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influence in the United States Military Government. Many of them have been sent home. Those who remain are careful to camouflage their real objectives. Nevertheless they are by no means eliminated and still exert con- siderable undercover influence. They can still work through the British, who, although they never subscribed to the absurdities of the Morgenthau Plan or let Communist sympathizers direct their policy, took advantage of the decartelization program to decrease Germany’s product ive capacity and raise her costs of production to the advantage of her British competitors on the world market.

The outstanding example of dismantlement of a model enter- prise is the August Thyssen works in the Ruhr. This was the most efficient smelting orks in Europe. It formerly produced 1,250,000w tons of crude steel, all used on the spot to turn out high quality dynamo and transformer sheets, materials for bridge building, and

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heat resistant and acid-proof steels. Situated on the river, it had its own wharves for the landing of coal and iron ore and for shipping of finished products. The Thyssen works formerly accounted for half of Germany’s total production of the transformer sheets now so desperately needed. Ever since the end of the war the British have prohibited its operation, and it is now being dismantled.

Repeated testimony before Congressional committees, and state- ments by ECA and United States Military Government spokes- men, confirm the fact that the basic limiting factor in the German recovery program is the power shortage. This is caused by the result of our air raids, long-neglected repairs, dismantlement of power plants, and shortage of coal supplies. Without new supplies of elec- trical sheets for transformers and dynamos the power shortage can- not be remedied. Fifty per cent of Bizonia’s capacity for the produc - tion of electrical sheets was located in the August Thyssen Works.

Yet the State Department, in its memorandum of March 1, 1948, asserted that “no plants producing electric gen erating equipment are scheduled for dismantlement in the British Zone.”

How is this statement to be explained? Are the experts of the State Department even more ignorant of technology and the re- quirements of modern industry than the author of this book? Or is someone interested in misleading the Secretary of State, Congress, and the American public? Or is it worth nearly a billion dollars year to preserve the reputations of the incompetents who made the past mistakes?

Technical progress in all countries is leading to increased use of electric and fine steels, and the Level of Industry Plan requires that Germany produce more, not less, of the high-grade machine tools and fine optical and electrotechnical instruments which require such steel. But Germany’s capacity to produce electric steel is being reduced to a mere 300,000 tons a year. One hundred and eighteen electric furnaces out of a total of 209 are being dismantled.

Thus, while promising that the Germans would be allowed to in- crease their production and export of machine tools and optical instruments, we are busy depriving them of the capacity to procure the specialized steels these industries require.

This crippling of Germany’s capacity to produce the fine steels increasingly in demand on the world market is of particular impor- tance to the American taxpayer, since it drastically reduces Ger- many’s capacity to export high quality tools, and perpetuates the unfavorable balance of trade now met by American food subsidies.

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It also cripples the chemical industry because Germany will hence- forth be unable to produce sufficient quantities of heat- and acid- proof stainless steel.

It was promised in the Revised Level of Industry Plan that the fine machine-tool mechanics and optical-instrument industry would not be touched, but even in this field factories have been disman- tled in the United States zone, sometimes with the excuse that they had been “substantially modified” for war use. There has also been dismantlement of factories producing fine precision tools es- sential to the permitted export industries.

It was also stated that the production of agricultural machinery and road tractors in the Bizone was insufficient, and none should be taken for reparations. But here again a promise to the Germans was broken. In 1948 the section of Krupps producing agricultural machinery was dismantled in spite of bitter protests by the workers employed there.

In spite of the admitted necessity to increase German exports of machinery, the 1947 plan provides for the ollowing removals of productive capacity:

Thirty-five per cent of the production facilities of the heavy me- chanical engineering industry.

Twenty-three per cent of the capacity of the light machinery in- dustry.

Thirty-five per cent of the present productive capacity of the machine-tool industry.

Removal of “only” three electrical engineering plants, because “the pre -war requirements of the Bizonal area were in large part met from capacities in Berlin, which have been almost totally dismantled.”

Regarding automobiles and trucks, the plan states that capacity to produce 160.000 passenger cars and 61,500 commercial vehicles will be left in Western Germany. Prewar production was far above this level. It should be noted that up to 1948 practically the whole production of Volkswagen and trucks was taken by the British and French occupation authorities for their own use or for sale for their own profit. Moreover, a large number of German automobiles and trucks were confiscated at the beginning of the occupation. Thus very few Germans still have automobiles and those still in their possession are usually very old. Most business enterprises lack essential transport. The backlog demand is accordingly huge.

As for chemicals, 40 to 50 per cent of existing capacity is to be

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removed or destroyed. All explosive plants are to be removed or destroyed. A quarter of the capacity of the plastics industry is made available for reparations. Less than the prewar capacity of dye- stuffs is to be retained. The production of atabrine is to be re- duced below prewar by removal of a pharmaceutical plant. Fifteen per cent of the capacity of the “miscellaneous chemicals” group is to be removed, and 17 per cent of the capacity of the “basic, or - ganic and inorganic” chemical industries.

The prohibited list of industries still includes ships, aluminum, beryllium, vanadium, magnesium, ball bearings, synthetic ammo- nia, rubber, gasoline, and oil.

Under a temporary provision Germany has been allowed to con- tinue producing some ball bearings ntil such time as her exports u shall enable her to buy them abroad. Both the British and Ameri- cans now agree this is impracticable, but in the meantime half the equipment at the large ball-bearing factory at Schweinfurt in Bavaria has been sent to the Soviet Union.

