After World War II

Germany. The question of reparations after World War II came up even before the end of the war. At the Yalta Conference (February, 1945), the Soviet Union proposed that German reparations be set at approximately $20,000,000,000, of which the Soviets wanted half. Although neither the United States nor Great Britain agreed to the specific Soviet proposals, the Yalta Conference did decide that Germany should be made to compensate the Allies for war damage. Allied claims of damages reached $320,000,000,000, but it was recognized that Germany could not pay this enormous total.

The Allied Commission on Reparations, established at Yalta, met in Moscow in June and July, 1945. The delegates agreed on a plan that provided for the following:

  • Greatest possible compensation in goods would be made to the Allies on the basis of their contributions and losses in bringing about Germany's defeat.
  • The German economy would be limited to the capacity required to meet minimum civilian needs.
  • Enough German industry would be maintained to supply those needs without additional Allied support.

This plan was approved with reservations at the three-power conference held at Potsdam in July, 1945. Reparations were to be obtained only from the various occupation zones, and no country was to draw from other than its own area. However, the Soviet Union was to receive, in addition to reparations from the eastern zone, 10 per cent of the industrial equipment removed from the western zones, plus an additional 15 per cent that the Soviets would pay for with food, coal, and other products. To supervise the removal of equipment, the Allied Control Council was created.

The percentage of reparations which each country was to receive was decided at an 18-nation conference on reparations, held in Paris in November and December, 1945. The conference established the Inter-Allied Reparations Agency, composed of a representative of each of the nations, to allocate German reparations payments.

The reparations plan was based on the assumption that Germany would have a unified economic system despite its division into four zones of occupation. Unification, however, never occurred. Instead, the British, French, and American zones were merged in 1949 to form the Federal Republic of Germany, and the Soviet zone became a separate country. By 1949, when reparations payments to the West ceased, the Allies had dismantled more than 300 plants, taking parts and industrial equipment valued at approximately $413,000,000. The United States received about one-fourth of the total.

Japan. The original Allied policy on Japanese reparations was based on a report made in April, 1946, by Edwin J. Pauley of the United States. It called for payments to countries injured by Japan and outlined a method for dismantling Japan's war industry. An Allied reparations committee approved this policy but was unable to agree on the amount of reparations. Claims totaled $54,000,000,000—an obviously impossible figure—of which China demanded 40 per cent and the Philippines 15 per cent.

When it became clear that the reparations committee was making no progress, the United States authorized General Douglas MacArthur, Allied military commander in Japan, to make “interim" payments. Under this program, Japan delivered industrial equipment worth $40,000,000 to China, the Philippines, Great Britain, and the Netherlands. In addition, Japanese assets in Allied countries—worth more than $3,000,000,000—were taken over as reparations.

Meanwhile, the United States had reversed its policy. Instead of reducing Japan's industrial might, the United States decided it was necessary to strengthen the conquered country's economy. Since continued reparations payments would have the opposite effect, the United States ended the program of interim reparations in 1949.

Japan signed a peace treaty with 49 nations, including the United States, in 1952. One provision of the treaty stated that Japan was to negotiate with Allied countries desiring reparations. Under this provision, Japan agreed to pay, over a period of years, reparations totaling $1,190,000,000 to Burma, Indonesia, the Philippines, and Thailand. Most of these reparations were to be paid in goods, services, and investments.