Chapter 3

The Material Cost of Vengeance

Leaving Berlin on the airlift early in September and arriving in the United States zone, I felt I had traveled farther in time than in space. In Berlin, in spite of the gross inequalities between the Germans and ourselves in sacrifice, privation, and danger, we were standing shoulder to shoulder in resisting Soviet aggression. But in Bizonia we still seemed to be fighting the last war. Here we were acting as if Germany, not Soviet Russia, now menaces the peace of the world and the freedom of Europe. We were still dismantling German industry, and in general carrying out the Yalta and Potsdam agreements as if Soviet Russia had never broken them, and with an almost total disregard of the Marshall Plan and the Truman Doctrine which Americans at home imagined were now the basis of United States policy.

Large shipments of "reparations and restitutions" were still going to Russia, Czechoslovakia, Poland, Yugoslavia, and other countries behind the Iron Curtain, not only from the British and French zones but also from the American.

Following the start, in June, of Soviet Russia's blockade of Berlin, such shipments from Bizonia and the French zone to the countries behind the Iron Curtain, instead of being stopped, had been doubled in quantity. The bulk of the shipments to the Soviet Union in July 1948 and subsequent months went from the British zone, and deliveries from the United States zone direct to Russia had been stopped. But the United States had continued to give aid and comfort to the Communists by supplying the Czechs, Poles, and Yugoslavs with 5,790 tons of German machinery and other assets in that one month. At the end of October, when bad weather was endangering the lives of American pilots on the air lift and


the Berlin population was already shivering in its unheated homes, the total reparations and restitutions shipments to the countries behind the Iron Curtain from Bizonia and the French zone combined, had been stepped up to nearly nine thousand tons, from the six and a half thousand sent before Stalin started the blockade of Berlin.

Factories were being dismantled in Western Germany to the detriment of the whole European economy, and with a cynical disregard of the needs of the German people and the danger of losing Western Germany to the Communists while attempting to save Berlin from them.

The cost to the United States taxpayer of subsidizing a pauperized Germany, and a Europe deprived of the products of German industry, was apparently also being disregarded not only by our Western allies, but by the American authorities responsible for our German policy.

In spite of the fact that it had been announced that Germany was to participate in the rebuilding of Europe under the Marshall Plan, the United States and Britain were implementing the 1947 "Revised Level of Industry Plan," which severely limits Germany's capacity to produce in most major industries and was drawn up with no provision for German exports of steel, machinery, and other goods most urgently required for European reconstruction.

From the British point of view dismantlement makes sense, since it helps to reduce Germany's competitive power on the world market. Originally the British authorities had held out for a higher level of industry than the United States was willing to allow. They understood that Western Germany could not be self-sustaining if the reparations program were carried through; and so long as they were themselves financially responsible for feeding the industrial population of their zone, they pursued a more enlightened policy than the United States. But since the merging of the British and American zones and the United States' commitment to meet the deficits of Bizonia, Britain's competitive motive has had free rein, and the British now oppose revision of the dismantlement program. In their frantic efforts to free themselves from dependence on dollar subsidies, they have abandoned the policy of wisdom and restraint toward defeated enemies which formerly made Britain great and strong.

Today the British are sacrificing their long-term interests by themselves exporting airplanes and capital goods to Soviet Russia,


and by alienating the Germans and weakening Continental Europe by shipments of large quantities of dismantled German machines to Stalin's empire. According to figures given in a British Military Government communique, published in "Die Tat," on February 6, 1949, out of a total of 598,000 tons of machinery and other materials taken from German factories, 163,896 tons had been delivered to Russia, 18,618 tons to Czechoslovakia, 1,789 to Albania, and 45,135 to Yugoslavia. The British have had no scruples even in delivering armament factories to Russia. On December 20, 1948, the London Times reported that the Borbeck-Krupps Armaments Works was in process of being shipped to the Soviet Union.

In the French zone one could hardly have imagined that there is such a thing as a Communist danger, a Marshall Plan or any such question as the defense of Western Europe. The blindness of the French, their obsession with a past danger, and seeming unawareness of the lively present danger of Soviet aggression, their squeezing of their German zone to subsidize their own mismanaged economy, and their futile parade of the trappings of a nonexistent military might before the cowed but secretly mocking German population, require a separate chapter. Here I shall be concerned only with Bizonia, as the partially merged British and American zones are called.

Whereas both the British and French treatment of the Germans is easy to understand, if not to condone, American policy is incomprehensible. America has nothing to gain, and everything to lose economically, politically, and militarily by dismantlement. Yet the United States has exerted no strong pressure to bring it to an end in the British and French zones, and has continued to carry it out even in the American zone.

The comfortable assumption in America that the Marshall Plan has replaced the Morgenthau Plan is, I quickly perceived, a delusion. The spirit of Morgenthau, although it no longer dominates our German policy, still inspires it. The fact that there is now a Marshall Plan looking toward the integration of a revived and democratic Germany in a reconstructed and self-supporting Europe means that we are busy repairing with our right hand the damage done by our left hand. It is as if one team of Americans were rebuilding a bombed dwelling while another team is destroying the foundations.