The British, obviously because they want no German competi- tion in this sphere, have as yet refused to agree to remove the ban on shipbuilding except for small and slow vessels.

The British in their implementation of the plan have included the light-metal industries in the category of “light machine indus - try” scheduled for a 23 per cent reduction in productive capacity. In spite of German protests the British have dismantled factories making coffee pots, skillets, kettles, and other household goods made of sheet metal. Some 40 plants producing such peacetime necessities were included on the British dismantlement list.

The State Department has contended that the task of selecting the plants to be dismantled was performed with great care, that none of them could be used in Germany if retained there, and that their removal facilitates the economic recovery of the recipient nations.

This statement must be based on inadequate information. For nothing is more obvious in Germany than the fact that many of the plants being dismantled are precisely those working to full capacity, having been given priority in the allocation of coal and raw mate- rials, precisely because their products were essential to the working of the civilian economy. Telling the Germans that the machinery being dismantled is “surplus” to their requirements is a heartless joke.

The State Department’s contention that the plants dismantled

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were those which could not be used in Germany if retained there is contradicted by information given by the Military Government, as well as by the evidence presented by the Germans. I was told by Military Government authorities in Berlin in November 1948 that the plants dismantled in the United States zone were now once again producing half as much as before they were dismantled. They had been put back into production by providing them with equip- ment formerly unused in plants which were not dismantled. In other words, reparations were not taken from “surplus” capacity in idle factories, but from those working to capacity.

In any case the contention that German reparations have not impeded recovery because capacities are not fully utilized, begs the question. It should, instead, be asked why potential capacities have not been fully utilized in view of urope’s needs. The answer re - E veals the vicious cycle for which the Allied wrecking policy in Germany is responsible.

The inadequate food supplied to the German miners and their families, and their miserable housing conditions, combined with the dismantlement of the factories producing mining equipment, has held down coal production.

The obligation to export 20 per cent of the Ruhr’s coal produc - tion (mainly to France) and the loss of the Saar and of the brown coal of Eastern Germany, has further drastically curtailed the amount of coal available for German consumption.

This in turn limits steel production and has led some iron and steel works to be represented as “surplus,” only because Germany is not permitted to obtain the coal and iron ore she requires to make a major contribution to European recovery.

The real reason for dismantlement is that given by the head of the Steel Production Board in Düsseldorf, who in August 1948, said to my friend Mrs. John Crane, who was representing Senator George W. Malone: “There is no intention that Germany will be left with enough steel-making capacity ever again to be able to export steel or steel products in significant quantities.”

The Revised Plan would be unrealistic in view of the necessity for increased German exports, even if based on a correct estimate of existing capacities. There is, however, evidence that the list of plants to be dismantled was drawn up without a proper survey of what equipment remained in Germany.

The Germans contend that the basis of United States-British calculations of productive capacity was the maximum output

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reached temporarily during the war and impossible to sustain. Normal utilization is only 80 to 90 per cent, and the many years during which no repairs were carried out have reduced the capacity by a greater degree than normal depreciation. These facts too were not taken into consideration. They also contend that the use of gross capacities in Allied calculations results in an overestimation of production facilities, since some subsuppliers are counted twice over.

Secondly, the Germans say, since the most efficient plants were chosen for dismantlement, and since the destruction of one branch of an industry deprives others of the material they use, the net reduction in productive capacity is far greater than indicated by the total figures of dismantlement. Insuperable bottlenecks result from reparations deliveries which affect the whole German economy, and in some cases the whole of Europe, since some plants can never be reconstructed in other countries, and even those which are re-erected take months or years before they can produce again.

Thirdly, the basis on which Germany’s productive capacity was calculated was not, as the State Department has asserted, any “care - ful” investigation of existing capacity. The basis was apparently the so called “Mecit” reports of the winter of 1945 -46 when the German factory owners were instructed to fill in forms stating the productive capacity of their plants. The object of these question- naires was not stated at the time and the Germans thought they were to be the basis for fuel and raw-material allocations. Human nature being what it is, they almost all overestimated their pro- ductive capacities at a time when no one expected to be supplied with anything but a small proportion of their needs. It was cer- tainly the Germans’ fault that productive capacities were accord - ingly overestimated, but the fact remains that these “Mecit” reports are not reliable, and should not have been taken as the basis or the calculation of which plants are surplus under the Revised Level of Industry Plan.

There are numerous established cases in which data on plants have been so inaccurate that they were not even listed in the right industry.

Even if the original Anglo-American estimates of Germany’s productive capacity are accepted as correct, British “multilateral deliveries,” French prélèvements,” and “restitutions” from all three zones have destroyed their validity. No one, not even the

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Germans, now knows exactly what is left of Germany’s productive capacity.

“Multilateral deliveries” is the British term for the removal of specially valuable, or special-purpose and frequently irreplaceable, machinery from German factories to England. Prélèvements” is the French term for their seizure of whole plants and of indi- vidual machines in their zone without reference to the Inter-Allied Reparations Authority (IARA) in Brussels. Both terms are “legalized” synonym for what would be described as looting if practiced by an enemy country.

