Henry Burke Wend. Recovery and Restoration: U.S. Foreign Policy and the Politics of Reconstruction of West Germany's Shipbuilding Industry, 1945-1955. Westport: Praeger, 2001. 288 pp. $72.95 (cloth), ISBN 978-0-275-96990-5.

Reviewed by Alfred C. Mierzejewski (Department of History, University of North Texas)
Published on H-German (November, 2003)

Why should anyone care about something as obscure as the German shipbuilding industry after 1945? After all, Germany has not been a naval power since the end of the war. It has not even been a significant commercial maritime player. Why was this book written and why should anyone read it? Students of the post-war West German economy should read this book because Henry Burke Wend uses the West German shipbuilding industry, and particularly the city of Bremen and the A.G. Weser, to teach us some very important lessons. Because the West German shipbuilding industry exhibited all of the characteristics typical of that nation's economy, this book throws light on the reality of the social market economy and how U.S. policy helped prevent it from becoming what Ludwig Erhard envisioned.

Wend proposes two fundamental theses: first, U.S. actions promoted the perpetuation of German anti-competitive corporatist structures consisting of industry organizations and their government collaborators; second, the globalization and militarization of U.S. foreign policy due to the Cold War made the United States dependent on local political actors in West Germany in order to achieve its international goals. This undermined the American effort to create a free, competitive economy in the Federal Republic.

Wend organizes his narrative into three levels. He provides us with a history of U.S. diplomatic relations with West Germany at the highest level. Here we see how the West German government, led by Konrad Adenauer, constantly fought to gain greater control of its own affairs as soon as possible, culminating in the achievement of West German sovereignty in 1955. We also see that U.S. perceptions about the threat from the Soviet Union, amplified by the North Korean attack on South Korea in June 1950, which the United States believed to be part of a worldwide conspiracy to spread communism orchestrated from Moscow, altered U.S. policy toward West Germany. The fear of communism caused the Americans to abandon their plans to restructure German business and instead to work with, and thereby strengthen, the corporatist institutions that had dominated the German economy for generations. At the second level of narrative, Wend shows us how U.S. reliance on West German industrial organizations such as the Verband Deutsche Schiffswerften (Association of German Shipyards--VDS) and the Bundesverband der Deutschen Industrie (Federal Association of German Industry--BDI) as well as on federal institutions such as the Bundesministerium für Wirtschaft (Federal Ministry for Economics--BMWi) allowed the old corporatist institutions to reconstitute themselves and regain a dominant position. At the third level, Wend describes how A. G. Weser received help from the municipal government of Bremen, led by the SPD's Wilhelm Kaisen, to fend off Allied efforts to dismantle it and eventually to rebuild itself using public funds.

Wend begins his narrative with a useful description of the origins of the organizations that steered the German shipbuilding industry. He describes how the shipyards on the Baltic and North Sea coasts were tied to the major Ruhr steel producing firms in a classic example of vertical integration. Since these firms themselves were organized in a cartel, it was difficult for the shipyard organization, the VDS, to control its own industry. From the late 1890s, the influence of the government in the form of Alfred Tirpitz's naval office grew considerably. Tirpitz orchestrated the expansion of the industry to ensure that it would meet the needs of his effort to build a battle fleet. Consequently, he opposed both competition among the shipyards and the attempt by the VDS to gain leverage. After World War I, the Reich government intervened once again to determine the fate of the shipbuilding industry. With the German High Seas fleet lying at the bottom of Scapa Flow and the majority of German merchant ships lost to the Allies due to reparations, the government in Berlin funneled millions of Marks into the shipyards to rebuild the merchant marine. This policy, identical to the one that it followed toward the Deutsche Reichsbahn, the German National Railway, was designed to prevent social unrest by providing jobs, in this case for shipyard workers and seamen. The industry survived on subsidies through the 1920s. Under the Nazis, the industry's organizations were strengthened and ultimately absorbed into the regime's compulsory cartel system. Once again, the shipyards were used to promote national goals by building a large naval force. What becomes especially clear from this account is that the German shipbuilding industry had not competed in a free market since at least the late nineteenth century. It had been organized to avoid competition and had been subsidized by the government virtually from the outset. Not surprisingly, in the spring of 1945, the industry and its political patrons attempted to reestablish the old order. Wend demonstrates that they unexpectedly received substantial assistance from the avowed enemies of anti-competitive practices, the Americans.

Wend divides his discussion of the resurrection of the corporatist West German shipbuilding industry into three periods: 1945 to 1949, 1949 to 1952, and 1952 to 1955. In the initial phase, both the British and the Americans followed a rigorous policy designed to weaken permanently the shipyards in their occupation zones. This meant, in practical terms, severing the yards's ties to the Ruhr steel industry and dismantling their construction facilities. The Germans resisted these efforts with great energy. They were most successful with the Americans. The United States quickly began to retreat from its policy of breaking-up the shipyards located in its enclave at Bremen, especially A. G. Weser. The unions representing the employees of the yards, the owners and management of the yards and the municipal government of Bremen all defended the company. They lobbied the Americans, they formed a shadow company to purchase the assets of A. G. Bremen and they used salami tactics to undermine American restrictions. In contrast, the British moved ruthlessly against Blohm and Voss in Hamburg. They did not do this because they were committed to breaking-up German corporatist business structures and creating free markets. Rather, the Labour government in London and their union constituents wanted to eliminate a potential competitor.

