User:Stor stark7/Sandbox/Industrial plans for Germany

The industrial plans for Germany or Level of Industry plans for Germany were the plans to lower German industrial potential after World War II. At the Potsdam conference, with the U.S. operating under influence of the Morgenthau plan, the victorious Allies decided to abolish the German armed forces as well as all munitions factories and civilian industries that could support them. This included the destruction of all ship and aircraft manufacturing capability. Further, it was decided that civilian industries which might have a military potential, which in the modern era of "total war" included virtually all, were to be severely restricted. The restriction of the latter was set to Germany's "approved peacetime needs", which were defined to be set on the average European standard. In order to achieve this, each type of industry was subsequently reviewed to see how many factories Germany required under these minimum level of industry requirements.

The first "level of industry" plan, signed by the Allies in March 29, 1946, stated that German heavy industry was to be lowered to 50% of its 1938 levels by the destruction of 1,500 listed manufacturing plants. In January 1946 the Allied Control Council set the foundation of the future German economy by putting a cap on German steel production—the maximum allowed was set at about 5,800,000 tons of steel a year, equivalent to 25% of the prewar production level. The UK, in whose occupation zone most of the steel production was located, had argued for a more limited capacity reduction by placing the production ceiling at 12 million tons of steel per year, but had to submit to the will of the U.S., France and the Soviet Union (which had argued for a 3 million ton limit). Steel plants thus made redundant were to be dismantled. Germany was to be reduced to the standard of life it had known at the height of the Great depression (1932). Car production was set to 10% of prewar levels, etc.

On February 2, 1946, a dispatch from Berlin reported:

Some progress has been made in converting Germany to an agricultural and light industry economy, said Brigadier General William Henry Draper Jr., chief of the American Economics Division, who emphasized that there was general agreement on that plan.

He explained that Germany’s future industrial and economic pattern was being drawn for a population of 66,500,000. On that basis, he said, the nation will need large imports of food and raw materials to maintain a minimum standard of living.

General agreement, he continued, had been reached on the types of German exports — coal, coke, electrical equipment, leather goods, beer, wines, spirits, toys, musical instruments, textiles and apparel — to take the place of the heavy industrial products which formed most of Germany's pre-war exports.



Timber exports from the U.S. occupation zone were particularly heavy. Sources in the U.S. government admitted that the purpose of this was the "ultimate destruction of the war potential of German forests." As a consequence of the practiced clear-felling extensive deforestation resulted which could "be replaced only by long forestry development over perhaps a century.".

The first plan was subsequently followed by a number of new ones, the last signed in 1949. By 1950, after the virtual completion of the by the then much watered-out "level of industry" plans, equipment had been removed from 706 manufacturing plants in the west and steel production capacity had been reduced by 6,700,000 tons.

The reduction in steel production that resulted from the first and second level of industry plans meant that the steel bottleneck caused other parts of the German industry to struggle even below its permitted levels. The bizonal economy hit rock bottom early in 1948 as a consequence of this.

From mid-1946 American and British policy towards the German economy had begun to alter, illustrated by Byrnes's Stuttgart Speech. According to Dennis L. Bark and David R. Gress in "A history of West Germany vol 1" the then current policy came to be seen as inflicting hardship (see also Morgenthau Plan, Eisenhower and German POWs), and the approach shifted, over time, to one encouraging German economic expansion, and subsequently the allowed levels were raised. According to Vladimir Petrov in "Money and conquest; allied occupation currencies in World War II" the reason for the change in U.S. occupation policy was almost exclusively based on economic considerations, although a large part of the occupation costs were placed on the German economy, the U.S. and the U.K were increasingly forced to supply food imports to prevent mass starvation. The speech is also generally been seen as the transition in U.S. policy away from promotion of the punitive Morgenthau plan.

After lobbying by the Joint Chiefs of Staff, and Generals Clay and Marshall, the Truman administration finally realized that economic recovery in Europe could not go forward without the reconstruction of the German industrial base on which it had previously had been dependent. In July 1947, President Harry S. Truman rescinded on "national security grounds" the punitive occupation directive JCS 1067, which had directed the U.S. forces in Germany to "take no steps looking toward the economic rehabilitation of Germany [or] designed to maintain or strengthen the German economy". It was replaced by JCS 1779, which instead stated that "[a]n orderly, prosperous Europe requires the economic contributions of a stable and productive Germany." The restrictions placed on German heavy industry production were partly ameliorated, permitted steel production levels were raised from 25% of pre-war capacity to a new limit placed at 50% of pre-war capacity.