In the British zone a commission would come to a German fac- tory not on the dismantlement list, pick out certain machines, and order them dismantled “to meet United Kingdom requirements.” Although on October 18, 1947, General Robertson made an official promise that no further multilateral deliveries would be demanded, in the fall of 1948 they were resumed in some places. In Düssel- dorf, for instance, in September 1948, the British demanded seventy-two machines, this time however from factories on the dis- mantlement list. The point, of course, was that these machines had to be delivered earlier than the dates set for general dismantlement, and the Germans were convinced that the British hoped thus to forestall the ECA commission’s recommendatio ns.

The machines taken as multilateral deliveries were for British use, since they were not being allocated by the IARA at Brussels. Some of the machinery thus torn out of German factories and not taken into consideration in drawing up the Level of Industry Plan is ir- replaceable, because it is made only in the Russian zone. Many factories have been permanently crippled although they do not figure on the dismantlement list.

“Restitutions” have further invalidated the original estimate of Germany’s producti ve assets. Originally the term “restitutions” was taken to mean only the restoration of property stolen by the Ger- mans in occupied countries, or transferred to German ownership “under duress.” Confined to this interpretation restitutions are entirely justified on both moral and economic grounds. But, in July 1948, the United States Military Government began to give an interpretation to the term “restitutions” which has no basis in law or equity. The 1946 ruling by General Clay, according to

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which “duress ” had to be proved, was canceled, and it was decreed that no transfers of property under German occupation were to be considered as “normal commercial transactions.” According to this ruling machinery and other goods, bought and paid for by German merchants or manufacturers, must be returned to the country of origin as restitutions without any need to prove they were sold under duress.

Even if the German buyer can produce documentary evidence that the seller considers that he was properly paid and does not now claim return of the property, the German purchaser has to give it up without compensation, because, “restitution claims are government claims and not those of individuals.” As a result of this United States Military Government ruling, property for resti- tution is not delivered to those who originally sold it to the Ger- mans, but to foreign governments. Most of the foreign governments who thus obtain restitution of the machinery and other goods originally sold by their nationals are Soviet satellites oday, and they often dispose of the “restored” property by sale to foreign countries for dollars. In a considerable number of cases they have offered to sell these restitutions to their dispossessed German owners for foreign currency— to be used presumably for strengthen- ing themselves against the “menace of American imperialism.”

The only exception to this American ruling concerning the resto- ration to former occupied countries of the machinery and other goods bought by the Germans, is the proviso that if a German can produce “figures and dates” to prove that he bought the same kind of machinery or other goods in the same quantities before the war, he may perhaps be allowed to retain his property.

Commerce between Germany and France, Belgium, Holland, Czechoslovakia, and other East European countries, always large, naturally increased greatly during the war and blockade, especially since the Nazis concentrated as much production as possible in Czechoslovakia and France because of our air raids on Germany. The demand that all goods delivered to Germany during the war should be now returned to the country of origin, even if paid for, therefore opens up limitless demands on the economy of Bizonia.

A country like Czechoslovakia, which probably received more equipment from Germany than it sold to Germany, is in a par- ticularly happy situation under the United States interpretation of restitutions, although it must be noted that in the case of Czechoslovakia the United States does not accept claims for the

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restitution of property sold to the Germans prior to the Allied London declaration of January 5, 1943, which warned Germany that we would set aside all forcible transfers of property in occu- pied countries. Nevertheless, Czechoslovakia, whose country was not bombed and never became a battlefield, and whose manu- facturers made profits working for Germany during the war, is in far better position today in claiming “restitutions” than the Poles who suffered so much more under the German occupation and whose country never became a Nazi arsenal. The destruction of Warsaw caused the Poles to lose many of the records necessary to claim restitutions of the machinery taken from them by the Ger- mans without compensation, whereas the Czechs and the French find little difficulty in specifying, finding, and claiming the ma- chines they sold to Germany.

Perhaps it makes little difference in the end since Poland and Czechoslovakia are both under Stalin’s domination, but I found myself sympathizing with the Polish officer who epresented his country at the United States Restitutions Office in Karlsruhe, when he told me how great a handicap it was to the Poles not to be allowed to visit German factories, unless authorized to do so by the United States authorities, and unless they could give a descrip- tion of the Polish machinery they expected to find and the date on which the Germans had taken it. Clearly Poland was at a great disadvantage as compared with Czechoslovakia and France which had collaborated with the Germans and knew to whom they had sold their manufactures, or as compared with Germany’s former allies, Italy, Hungary, and Rumania, whose representatives in the United States zone also found it easy to claim restitutions.

The British, said my Polish informant, were far ore co-opera- tive than the Americans in enabling Poland to receive the ma- chinery looted by the Germans. In the British zone the Poles could inspect all German factories at will, and had received hundreds of loaded railway cars of restitutions.

If the Poles were dissatisfied at the small number of restitutions they had been able to obtain in the United States zone, the sum total of which the Soviet satellite countries was getting was not inconsiderable.

When I arrived in Karlsruhe, where the Restitutions branch of the United States Military Government is located, I first ran into a group of Yugoslav officers whom at first sight I took to be Rus- sians, on account of the similarity of their uniforms and gold and

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scarlet epaulettes. Then I met Poles, Czechs, Hungarians, Italians, and Rumanians and learnt that almost every nation in Europe (including Germany’s former allies) is busy claiming something or other from Germany at our expense.