The second phase, 1949 to 1952, saw the collapse of the American restructuring initiative. The intensification of the Cold War combined with the planning impulses that came from the Marshall Plan administration opened the door for the traditional German corporatist institutions to reassert themselves. The Marshall Plan in particular marked a major departure in U.S. policy toward West German industry. Not only did it stress long-range economic planning, it also sought to concentrate investment in the heavy industrial sector. This placed Ludwig Erhard, the chief of the Verwaltung für Wirtschaft (Administration for Economics) in the Bizonal administration and later federal economics minister, on the horns of a dilemma. Erhard welcomed the infusions of cash that the Marshall Plan provided, but he loathed the planning that it required and was appalled by its emphasis on heavy industry. Erhard had hoped to refocus the German economy toward satisfying consumer wants. Consequently, he consistently and eloquently advocated concentrating investment in consumer goods industries. This direction would also have demilitarized the German economy and assisted West Germany's fledgling democracy in stabilizing itself.[1] The globalization and militarization of U.S. policy toward Germany, including the Marshall Plan from 1950, undercut Erhard's reform effort, and helped the traditional, anticompetitive forces to regain their footing.

The effects of the change in U.S. policy were reflected in developments at A.G. Weser. The Americans allowed the company to begin repairing ships in April 1949. They then permitted it to build small vessels for operation on coastal and inland waterways. By the early 1950s, to support western rearmament, A. G. Weser was back in the business of building warships. At the same time, it became heavily involved in building vessels for the new West German merchant marine and for export. The materials necessary to build all of these ships were not readily available. Therefore, steel, among other commodities, had to be rationed. Because the Allies lacked the knowledge necessary to do this themselves, they assigned responsibility for allocating steel among shipyards to the revitalized VDS.

The final period examined by Wend, the years 1952 to 1955, saw A. G. Weser and the German shipbuilding industry effectively restore the situation that had existed before the rise of the Nazis. The industry was managing itself, ensuring that competition did not upset its operations, and cooperating with the government to distribute subsidies and other assistance to its member firms. During these years, with the waning of the Korean War, the Americans returned to their earlier policy of fostering competition. Yet the shipbuilders made it clear that they preferred the comfortable corporatist environment in which their survival was ensured by the government and their business activities arranged through negotiation. In this section, it becomes clear that A. G. Weser was rebuilt almost entirely with public funds, an indication that the old regime was still very much at the helm. Wend uses this as an opportunity to characterize the social market economy as a system that fostered competition within a framework established by the government. He highlights the use of tax incentives to promote economic development (pp. 160, 207). He asserts that this characterized the "third way" implicit in the social market economy. This, however, somewhat distorts the picture. The system envisioned by Erhard did indeed provide for competition, which, as Wend shows, did not exist in the revitalized shipbuilding industry. Erhard wanted the government to supervise the market, but not to steer it. Within this framework, Erhard advocated, as Wend demonstrates, the use of tax incentives to stimulate growth. However, Erhard preferred to use this device to spur the expansion of the consumer goods sector, an aim from which he was partially deflected by the Allies. Moreover, Erhard favored using the tax code rather than direct subsidies because doing so did not interfere with the price mechanism, without which no free economy can function. The direct subsidies received by firms such as A. G. Weser, came primarily from local and state governments.

These observations lead us to a discussion of some of the weaknesses of Wend's book. In his account of the reorganization of the shipbuilding industry by the Nazis in the 1930s, Wend overlooks the compulsory cartelization (Zwangskartellisierung) that was carried out (p. 12). Wend discusses the forced loan that was made to West German heavy industry in 1952. The loan was arranged in response to demands by the Allies, and especially the American High Commissioner, John J. McCloy, that the Federal Republic redirect its economic policies to accelerate the expansion of heavy manufacturing industries in order to support the effort to stem the spread of communism. In a letter to Adenauer on March 6, 1951, McCloy explicitly called on West Germany to abandon its liberalization policy and to plan investment more thoroughly. Erhard opposed this change of direction. He resorted to cosmetic measures to placate the Americans's desire for planning and proposed a tax on consumer goods, the proceeds of which would be used to expand the capital goods sector. Erhard's plan was rejected by industry and the federal cabinet. Instead, the Federal Association of German Industry organized a forced loan from the consumer goods industry to the coal and steel industries to help them clear away production bottlenecks industries to clear away bottlenecks. Wend portrays this result as a victory for Erhard (pp. 126-127).

