By this time, following the election in July 1945, the Labour government was in power and the Potsdam conference in the same month marked the moment when Ernest Bevin appeared on the scene as British Foreign Secretary. Potsdam established the four power division of Germany and a general policy which may have fallen short of the full Morgenthau Plan but was still punitive, based on a policy of de-industrialisation, not to the extent wanted by Morgenthau, reducing Germany to a near-entirely agrarian economy, but to the extent necessary to prevent its re-emergence as a military power. American policy was outlined in the 'US directive to General Eisenhower on military rule of Germany' - JCS (Joint Chiefs of Staff) 1067, which was approved by Truman in May 1945 while Morgenthau was still in place. It's basic principles were outlined in Paragraph 4:
'a. It should be brought home to the Germans that Germany's ruthless warfare and the fanatical Nazi resistance have destroyed the German economy and made chaos and suffering inevitable and that the Germans cannot escape responsibility for what they have brought upon themselves.
b. Germany will not be occupied for the purpose of liberation but as a defeated enemy nation. Your aim is not oppression but to occupy Germany for the purpose of realizing certain important Allied objectives. In the conduct of your occupation and administration you should be just but firm and aloof. You will strongly discourage fraternization with the German officials and population.
c. The principal Allied objective is to prevent Germany from ever again becoming a threat to the peace of the world. Essential steps in the accomplishment of this objective are the elimination of Nazism and militarism in all their forms, the immediate apprehension of war criminals for punishment, the industrial disarmament and demilitarization of Germany, with continuing control over Germany's capacity to make war, and the preparation for an eventual reconstruction of German political life on a democratic basis.'
In particular, according to para 16:
'Except as may be necessary to carry out these objectives, you will take no steps (a) looking toward the economic rehabilitation of Germany, or (b) designed to maintain or strengthen the German economy'
and according to para 32:
'Pending final Allied agreements on reparation and on control or elimination of German industries that can be utilized for war production, the Control Council should
a. prohibit and prevent production of iron and steel, chemicals, non-ferrous metals (excluding aluminum and magnesium), machine tools, radio and electrical equipment, automotive vehicles, heavy machinery and important parts thereof, except for the purposes stated in paragraphs 4 and 5 of this directive
b. prohibit and prevent rehabilitation of plant and equipment in such industries except for the purposes stated in paragraphs 4 and 5 of this directive; and
c. safeguard plant and equipment in such industries for transfer on reparation account.'
Some detail was given for this in the March 1946 'Plan for the limitation of German industries:
'According to this plan, industrial capacity was to be reduced to 55% of its 1938 level. In the production goods sector, steel capacity was to be cut to one-fourth the pre-war level, basic chemicals and heavy machinery to one-third, and machine tools to one-tenth. A few industries, mainly those producing the synthetics which had been important during the war, were entirely forbidden. Only a few sectors of light machinery production were to be left untouched; soft-coal output was even to be increased to meet the energy needs of Western Europe.' (7)
(7) Dietmar Petzina: 'The Origin of the European Coal and Steel Community: Economic Forces and Political Interests', Zeitschrift für die gesamte Staatswissenschaft / Journal of Institutional andTheoretical Economics, Bd. 137, H. 3., Economic Reconstruction in Europe: The Re-integration of Western Germany: A Symposium (September 1981), pp.454-5.