No accounts are kept concerning such “restitutions” to show the effect on the German economy. The head of the United States Restitutions Office, a German born American citizen, who has changed his name from von, to de, Kaiserlinck, told me that he “had not the least idea nor any interest in the quantity and volume of machinery” taken out of Germany in the form of restitutions. The only figures he could give me were the over-all values of resti- tution deliveries which amounted to 287,000,000 Reichsmarks of 1938 value.

I told Herr von, or Monsieur de, Kaiserlinck that, although my main interest was the economic effect of restitutions, I was also interested in ascertaining the legal justification for the wide inter- pretation given the term by his office, since in the future we might, like the Germans, be arraigned as “war crimin als” for our failure to observe the Hague rules of land warfare concerning enemy prop- erty. His indignation at my statement was, at first, unbounded. But after a while he started telling me that if I would visit the Poles, the French, and other Allied representatives in Karlsruhe, I would revise my estimate of the attitude of the United States Restitutions Office. After talking to the Poles I understood what he meant. Nevertheless I continued to have my doubts about the legality of the orders issued by the United States Restitutions Office.

Just how broad the distinction of “restitutions” can he made is illustrated by a French demand in the summer of 1948 that certain pure-bred horses in Germany should be returned to France. None of the horses was more than three or four years old, and could not therefore have been stolen during the Nazi occupation. The French, however, contended that the horses in question had been sired by French stallions. It was assumed that a good and patriotic French horse could only ave acted “under duress” when conh- fronted by a German mare.

Other and less humorous examples of what restitutions can be held to cover are the following:

A tailor called Hans Schweighofer of Regen, having been bombed out, bought an old second-hand sewing machine of Czech make and got it repaired. He was ordered to “restitute” it to Czecho -

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slovakia, and thus deprived of the possibility of earning his living and supporting his five children.

Frau Leni Kraus, whose husband was killed in action, lost all her property in Berlin by bombing. She bought some second-hand furniture at Mülhausen in Alsace and took it with her when she was evacuated to Bavaria. Now the French are claiming the bed she shares with her son as restitution.

The list of such cases could be continued indefinitely.

The French have given the term restitutions so wide a meaning that they have confiscated automobiles of French make bought by the Germans before the war.

The Americans are now confiscating the automobiles they sold to the Germans n the first years of the occupation from confiscatedi Wehrmacht supplies. Several thousands of automobiles paid for by the Germans are now being taken from them without compensa- tion in the combined British and American zones, and “restituted” to the French and others who originally sold them to the Germans. American and British military governments, having first derived profit from selling confiscated Wehrmacht property to the Ger- mans, are now annulling the contract, and restoring it to the original seller at no cost to the Military Government.

The British with the respect for law which they display when- ever it does not conflict with their vital interests, originally refused to accept restitution claims unless duress could be proved. Only such items ere restitutedw from the British zone which had been illegally acquired from occupied territories. Since September 1948, however, the British have adopted the “more comprehensive” American interpretation of restitutions, and have been declaring property brought to Germany by legal business transactions as liable to be returned to the countries from which it was bought.

A confidential instruction issued by the British Foreign Office on August 18th, 1948, Reference No. 45 Basic (Saving), a copy of which was obtained by the Germans, reads as follows:

I also believe it to be in the economic and security interests of Europe that some of Germany’s surplus industrial equipment should be removed and put to productive use elsewhere, and a liberal restitu- tion policy would be consonant with this aim (italics added).

There is little doubt that the change in British practice last fall was due to the expected halt in the dismantlement of German

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factories to be shipped abroad as reparations. When I left Ger- many, restitutions from both the British and United States zones were already threatening to supplant reparations as the means to reduce Germany’s industrial capacity and increase her need of American ECA aid.

On February 28, 1949, Dr. Kutscher, of the German Economic Administration for Bizonia, wrote to me that since I left Germany “the situation in the field of restitutions, especially in the British zone, has gone from bad to worse.” According to the information he sent me, the productive assets being withdrawn from Western Germany under the heading of restitutions now almost equal rep- arations, and in the United States zone they are even greater.

According to the official statistics of the United States Military Government the value of restitutions from the United tates zone, up to September 1948, amounted to 287,075,915 marks, as against a figure of 235,000,000 marks given as the residual value of the plants dismantled on reparation account.

In Hamburg, in the British zone, the Allied Missions compute restitutions already delivered as totalling 36,000,000 marks, as against the 32,000,000 marks residual value of the plants dis- mantled on the reparation account.

My German informant also wrote concerning the fresh blow delivered to the German economy by the decision o hand over to the Netherlands as restitutions five of the few surviving modernly equipped trawlers of the German fishing fleet, thereby reducing Germany’s present small catch by 30 per cent. This is being done at a time when the United States is considering appropriating ECA funds for the purpose of enlarging the German fishing fleet, in order to reduce Germany’s dependence on American food imports.

The Netherlands are also claiming restitution of nineteen tankers, the withdrawal of which from Germany will mean that Bizonia’s crude oil supply will require the gift of American tankers. The fact that Holland is using her resources to impose the same kind of servitude on the Indonesians as the Dutch suffered under the Nazis, makes such restitutions at America’ s expense seem not only absurd but an outrage.

Restitutions are also now affecting the supply of essential ma- chinery to the Ruhr mines. A number of coal mines are threatened with the necessity to close down or curtail operations, because the new equipment they need will not be delivered on account of restitutions.

