At the end of World War II, a bloody horror that cost 80 million lives worldwide, American leaders were determined that Germany must never again rise to massacre its neighbors. So the allies created a plan to strip Germany of its industrial might and turn it into a "pastoral" economy with a GDP well below its level of 1938. In addition, the reparations from the previous damage created by Germany during World War I, which were levied at the Versailles peace conference but never paid, were made due and payable over ten years. The combined cost of the reparations and the loss of its industry were deemed a fitting punishment for the Germans, who pretended not to know what was going on but were fully culpable for the rise and the grotesque atrocities of the Hitler regime. Germany, economically crushed, never did pay back its debts but at least the Germans were taught a lesson -- and Germany never again became a world power. Oops -- that's not what happened. In 1945, there was indeed tremendous pressure from the French and the Russians to destroy German industry. Bankers did want to squeeze Germany for debts. And the American secretary of the treasury, Henry Morgenthau, did prepare a detailed plan to reduce Germany to pastoral status, which was initially accepted by FDR. But three very improbable events came together that produced exactly the opposite policy -- aid from the Allies and extensive debt forgiveness -- to help Germany recover. This was all but unprecedented. Victorious powers, after wars, were not in the habit of extending the hand of friendship to defeated ones -- least of all to odious nations like Nazi Germany. The first event was the Cold War. America quickly realized that it needed a strong and democratic Germany as a bulwark against Stalin. What became the Marshall Plan was merely common sense and enlightened self-interest only in memory. In 1945 and 1946, the idea of spending taxpayer money to put Germany -- Germany! -- back on its feet was hugely controversial. The second event was the central role of John Maynard Keynes. At the Versailles conference of 1919, Keynes as a young economic adviser to the British Treasury, was the prophetic voice in the wilderness, warning that the crushing terms of reparations would only destroy the Germany economy and seed future conflict. But at the Bretton Woods Conference of 1944, a quarter century later, now Lord Kenyes was conference chairman and a key architect of the opposite course: Growth, debt relief, and above all strict limits on the ability of private financial capital to crash economies, were the key elements of the postwar system. The third event was the rather anomalous stance of the United States. America, chastened by Depression, cheered by the New Deal and the success of the government's wartime mobilization, was in one of its rare progressive moods. The financial industry lobbied for the key role in Europe's reconstruction but Roosevelt and then Truman said no. Private financiers caused booms and busts -- they offered loans like candy on the upside, and quickly turned into Scrooges in crises -- just the opposite of what was needed. The key role would be played by public institutions like the Marshall Plan and the World Bank. As I've written before, Germany not only got massive Marshall Aid. It benefitted from unprecedented debt relief. Much of the German debt was written off -- the rest stretched out over sixty years at very low rates. Thanks to this fortuitous trilogy of unusual expansionist policies, Germany not only recovered; it became Europe's economic powerhouse. And after reunification, Germany because Europe's dominant political power as well. These of course are the very policies being denied to the Greeks. Ordinary Greeks are being blamed for fake budgetary maneuvers produced by a right-wing cabinet three governments ago. Due to an equally improbable convergence of separate events half a century later, Germany is now playing an entirely perverse role -- not only vis-a-vis Greece but in terms of the larger European project. I write about this in detail in my book, Debtors' Prison. When the leading nations of Europe came together to create a stronger European Union and a new currency, the intent was to partly limit Germany's influence by incorporating it in a larger whole. But German reunification, followed by a series of economic crises, produced the opposite effect. An austerity-minded Germany became the continent's dominant power. Around the same time, a spate of conservative and neo-liberal governments removed the last vestiges of Bretton Woods era constraints on the speculative orgy that is private finance. That seeded the collapse of 2007-2008. Even worse, a newly hegemonic Germany took only one lesson from its economic history -- avoid debt. Forgotten were the lessons of Versailles, the allied generosity, the perverse folly of austerity. The German view of debt became part of the European constitution. Greece, of course, is the immediate victim, but the entire European project is now at risk. The euro might have stood a chance, if it were connected to a common, expansionary fiscal policy and a central bank with real powers. But except for a few creditor countries like Germany, the euro is now a ball and chain. Sovereignty has been delegated to a deadly troika of a punitive Germany, speculative private financiers, and public institutions that now play the opposite role from the one designed in 1944 at Bretton Woods. The best course for Europe's smaller and weaker nations would be to leave the euro, so that they can reclaim some economic sovereignty. Alternatively, Germany could quit the euro, and leave that currency to nations that are less austerity minded. Even more fundamentally, the EU itself is in jeopardy. The perverse dominance of the austerity mongers in Brussels and Berlin has left Europe entering its seventh year of near-depression, and created a backlash of nationalist rightwing parties all over the continent that rejected the EU. The crushing of a freely elected leftist government shows the sheer brute force of the unholy alliance of Germany and global finance. The EU was created to expand democracy, boost economic growth, and contain Germany within a democratic whole. Instead, it is destroying democracy, crushing growth, and leaving Germany's most churlish impulses to rule Europe. A recent New Yorker profile of the former Greek Finance Minister, Yanis Varoufakis, who defied the Germans until he had to step down from the government, quotes Varoufakis as saying, "There are times when you say, 'I'm not going to sign something I disagree with. And stuff the consequences.'" I think of one my favorite poems, "I sing of Olaf Glad and Big", by E.E. Cummings. Olaf was a World War I era conscientious objector, who was brutalized for his views. Cummings wrote: Olaf (upon what were once knees) does almost ceaselessly repeat there is some shit I will not eat. People all over Europe are expressing just those sentiments. There is some shit -- some made-in-Germany scheisse -- they will not eat. And many of them far less committed to democracy than the Greek government of Alexis Tsipras. Indeed, Tsipras is far better than Germany has any right to deserve. Unlike World Wars I and II, the destruction being wrought by Germany is not military. But it is just as poisonous and more insidious. Before it is over, one of history's noblest experiments in enlightened statecraft -- the project of European union -- could end in ruins. -- Robert Kuttner is co-editor of The American Prospect and a visiting professor at Brandeis University's Heller School. His latest book is Debtors' Prison: The Politics of Austerity Versus Possibility. Like Robert Kuttner on Facebook. -- This feed and its contents are the property of The Huffington Post, and use is subject to our terms. It may be used for personal consumption, but may not be distributed on a website.
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