Thinking Small (44 page)

For a moment
in the early months of 1948, all eyes focused on Prague’s Czerin Palace when renowned Czech foreign minister Jan Masaryk was found dead in his pajamas in a courtyard just under his bathroom window. The scandal seemed to symbolize the growing problems of the Western world. Czechoslovakia had been free, but on February 28, 1948, it had been taken over by the Soviets. Masaryk’s name was one on
the Kremlin’s list of men to be killed. Whether it was a Soviet plot or a suicide has never been resolved, but the event was evidence of the unrest that had once again mounted throughout the world. Stalin’s coup d’état of Czechoslovakia demonstrated that he had no qualms about pursuing his own goals with defiance and aggression, in much the same way Hitler had. Democratic countries did not want an authoritarian antidemocratic regime spreading through
Europe. Hitler was gone, but the danger he represented was still there. And, once again, Germany was the crux of the new battle: As London’s
Economist
wrote at the time, “…  the competition for the soul of Germany is now no longer avoidable—and it is the soul that must be won.”
¹

When the Soviets moved into Czechoslovakia, Britain, France, and the Benelux countries formed a defensive union. This was a dramatic move, for it brought France and Britain back into an alliance, and it marked a sizable shift in the French attitude toward Germany. France would join their zone with the American and British zones, effectively making it the Allies minus the Soviets. The French would also give up their plans of trying to separate and control the rich Ruhr
area of Germany,
and agree to help create the International Ruhr Authority to get the industrial veins of Germany fully flowing again.

In the Second World War, Russian soldiers had been a crucial reason for Allied victory. The Russian people suffered greatly—an estimated twenty-seven million of them died, more than any other nationality fighting at the time. The Allies were lucky to have the Soviets on their side in the war, but it was the Soviet people who had fought, not the Soviet government. And it was the Soviet government that the Allied governments were now beginning to see as a threat,
one that became all the more daunting when combined with the condition that much of Europe was in at the time. It wasn’t only Germany that was in need of help, after all. It was much of Europe. And for Europe to be strong, Germany needed to be able to function without relying on Allied support. The recognition of this need, alongside the rise in Soviet aggression, became the catalyst that changed the Allied attitude toward Germany, and toward the rest of Europe as well.

In the States, the attitude change was quite literal: General George Marshall replaced Byrnes as the secretary of state under Truman on June 5, 1947, and just five months later, gave a speech at Harvard that summed up this new way of seeing the world, introducing what would later be known as the Marshall Plan. “The truth of the matter,”
²
Marshall
said that day in his speech, “is that Europe’s requirements … are so much greater than her present ability to pay that she must have substantial additional help or face economic, social, and political deterioration of a very grave character.” Marshall’s plan called for a large amount of funds (what would eventually be just over $13 billion, something like $70 billion by today’s terms) to be given to Europe. According to those
who supported the plan, giving Europe money would be the best thing for the U.S. economy, because much of the money would be used to purchase goods from the United States and would ultimately be pumped back into the United States, erasing debts owed and strengthening the market as a whole.

It was a hard case to make to the American public and to
Congress though, especially in a time where the only ones who truly understood the desperation in Europe were those who had seen it firsthand. Many people felt it was time for Europe, and especially Germany, to take care of itself. But Marshall had thought of that too: One big part of his overall approach was that
before
American funds could be given, Europe needed to show that it was
ready to deal with those funds; it needed to come up with a new structure and plan for itself. Only once that plan was made would America release the promised funds.

In Europe, Marshall’s speech had a catalyzing effect. Word of it buzzed through the decimated countries—just the very possibility of getting help was enough to inspire a great deal of activity and work and they certainly had the clarity, intelligence, and integrity to create a competent plan. Sixteen countries arranged to meet in Paris and discuss how to set up a new European system as Marshall had suggested. The Organization for European Economic
Cooperation, and later the European Steel and Coal Community—two organizations often seen as the first official steps toward what is today the European Union—were set up to find the best ways to allocate the funds and services of the Marshall Plan.

Though the Marshall Plan would be extended to the Axis powers as well, the Soviets did not stretch out their hands, but rather, created their own plan for the Eastern Bloc, the Molotov Plan (what eventually became COMECON). In this way, the Soviets formed their own economic enclave in Eastern Europe, creating market ties between the communist countries and organizing trade through the USSR. In truth, many Americans eventually got behind the Marshall Plan not because
they were thrilled to send more money to Europe, but because they were worried about the Soviet threat. The Communist Soviet state had become the new enemy of the West.

As all this change was happening in the larger context of Germany, at the Volkswagen plant, Heinrich was still dealing with
the possibility of the company being bought by an outside source. Henry Ford II was his biggest customer; a Volkswagen/Ford deal had come close to happening in 1947, but had fallen through because the British occupying force had been ensnared in difficult problems with the right-wing tendencies at the plant, and Ford had felt
there was too much confusion about the best way to enforce denazification. But once Nordhoff began managing the plant, the negotiations with Ford began anew. At first, Nordhoff thought that joining forces with Ford might be a way to ensure the plant had a solid future. Joining with Ford would give the factory access to more capital and make it easier for them to repair and modernize the plant. Nordhoff also knew that merging with an American-owned company would loosen the
restrictions that were then placed on foreign trade.