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According to a compilation made at the instigation of the Anglo- American Bipartite Steel Production Office, restitution claims af- fecting the iron and steel industry amount to a total of more than 40,000,000 marks (1938 value). Losses through the disruption of production entailed by the removal of bottleneck machinery as restitutions, are calculated to amount to a far larger sum.

The Germans, having earlier been led to believe that the Mar- shall Plan meant an end to the wrecking of their economy, are becoming thoroughly disillusioned, now that restitutions are held to cover machinery legally acquired and fully paid for, and are taking the place of reparations as the means to deprive them of any possibility of earning a living.

They can see no end to the various methods adopted by their conquerors to reduce them to a pauper status. They can no longer place any trust even in the 1947 Revised Level of Industry Plan, which, harsh and unrealistic as it was, at least promised to allow them to retain the industrial capacity to produce to the limit in certain purely peacetime industries. The factories already dis- mantled, or now being dismantled, include many which are outside the categories scheduled to be delivered as reparations according to the Revised Level of Industry Plan.

Factories making soap, toys, furniture, pots and pans, fine optical instruments, agricultural machinery, hospital equipment, and multitude of other peacetime needs and exports have been dis- mantled not only in the British and French zones, but also in the American. There were bad enough examples in the United States zone, but there seemed no limit to the injustice caused by the British desire to eliminate competition, or to he hypocritical ex- cuses made by the British to obtain German assets for the purpose of decreasing their own dollar deficit.

There was, for instance, the case of the Diana Toy Factory in the French zone, making air guns, which the British had induced the French to classify as an “armaments factory” in order that they might obtain its equipment.

On the way out of Germany in December 1948 I happened to share a compartment on the train to Ostende with a British toy manufacturer on his way home from Nuremberg. He showed me samples of toy motor cars with three gears, and other examples of German inventiveness and ingenuity, saying that no other toy manufacturers could compete with the Germans. Then he told me how, immediately following the war’s end, he and othe r British

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manufacturers had been told by the Board of Trade that they would be furnished suitable army or navy uniforms to go to Ger- many and pick out as “reparations officials” any machinery they wanted or thought they could make use of. He himself was friendly to the Germans and had no desire to deprive them of their liveli- hood, so he had not accepted the offer. In any case, he said, it paid him better to buy German toys than to make them in Eng- land. Because British workers were less efficient and efused to work r as hard as the Germans it was cheaper to import German toys than to take German machinery to compete against them.

The outstanding example of the failure of the Western Powers to allow the Germans to retain even those industries which are not supposed to be on the dismantlement list, is the watch and clock industry. Centered in the Black Forest and consisting mainly of very small enterprises, this is one of the oldest of German industries and in no way related to armaments production. But the French at the beginning of the occupation started to destroy it and remove its equipment to France. The British were equally interested in stopping the Germans from making watches and clocks, and thanks to the efforts made by some liberal Englishmen, who have en- deavored to stop dismantlement, the following excerpt from the trade journal, British Jeweler and Metal Worker received wide publicity in 1948.

Lengthy negotiations and discussions have been conducted by Mr. Barrett (Chairman of the Export Group) over the past three years with a view to fixing the future level of the German horological in- dustry below the 72 per cent of the 1938 level which had been agreed by the Allied Control Commission. It is pleasing to be able to record that the final result has been to reach agreement that the German industry is to be reduced to 50 per cent of the 1938 level. This result is what we wanted to achieve; and although there can be no doubt that the Germans will ultimately re-develop their horological industry on stronga basis the present position means that the British industry has been given a certain amount of breathing space in order to become organized on a sound basis. The thanks of the Association have already been conveyed to Mr. Barrett for his patient and untiring work in achieving this result. Following upon this, the contents of a number of German factories are to be thrown up for reparations, and Mr. W. W. Cope has recently made an inspection of these factories, as also of certain other machines which are available to this country.

The scandal occasioned in England by this exposure of the com-

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mercial motive which inspires dismantlement led to the appoint- ment by the Foreign Office of a commission, headed by the former Soviet-friendly Labour M.P. Crossman, to investigate what was happening to the German watch and clock industry. In Frankfurt I happened to meet the wife of an old English friend of mine, H. N. Brailsford, who is among the small number of liberals who have always fought for justice. Mrs. railsford had accompanied Crossman on his tour of the French zone, and had been horrified at what she had seen. She was full of sympathy for the German workers deprived of their livelihood by dismantlement, but, she said to me, “After all, America is to bl ame for it.”

I couldn’t quite get my bearings. America’s sins might be great and her stupidities even greater, but I could not see how the United States could be held responsible for France’s and England’s destruc - tion of the German watch and clock industry. Mrs. Brailsford en- lightened me: “Don’t you see,” she said, “it’s all due to America’s failure to give enough dollars to Britain and France. They have to do these mean things in order to get enough dollars.”

Although Mrs. Brailsford’s remarks must str ike any American as not only ungrateful but absurd, they revealed the basic problem which no Marshall Plan can resolve. Whether or not one believes that it was commercial competition which was the root cause of both world wars, the fact remains that Germany and Britain are the two European countries which must “Export or Die.” True as this was before America’s wartime President agreed to let Russia have most of Eastern Europe and its agricultural resources, it is even truer today. It would now seem that America has only the choice between subsidizing a Western Germany deprived of the possibility of sustaining itself because of British and French de- struction of her assets, or of continuing to supply dollars to Britain under an everlasting European Reconstruction Program.