A compounding factor for the German economy was the fact that it was not allowed to import Swedish ore until 1948, but had to rely on low quality local ore instead which required almost twice the amount of coal. The Germans were also forced to sell their steel at wartime prices until April 1, 1948, which meant large losses for the industry. In addition to this there were large scale attempts to "decartelize" the German steel industry, which greatly added to the low output.

The Allied Control Council set the price for German coal at half what it cost to produce it. As a consequence the German taxpayer had to foot the bill. From May 1945 until September 1947 the U.S. UK and France exported German coal for $10.50/tonne, while the world price was at $25-$30 per tonne. During this period the Allies thus took from the German economy roughly $200,000,000 from this source alone. In September 1947 the export price was raised but was still set at $5-$7 below world-market prices.

In Germany shortage of food was an acute problem, according to Alan S. Milward in 1946–47 the average kilocalorie intake per day was only 1,080, an amount insufficient for long-term health. Other sources state that the kilocalorie intake in those years varied between as low as 1,000 and 1,500 (see Eisenhower and German POWs). William Clayton reported to Washington that "millions of people are slowly starving."

Germany received many offers from Western European nations to trade food for desperately needed coal and steel. Neither the Italians nor the Dutch could sell the vegetables that they had previously sold in Germany, with the consequence that the Dutch had to destroy considerable proportions of their crop. Denmark offered 150 tons of lard a month; Turkey offered hazelnuts; Norway offered fish and fish oil; Sweden offered considerable amounts of fats. The Allies were however not willing to let the Germans trade.

Contrary to common myth the U.S. did in fact take "reparations" directly from Germany. The Allies confiscated large amounts of German intellectual property. Beginning immediately after the German surrender and continuing for the next two years the U.S. pursued a vigorous program to harvest all technological and scientific know-how as well as all patents in Germany. John Gimbel comes to the conclusion, in his book "Science Technology and Reparations: Exploitation and Plunder in Postwar Germany", that the "intellectual reparations" taken by the U.S. (and the UK) amounted to close to $10 billion. During the more than two years that this policy was in place, no industrial research in Germany could take place, as any results would have been automatically available to overseas competitors who were encouraged by the occupation authorities to access all records and facilities.

The dismantling of German industry continued, and in 1949 Konrad Adenauer wrote to the Allies requesting that it end, citing the inherent contradiction between encouraging industrial growth and removing factories and also the unpopularity of the policy. (See also Adenauers original letter to Schuman, Ernest Bevins letter to Robert Schuman urging a reconsideration of the dismantling policy.) Support for dismantling was by this time coming predominantly from the French, and the Petersberg Agreement of November 1949 reduced the levels vastly, though dismantling of minor factories continued until 1951.

In 1951 West Germany agreed to join the European Coal and Steel Community (ECSC) the following year. This meant that some of the economic restrictions on production capacity and on actual production that were imposed by the International Authority for the Ruhr were lifted, and that its role was taken over by the ECSC.

The final limitations on German industrial levels were lifted after the European Coal and Steel Community entered into force in 1952, though arms manufacture remained prohibited. The Allied efforts to "de-concentrate and reorganize" the German coal, iron and steel industry were also continued.

Vladimir Petrov concludes that the Allies "delayed by several years the economic reconstruction of the wartorn continent, a reconstruction which subsequently cost the United States billions of dollars." (see Marshall plan)

Time Magazine articles
Category:Aftermath of World War II Category:Economy of Germany Category:Economic history of Germany
 * THE UNDEFEATED
 * Cost of Defeat
 * "Cornerstone of Steel"
 * Coal or Chaos
 * Temperature Down
 * "What Would You Do?"
 * No Road Back?
 * A Policy for Germany
 * Socialist Medicine
 * Potsdam Product
 * "If Your Wind Is Right"
 * The Trouble with Horned Toads
 * Pas de Pagaille!