Effect on British Crisis and Many Other Vital Matters

Waikato Independent, Volume XLIV, Issue 6106, 26 September 1947, Page 7

Effect on British Crisis and Many Other Vital Matters

“LEVEL OF GERMAN INDUSTRY”

Into every discussion of international economic problems, the question of the “ level of German . industry ” sooner or later obtrudes itself. It is a factor in the Marshall plan conference in Paris. It links •directly with the “ dollar famine ” and the British crisis and with all economic issues raised, but not settled, at the Moscow conference. .

In theory, the whole question was settled two years ago at Potsdam. But, in practice, the Potsdam formulas settled nothing at all. On one hand, Germany’s production of “ meals, chemicals, machinery, and other items that are directly necessary to a war economy ” was to be “rigidly restricted to Germany’s peace-time needs.” And, on the other hand, Germany was to be left “ enough resources to enable the German people to subsist without external help” Admirable phrases. But; giving no guidance at all as to where the line must be drawn—what level of production wodld be necessary to allow Germany to subsist, while insufficient to provide a basis for a re-creation of her military power. And complicated by the. fact that—as reparation clauses wiere then understood the permitted level of industry would determine the amount available for reparations.

For, apart from German assets abroad, reparations were to be provided by the removal'of the “ productive capacity not needed for permitted production.” The lower the permitted level, the more the amount of “industrial capital equipment” available as reparations. W?hen the task of fixing the level was undertaken by the Allied Control Commission, there were sharp differences of views. Americans were still influenced by the so-called Morgenthau Doctrine, which envisaged the conversion of Germany into a pre-dominantly agricultural country with its industry re duced to-a minimum. The.complete unreality of such a plan for a densely populated cpuntry with a large urbanised population has not been realised.

The Russians—as a natural resul of the devastation in their own country—wanted the maximum amount o:

reparations, and, therefore, a low permitted level. . While the French, placing “ security” considerations above all; also wanted the lowest possible level, so that there should be no possibility of a revived though perhaps concealed armaments industry. Only Britain, which had already in 1944 made an exhaustive study of the problem, argued that what others considered too high a level was, in fact, essential if Germany was to be economically stable. The result was a compromise. Steel was, for obvious reasons, the key. The British had argued for a production capacity of between 10,000,000 and 12,000,000 tons a year—roughly, half the pre-war figure. The French argued fey? 5,000,000 tons; the Russians at one time suggested 3,000,000 tons. 1 ,

In the end it was agreed that a capacity of 7.5 million tons should be permitted, but that production should not be higher than 5.8 million tons without the specific approval of the Allies! There was a touch of unreality about this last figure, since production at the time was only about 2,000,000 tons. But, in any event, the 'agreement reached in March, 1946, never came into force.

A year later at the Moscow Conference the picture had changed entirely. The Americans, convinced by the hard necessity of a deficit of nearly 400,000,000,000 dollars on the

balance of payments of their zone, had come round to the British view.

. .So had the Russians for quite an- £ other reason. They were now insisting that reparations should.be taken ■from the current German production rather than in the form of “ industrial capital equipment.” And for that, a high level of production was clearly necessary. Only M. Bidault still objected to any substantial revision of the 1946 figure. But on this, as on other matters, the Moscow Conference reached no decison. The question was left in the air. And the British and American Governments, in view of the economic situation in the fused zones, decided that they must, in default of the Four-Power Agreement, themselves decide the “permitted” level in the Anglo-American zone—which includes by far the greater part of heavy industry. Agreement has been reached, but its announcement and definite adoption have been postponed in order to allow' the French Government the opportunity once again to express its views. Report has it that, the new steel figure is in the neighbourhood of 10,000,000 tons of steel a year. French Objection The French objection is certain, and will be voiced at a meeting which is to begin in London in the next few days. But the final decision will still be Anglo-American; for the French Government, though anxious to ex-, press its opinion, has made it plain that it will not join in the decision. The decision, however, musj; be made, and it is hoped that it will be accepted and approved by the Council of Foreign Ministers in November. If so, one at least of the many issues left open by the Potsdam Agreement will have been finally settled, But in the Paris Conference another has presented itself—that is the question of not what level of production Germany shall ultimately be allowed to attain, but what level she shall immediately be encouraged and assisted to attain as part of a fouryear plan for general European recovery.

Here discussion has not reached the point at which figures can be considered and debated, but it is clear that there, will be a similar divergence of views—with this difference: that in this case the last word must, from the nature of circumstances, rest with the Americans, i

It should, however, be stressed, since there is a lot of confusion on this point, that the two “levels”— the level to be ultimately permitted and the level'to be immediately stimulated—are quite distinct and that decision on the one hand does not prejudice or necessarily - affect the decision on the other.