According to a report from the Ruhr, published in the New York Herald Tribune on February 27, 1949,

Britons here do not deny that the West Germans with increased popu- lation and greatly decreased resources will have good arguments for raising production even beyond that of prewar. But they foresee that the production drive designed to end the billion-dollar-a-year subsidy being poured into Germany, mainly by the United States, will prob- ably bring a bitter struggle for world markets.

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Is America to side with the defeated enemy country which has be- come her ward, or with her British ally? The British, of course, have no doubts as to what American policy should be. “The British view as explained by a high official in Düsseldorf,” continued Mi ss Mar- guerite Higgins’ dispatch in the Herald Tribune, is as follows:

It is true that the slogan “Export or Die” holds good for both Britain and Germany. But from our point of view, if anybody has to die in the ensuing struggle for world markets, it is oing to be the Germans. We feel entitled to demand the fruits of victory. Britain will demand sufficient priority on world markets to insure the success of its own great battle to become self-sustaining.

Miss Higgins further reports that the British view s that German production must be allowed to expand, but not to a point where it would interfere with efforts of Britain and France to sell enough abroad to pay for imports on which they must live.

I am not presuming to pronounce judgment, but it seems high time that Americans understood that, having twice intervened in Europe’s “interminable wars” to prevent a settlement by the ver - dict of arms without benefit of American aid of the conflict be- tween Germany and England for industrial and political supremacy, the United States cannot now refuse to arbitrate, unless all Europe is to succumb to Soviet Russia by reason of its internal conflicts.

The British, having lost a large part of their colonial Empire and foreign investments, are now in a situation comparable to that of the Germans between the two World Wars; but the Germans, by reason of their defeat and lost territories, are in a far worse situa- tion. The old commercial rivalry between England and Germany, therefore leads inevitably to cutthroat competition, in which Brit- ain’s advantage as a victor is counterbalanced by Germany’s greater capacity for hard work, and America’s interest in preventing her re - maining an economic dead weight around the American taxpayer’s neck.

On the other hand, the bitter competition for markets among the nations of Europe seems an absurdity today since the whole world is short of the manufactures they can supply. Moreover, Ger- many and England, however difficult it is for them to be reconciled, have an equal interest n preventing further encroachments on i European territory by Soviet Russia. Some way must be found to stop the internecine struggle, if Western European and American civilization are to be saved. The issue and the desperate need for

THE MATERIAL COST OF VENGEANCE 97

solution are only obscured by the passionate appeal to hatred and the desire for vengeance on the Germans as an aggressor nation.

When I returned to Berlin at the end of November, I endeavored to ascertain not only the cause of our self-defeating reparations pol- icy, but also how it was that the Military Government’s official statements on dismantlement failed to correspond to the facts as had seen them.

After interviewing various Military Government officials, it seemed to me that the explanation of both phenomena was partly political and partly ignorance. The camouflaged influence of Mor- genthau’s remaining disciples, some of whom are still ensconced in the economic and financial divisions of the United States Military Government, had, it seemed to me, given the highest authorities an incomplete, if not actually false, account of the dismantlement operation.

Either because of their preoccupation with the Cold War in Berlin and consequent reliance on civilian subordinates for eco- nomic information, or because of sentiment t home and Washing- a ton’s directives, or because of the reluctance of the British and French to back up the United States against the Soviet Union, found that the highest United States Military Government author- ities in Berlin refused to consider dismantlement as a matter of urgent importance.

General Hays, who is General Clay’s deputy, and is far from being an apostle of vengeance, was clearly misinformed on the question of the cost and effect of dismantlement. He quoted a figure of only sixty or eighty million dollars as the value of the equipment of the 215 German factories in the American Zone on the dismantlement list. This he considered negligible in comparison with the need to reach an agreement with the French on the Ruhr and the forma- tion of a West German state.

Besides having accepted the fictitiously low value placed on the machinery delivered as reparations, General Hays, like so many other Americans, thinking in American terms of large natural re- sources and industrial capacity, considered German losses through dismantlement as easily remediable by ECA aid. In the summer, when I had interviewed General Clay, I had found him similarly inclined to dismiss German complaints and to consider Germany’s loss through dismantlement as insignificant and easily remediable.

The assumption that a few more million dollars of ECA aid can make good the loss ignores the social and political effects of dis-

98 THE HIGH COST OF VENGEANCE

mantlement. As Carlo Schmidt, the Social-Democratic leader from the French zone, said to me in Bonn:

“ Men are losing hope and the spirit of enterprise. Denied the right to work and be independent by Western occupation policies, they are beginning to view foreigners in the light of who can give them something. You are destroying morality and self-respect and pauperizing us by your dismantlement and other economic policies. Those who only hope for charity will never be able to resist Com- munism.”

I understood the obstacles to clear judgment better after I heard the views expressed to me by Mr. Wilkinson, General Clay’s chief economic adviser.

Mr. Wilkinson, who had served in Germany since the beginning of the occupation and was appointed while Mr. Morgenthau and his friends ran the Treasury Department, told me that he “couldn’t care less” about what the Germa ns felt about dismantlement. He had, he said, very vivid memories of what the Germans had done in occupied countries when they were the conquerors. He “neither liked nor trusted any Germans.”