The sources demonstrate that Werner Abelshauser's interpretation is closer to the mark.[2] From Erhard's standpoint, the industry action was preferable to a reallocation of capital by the state. But it bore in itself the disadvantage of strengthening the very corporatist structures that Erhard wanted to eliminate. Consequently, Erhard's success was limited and was purchased only at considerable cost.

There are also a number of minor lapses that should have been caught by the editors or referees. Wend refers to the American decartelization office under James S. Martin as the "Decartelization Agency" (p. 40). This office, which underwent a number of changes of name, was most often designated Decartelization Branch. Wend also frequently uses the word "disperse" when he clearly should have used the word "disburse." He also refers to the Allied High Command (p. 185) when he really means the Allied High Commission (AHC). None of these matters weaken his argument.

More generally, Wend's discussion of the political action on the German side seems to leave out a good deal. The West German actors, with the exception of Kaisen, the mayor of Bremen, never take on recognizable form. We never really hear their voices. Consequently, it is difficult to gain an idea of the texture of the debate on the German side of the issue.

Yet, even with these weaknesses, Wend is very effective in making his case that the Americans failed to change the fundamental nature of the West German economic structure. The old corporatist system remained intact and, indeed, was strengthened. The Americanization of German business, stressed by scholars such as Volker Berghahn, was limited. In effect, West German industrialists adapted American technology and marketing methods to their corporatist framework (pp. xviii, xxii). Wend quite justifiably remarks that the American officials who began the occupation in 1945 would have been "shocked" to see who was running German business and how it was organized in 1955 (pp. 23, 131, 160). Quite a few of the old boys who had sat in the offices of the cartels and the industrial organizations created by the Speer ministry, many of them former members of the Nazi Party, were back in the saddle.

Overall, Wend's brief book is an effective study of a particular industry, an industry that has been neglected in the English language literature. It is a book with wide-ranging implications. Wend's findings constitute a powerful blow to the Berghahn thesis concerning the Americanization of the West German economy. They lend further credence to the contention of Jonathan Zeitlin, Gary Herrigel and Werner Abelshauser that the traditional corporatist business structures survived the Allied occupation and Erhard's reforms efforts intact.[3] Consequently, this book is worth reading by specialists in German economic and business history.

However, Wend's book has even broader implications. It is a testament to the inefficiency of government economic intervention. Wend puts it best when he writes: "The intercession of every major institutional actor to save shipbuilding on the lower Weser River had yielded nothing but debt and debacle by the mid-1990s" (p. 214). He then turns the knife by pointing to the irony of the fate of Blohm and Voss of Hamburg. A. G. Weser was ultimately purchased by the city of Bremen, which closed the yard in 1983. In contrast, Blohm and Voss diversified, avoided public ownership, survived and prospered (p. 215).

Notes:

[1]. On Erhard see especially Volkhard Laitenberger, Ludwig Erhard, der Nationaloekonom als Politiker (Goettingen: Muster-Schmidt, 1986); Anthony J. Nicholls, Freedom with Responsibility (Oxford: Oxford University Press, 1994); the highly critical and flawed biography by Volker Hentschel, Ludwig Erhard: Ein Politikerleben (München: Olzog, 1996); and Alfred C. Mierzejewski, Ludwig Erhard: A Biography (Chapel Hill: University of North Carolina Press, forthcoming, Spring 2004).

[2]. Werner Abelshauser, "Ansaetze 'Korporativer Marktwirtschaft' in der Koreakrise der frühen fünfziger Jahre. Ein Briefwechsel zwischen dem Hohen Kommissar John McCloy und Bundeskanzler Konrad Adenauer, Vierteljahrshefte für Zeitgeschichte, 30 (1982): pp. 715-756 and Wirtschaftsgeschichte der Bundesrepublik Deutschland 1945-1980 (Frankfurt/Main: Suhrkamp, 1983). On the transfer loan see Horst Friedrich Wuensche, ed., Die Korea-Krise als ordnungspolitische Herausforderung der deutschen Wirtschaftspolitik. Texte und Dokumente (Stuttgart: Gustav Fischer Verlag, 1986). The Wuensche book does not appear in Wend's bibliography.

[3]. Jonathan Zeitlin, "Introduction: Americanization and Its Limits: Reworking U.S. Technology and Management in Post-War Europe and Japan," pp. 1-49 in Americanization and Its Limits, ed. Jonathan Zeitlin and Gary Herrigel (Oxford: Oxford University Press, 2000) and the sources cited in note 2.

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Citation: Alfred C. Mierzejewski. Review of Wend, Henry Burke, Recovery and Restoration: U.S. Foreign Policy and the Politics of Reconstruction of West Germany's Shipbuilding Industry, 1945-1955. H-German, H-Net Reviews. November, 2003.
URL: http://www.h-net.org/reviews/showrev.php?id=8383

Copyright © 2003 by H-Net, all rights reserved. H-Net permits the redistribution and reprinting of this work for nonprofit, educational purposes, with full and accurate attribution to the author, web location, date of publication, originating list, and H-Net: Humanities & Social Sciences Online. For any other proposed use, contact the Reviews editorial staff at hbooks@mail.h-net.org.