Ford was equally interested at the start, but that interest turned sour. In one of the legendary miscalculations in automotive management, the otherwise very astute Ford employee Ernie Breech—upon reviewing Volkswagen’s proposal—offered his advice to Henry Ford II: “What we’re being offered here,”
⁴
he said,
“isn’t worth a damn.” But the real cause behind Ford’s final decline of taking control of Volkswagen was likely the factory’s proximity to the nearby Soviet line. The Ford company would later admit that they had serious reservations about controlling a plant that was just miles away from what was fast becoming the Soviet Bloc.

Nineteen forty-eight was a year when Germany’s future felt very fragile. Since the war, the Volkswagen plant, and the country, had been hovering between options, teetering on the edge of “maybe this” and “maybe that.” And it was in October 1948, just as Nordhoff was preparing a new home so that Charlotte and the girls could finally join him in Wolfsburg, that Ford backed out of any possible deals.
³
For Nordhoff, it was a crucial moment of change: He realized that the factory would have to prove itself, on its own, as a German brand. And though it was possibly the biggest challenge anyone could have imagined for such a company at the time, he could suddenly see that it was
exactly the path that had to be taken. Perhaps in the back of his mind he was also thinking of
the health and future of his country: If a factory that had been a Nazi creation could transform itself into an instrument of the free market and its democratic ideas, then Germany would be able to do so as well. Volkswagen was to be a German company, come what may, and Nordhoff would proceed with that idea at the center of any future plans. This responsibility became clear to Nordhoff just as it was becoming clear on a larger political and economic scale to the Allies and the German
authorities; a new way of thinking had arrived, and men like Erhard and Nordhoff began to realize that confidence in Germany was the next step, the only way to move forward now.

Behind the scenes
in Germany, Ludwig Erhard was working furiously to push through a currency reform, and his actions did not stop there. At the same time, he was pushing for a price decontrol ordinance. In essence, and to simplify a very complex matter, this ordinance would wipe away all the old and lingering rules about how products were priced on the market, meaning that the most basic needs in any German’s life—vegetables, eggs, milk, as well as the industrial supplies required to produce supplies, clothing, and large-ticket items such as cars—would no longer be regulated or rationed, as they had been for the past ten years. Control of that sort would be placed in the hands of the market again.

On the surface, this plan seemed highly illogical: The German people were experiencing a scarcity of vegetables and eggs and parts for cars, and so on, so deregulating the price of such things seemed absurd. It was an uphill battle to get his reforms
passed, but Erhard could not be deterred. His incessant lobbying coupled with his clear and deeply reasoned arguments eventually provided him with the crucial support of General Clay and other Allied officials. But everywhere he went, Erhard had to explain himself. Hartrich tells of Erhard’s confrontation with a U.S. Army colonel named Oberst
¹
around that same time:

Erhard also cut high tax rates dramatically so that both the workers and their employers would have more money to spend; however, his tax reform did
not
include cutting taxes on high incomes or tax cuts for those who were already rich. Those would remain, helping to fund the rest. It’s indeed easy to imagine how this combination of cutting taxes, abolishing price controls, and wiping away an old currency in one fell swoop looked like a wild and dangerous move. And it’s understandable that so many were afraid it would result in a free-for-all fight for the limited available resources. But, Erhard asked, what if those resources were not limited; what if they only
looked
limited? Perhaps, Erhard reasoned, there
was
an abundance of goods. Perhaps goods had just been hoarded, congested, off-limits, forced out of the natural flow. This sounded like wishful thinking, and maybe it was, but a dramatic move had to be made so that the country could feel as though it had
assets
again.

Erhard’s hope (and belief) was that the measures he was taking would provide a production push to German industry while at the same time force German businesses to deal with competition from the rest of Europe (reducing tariffs, Erhard hoped,
would spur on the fighting spirit of capitalism) and yet allow German businesses to keep the prices of their goods low and affordable. Erhard knew that all of Europe was in need of the products that German industries could produce. Once German manufacturers got their factories running again, the market for their goods (both home and abroad) could be better and more profitable than anything they’d experienced before the war.

In making all these changes, Erhard was not really gambling on markets or systems; he was gambling on the Germans themselves. It boiled down to the question of whether or not, in all his study during the Nazi years, Erhard had indeed come to understand human behavior. With the implementation of his reforms, he was betting that “men were primarily motivated by their never-sleeping appetite for material gain, coupled with their deep-seated instinct for self-survival; in short, by their quest for security and protection against want and helplessness in a troubled and feckless world.” And he was betting that people could do this without resorting to hurting one another. His notion of “capitalism with a conscience” was a belief in the ingenuity of German businessmen and German consumers, a belief that if given proper incentives, as well as large doses of responsibility and competition, the industry of his country would find its own way without having to be directed by a detailed top-down plan.