Having thus proclaimed his readiness to indict the whole Ger- man nation, Mr. Wilkinson proceeded to tell me that the Germans, in his view, “did not deserve any consideration” from their con - querors. He was, however, intelligent enough to realize that Europe could not recover unless the Germans were allowed and encouraged to work. “Just as you can’t get a horse to work unless you give it enough to eat,” he said to me in his Berlin office, “so also the Ger - man people must be made contented enough to labor.”

The inverted Nazi sentiments expressed to me by General Clay’s chief economic adviser went far to explain the otherwise incompre- hensible policies I had seen being implemented in the United States zone. Racial antipathies, or the blind desire for retribution on a de- feated people, preclude wise statesmanship. By playing upon such feelings the Communists are able to induce us to follow policies detrimental to our own interests. I was therefore not greatly sur- prised when Mr. Wilkinson handed me a copy of the latest issue of the journal of the “Society for the Preven tion of World War III,” with the suggestion that I read the article it contained on dis - mantlement and reparations. He was, I presume, completely una- ware of the manner in which this notorious organization’s propa - ganda of hatred and vengeance helps the Communists.

After talking to Mr. Wilkinson in Berlin I have been better able

THE MATERIAL COST OF VENGEANCE 99

to comprehend why dismantled equipment from the United States zone is still being shipped to the Communist countries of Eastern Europe. One example is that of the firm of Martin Beilhack at Rosenheim, from which 115 tons of machinery were shipped to Czechoslovakia and 190 tons to Yugoslavia as late as February 1949. A horizontal forging press of 900 tons pressure capacity is also, I learned in a letter received from Germany, to e handed over to the Czech Communists. The fact that this Beilhack firm is listed in the ERP program to be aided with new machinery for the construction of freight cars shows the cost to America of dis- mantlement for the benefit of Soviet Russia and her satellites.

Sir Cecil Weir, the British Chief of Reparations whom I inter- viewed next day, could not be accused of hatred for the Germans like his American counterpart. He is a mild little man who, far from desiring to treat the Germans as work horses, was full of hu- mane and decent sentiments. Unfortunately, he obviously had no idea of what was going on in the Ruhr. He assured me over and over again that no machinery was being removed as reparations which was not surplus to the needs of the German economy. I felt convinced that he believed his assertion that reparations were not being taken from factories serving the essential needs of Ger- many’s peacetime economy and that “never had a victor treated vanquished nation so well” as the Western Powers were treating the Germans. It was no use telling him that he was misinformed. He simply would not believe that I had seen machinery being dis- mantled which was anything but surplus, and that much of it was being thrown on the scrap heap.

Mr. Wilkinson had appalled me by his cold-blooded hatred of the German people. Sir Cecil Weir made me wonder whether the ignorance of highly placed members of the Military Government was not even more destructive of the democratic cause in Europe than the race hatred of Morgenthau’s disciples. Since leaving Ger - many I have wondered if he knew that his subordinates were ship- ping the Borbeck Krupps Armaments Works to the Soviet Union. The London Times reported this on December 20, 1948, but it is possible that Sr. Cecil Weir does not know it.

My interview with Mr. McJunkins, chief of the reparations divi- sion of the United States Military Government and a subordinate of Mr. Wilkinson, was far less revealing. According to McJunkins, the United States Military Government had no choice but to de- liver the reparations promised to Czechoslovakia, Yugoslavia, and

100 THE HIGH COST OF VENGEANCE

other Communist countries. He was the model civil servant carry- ing out his orders without prejudice or favor. I was unable to judge how far he himself was responsible for the orders to dismantle and ship from the American zone the machinery which would otherwise have been able to contribute to both German and European re- covery. He never once displayed his personal antipathies as Mr. Wilkinson had done. Yet he is held mainly responsible for the sab- otage of the ECA program by local United States authorities in the American zone.

One thing I learned in Berlin in November gave cause for hope of a future intelligent United States policy. The United States Mili- tary Government had begun to take the line that the Revised Level of Industry Plan was not intended to tie the German economy down permanently to the low levels prescribed, but was merely an estimate of how much machinery could be removed as reparations. In practice, in the United States zone, no obstacles have been placed in the way of German installation of new machines to re- place the dismantled ones, when the factory owners are able to do so. The British and French have, however, not accepted this view, nor, in fact, does it seem that this was the original American atti- tude. It is rather that the United States authorities, without ad- mitting that the Level of Industry Plan was a mistake from the beginning, have adapted themselves to the changed international situation. They have not stopped dismantlement and reparations shipments, to which they consider themselves committed by earlier agreements, but they see the necessity for letting the Germans pro- duce all they can if Europe is to resist the Communist threat and America be relieved of permanent annual contributions of billions of dollars to Europe.

In regard to steel, however, the 10.7 million tons of steel capacity envisaged in the plan is still accepted by the United States as a per- manent ceiling in spite of the tremendous need for steel in Europe and the strain on the United States economy of supplying even part of the present European deficit. According to the Herter Com- mittee’s report, fulfilling the most urgent requirements of the six - teen nations receiving ECA assistance will increase the steel deficit in America from 1.6 to 5 million tons.

