply to investigate what they had actually done during the Third Reich while the evidence was fresh.

Draper blocked the measure as soon as it came to his attention. He refused to permit the investigation, contending that it would interfere with German economic recovery. When subordinates complained to sympathetic congressmen in Washington, Draper’s allies Robert Murphy and Colonel Clarence Adcock (General Clay’s most senior aide and longtime colleague) issued a series of reports stating—in October 1945—that the main work of denazifying the German economy had already been completed, so there was no need to go ahead with any further studies. “What [the investigators] are doing here through denazification is nothing less than a social revolution,” Murphy’s top aide Charles Reinhardt complained. “If the Russians want to bolshevize their side of the Elbe that is their business, but it is not in conformity with American standards to cut away the basis of private property.”17

Draper’s rebellious subordinates nonetheless managed to win some congressional support in Washington, notably from a West Virginia Democrat, Senator Harley Kilgore, and from FDR loyalists in the Senate’s liberal caucus. Kilgore delivered a broadside against Draper’s Economic Division, using ammunition provided by dissident insiders. U.S. Military Government officials were countenancing and even bolstering Nazism in the economic and political life of Germany, Kilgore charged. They “take the position that German businessmen are politically neutral and that no effort should be made to penalize German industry or prevent it from recapturing its prewar position in world markets.… They look forward to resuming commercial relationships with a rehabilitated German industry whose leading figures are well known to them, rather than striking out on new paths of economic enterprise.” Kilgore named William Draper, Frederick Devereux, Rufus Wysor, and others as particular problems. “Nazi industrial organization is not repugnant to them,” Kilgore charged, “and they have shown every disposition to make peace with it.”¹⁸

Over the next four months, Kilgore returned again and again to the theme that the U.S. Military Government in Germany was refusing to carry out the mandate of the Potsdam agreements and the publicly professed U.S. policy on Germany. Much of his information was leaked to his staff by dissidents inside the U.S. Military Government’s decartelization branch, who believed—accurately, as it turned out—that Draper and other higher-ups had systematically thwarted their initiatives against IG Farben and many other German companies. Kilgore charged that top U.S. officials in Berlin were “reluctant to carry out the policy of military and economic disarmament of the Reich as agreed upon at the Potsdam Conference,” as the New York Times summarized it, and that “some of our officials were connected with [U.S.] industrial and financial firms that had close pre-war ties with the Nazis, would like to resume commercial relationships with Germany, and were working for a strong Reich as a counterbalance to Soviet Russia.”19 But the Times report provided few specifics and declined to name names. Reportage on the issue, which had once been a front-page story, gradually drifted toward smaller articles buried deeper in the paper.

Kilgore, however, provided increasingly specific information, though it only rarely found its way into the prestige media. State Department and U.S. Military Government spokesmen bitterly denied his accusations. But the senator was in time proven to be substantially correct by an independent 1949 Federal Trade Commission investigation and—decades later—by the frank comments of Lucius Clay, William Draper, and others who had once aggressively rejected Kilgore’s claims.²⁰