The whole futility, stupidity, and expense of the dismantlement program is best illustrated by the long-term report of the Bizonal representatives to the Organization for European Economic Co- operation (OEEC) in October 1948. This report recommends a 10

THE MATERIAL COST OF VENGEANCE 101

per cent increase over the 1936 level in Germany’s productive ca - pacity, to be realized by 1952 through Marshall Plan assistance. Washington ECA authorities consider that, if Western Germany is to be able to support itself, an even greater increase is required— 15 or 20 per cent instead of 10 per cent.

Thus, while busy reducing Western Germany’s capacity to three - quarters of the 1936 figure by dismantlement, the United States is planning to increase it by 10 or 15 per cent out of funds supplied by the American taxpayer.

Dismantlement today no longer even pretends to remove only surplus equipment. The 1947 Revised Level of Industry Plan has become an absurdity now that we plan to replace the machinery being torn out of German factories. As the ECA representative in Germany has said: “We find in Western Germany today the para - dox of outside aid for recovery, and on the other hand, restrictions as to the extent to which such recovery is permitted. The current dismantlement program is one under which a percentage of indus- tries will be removed or scrapped.”

There is no validity left in the State Department argument that shortage of labor and materials precludes the use of Germany’s ex - isting productive capacity, and that reparations removals are there- fore economically as well as morally justified. For the OEEC rates Germany as a country where there will be unemployment in the future even if the Marshall recovery lan, as now drawn, is carriedp out. As regards shortages of raw materials, it is surely one of the main objectives of ECA to enable the countries of Europe to obtain the raw materials necessary to make them self-supporting instead of living on an American dole.

Digging holes in the ground and paying the unemployed to fill them up again in the United States in depression years was an eco- nomic operation as compared with present United States policy.

The cost of vengeance is even higher than the cost of economic crisis and unemployment. The State Department may, or may not be justified in its insistence as late as February 2, 1948, that: “The obligation of the aggressor to pay the maximum reparations com- patible with economic political realities is incontestable.” The im - portant point is that the economic and political realities of the world situation require an end to reparations and the reconstruc- tion of Germany as an integral part of a self-supporting Europe, able to resist Communist propaganda and Soviet aggression without making impossible demands on American resources.

102 THE HIGH COST OF VENGEANCE

In the present world situation our endeavor should not be to make restrictive plans on the basis of incomplete information, but to encourage the highest possible amount of production. nly by reviving the profit motive and encouraging initiative, self-help, and hard work can Germany and Europe be rendered self-supporting and cease to be a millstone around the neck of the American people.

In 1949-50 the American taxpayer contributed close to a billion dollars to Germany ($987,000,000), consisting of $573.400.000 of Army appropriations for the “prevention of disease and unrest,” and $414.000,000 under the European Reconstruction Program which consisted mainly of raw material supplies. The otal for 1949-50 is estimated at $881,600,000, but the ECA authorities consider that the capital investment figure included is too small to contribute ap- preciably to the recovery essential to make Germany self-supporting.

The strain on the American economy resulting from the Euro- pean Recovery Program as a whole could be appreciably diminished if dismantlement were stopped, the Revised Level of Industry Plan scrapped, and Germany permitted to supply the countries of West- ern Europe with the steel, machinery, and other industrial products which America now has to give to them.

To quote Mr. Collisson once again:

I have stated my firm conviction that recovery in Western Europe is not possible without the important contribution which Western Germany can and must make. Every foreign trade delegation coming to Western Germany has pleaded for more goods of the kind Germany once supplied, in fact in amounts far beyond Germany’s present ability to produce. To satisfy these requirements for a peaceful rehabilitation of Europe, recovery in Western Germany must be brought about. It is in this light that we have made our recommendations; not a pattern of what is good for Germany alone, but of what is best for Europe as a whole.

There is little doubt that if the American public were made aware of the facts of the situation, the postwar policy, described by the London Economist as one of “keeping Germany in chains and Europe in rags,” would be completely abandoned, instead of modi - fied as at present by American subsidies.

Unfortunately most Americans are unaware of the degree to which the ECA and the State Department have deferred to Brit- ain’s desire to eliminate German competition and the blind fears of France. When on April 13, 1949, the State Department an-

THE MATERIAL COST OF VENGEANCE 103

nounced the final intergovernmental agreement on dismantlement, reached with Britain and France, the American press as a whole failed to point out that destruction at our expense is to be con- tinued.

The Humphrey Committee, whose report was made public at the same time, had considered 381 of the original 900-odd factories on the 1947 dismantlement list, and had recommended the reten- tion of only 148 in whole and of another 19 in part. And the State Department gave way to France and Britain concerning the most important plants recommended for retention in Germany by the ECA; for example, the August Thyssen and the Bochum iron and steel works and the Oppau fertilizer plant (see Chapter 10). The ECA Committee had proposed retaining only 21 of the 84 steel plants it urveyed, and sallowing 47 to be removed, with another 16 to be partially allocated as reparations. The State Department went further and agreed to sacrifice the five largest and most effi- cient of the steel plants recommended for retention by the ECA. In pite ofs the grave shortage of power in Germany which now prevents further recovery the State Department agreed that two power plants are to be torn down. Similarly in regard to the chem- ical industry: 43 plants are “released” for reparations and only 32 retained out of a total of 75 surveyed. Thus the final agreement on dismantlement has only slightly modified the original program, and therefore not substantially altered the picture given in this chapter.




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