It would have been funny, were it not so tragic, to witness the unending struggle between those Americans who had been sent to


Germany to revive industry and trade, and those whose orders were to destroy the German economy. The conflict between the destroyers and the rebuilders was even more acrimonious and bitter than that between competitive Washington departments.

In Frankfurt, Essen, and Stuttgart, I have smiled to hear American coal, steel, and railway experts plotting, or pleading, to stop dismantlement of the factories producing the mining, railway, and other equipment without which coal production could not be increased or the railways restored. I heard revealing conversations between American and German authorities in which the former warned the latter about which Americans were on the constructive side and which on the destructive.

If there were some sort of collaboration between the Germans and those Americans who are engaged in restoring the German economy and furthering the Marshall Plan, there was naturally a far closer relationship between the American "destroyers" and the British Military Government. The United States experts endeavoring to increase coal and steel production and to reconstruct transportation facilities were dependent on the British, since not only the mines and iron and steel works are in the British zone, but also most of the factories producing mining equipment and railroad supplies. The predicament of the American experts can be understood if one notes the fact that the dismantlement list includes forty-seven factories making mining equipment and thirty-two specializing in the production of supplies for the German railways.

Fortunately there were some enlightened British officials also, who were anxious to revive the German economy, so the conflict between the constructors and the destroyers was not as unequal as it might otherwise have been. The British official in charge of the Bizonal Iron and Steel office in Düsseldorf, for instance, worked in complete harmony with his American counterpart, and in 1948 they succeeded in bringing about an astonishing increase in steel production. On the other hand, while $24,000,000 worth of American mining equipment had been earmarked for Germany by ECA, the British insisted on continuing to dismantle the German factories which could have supplied this machinery. Among others they were dismantling the plants producing 90 per cent of the pneumatic mining tools produced in the Western zone.

Obviously the British, in view of their dependence on American subsidies, could have been induced to stop the dismantlement of German factories, the loss of whose production had to be made


good by ECA allocations. The trouble was that some United States Military Government and Washington officials were still pursuing a camouflaged Morgenthau line of policy.

Whether or not the contradictory and self-defeating nature of American activities in Germany was due more to individual sentiments or to Washington's desire to win votes by being all things to all men, both the American destroyers of the German economy and its rebuilders could claim they were only doing their duty. Both were carrying out the orders they had received.

The situation was aptly summarized by one United States official who told me :

"We are caught between opposing policies and are unable to move forward. The forces of destruction, born of war hysteria, and set in motion by the Morgenthau Plan, are still in operation; while the constructive forces which the Marshall Plan was intended to release are stymied for lack of new directives from Washington." "The American people," he continued, "are only now beginning to realize that unconditional surrender and total victory force them to assume the same responsibilities in Germany as the inheritor of a property. Although the bills are rolling in, and America has to pay them; we still fail to understand fully that we must stop the destruction of Germany's assets if the United States is not to go bankrupt. At present the old destructive policy is merely overlaid by the new constructive one."

Some American officials were in the awkward position of holding positions with the destroyers and the reconstructors at the same time. Major Holbrook, for instance, whom I met in Stuttgart, was both Reparations Officer for Württemberg and Governor LaFollette's Chief of Industry and Commerce. While he had to fulfill the dismantlement orders which came to him from the Reparations Division of Military Government in Berlin, he also had to endeavor to increase production in his province. This he had managed to do with considerable ingenuity.

In the United States zone machinery is classified as already dismantled when the bolts attaching it to the floor have been unscrewed and it has been placed on wooden blocks. By allowing the Germans to continue using it in this condition, Major Holbrook had not only lightened the load of the American taxpayer by enabling more Germans to earn their own living than would otherwise have been possible; he had also kept the "dismantled" machinery in good working order for use in other countries when the


time came to ship it. Elsewhere, particularly in the British zone, I saw piles of rusty factory equipment long since dismantled which was gradually becoming unusable as it lay in the open air or in unheated damp depots. For it is the British practice to dismantle machinery even when no country entitled to receive reparations wants it. Hence the tremendous waste entailed by the Revised Level of Industry program, which is implemented with the primary objective of depriving the Germans of the capacity to produce, rather than helping other countries to reconstruct their economies with German reparations. Were the latter the real aim, new and better machinery could be supplied to them in far less time by stopping dismantlement and allowing the Germans to work to produce reparations.

Major Holbrook had also restored production in many of the factories from which reparations had been taken, by scouring Württemberg for unused machines which could have been taken in the first place, had the Berlin Military Government authorities not preferred to interrupt production and waste German labor by taking reparations from factories actually working instead of from those closed down.

Before I visited Stuttgart toward the end of October, I had believed that the various statements made by General Marshall and other representatives of the State Department in Washington, and by General Clay and his subordinates in Germany, meant that dismantlement had been completed or stopped in the United States zone. I was as bewildered as the Germans when I found that the expected arrival of the ECA's "Humphrey Committee" experts—sent to Germany in accordance with the 1948 Foreign Aid Act to ascertain which plants on the dismantlement list could better contribute to European recovery by being left in Germany—far from stopping reparations deliveries had led to a speed-up in shipments of machinery out of the United States zone. Evidently it was not only the British and French who were anxious to confront Paul Hoffman's Committee with a fait accompli. The United States Reparations Office at Military Government headquarters in Berlin had issued orders to crate and ship out immediately the machinery which had hitherto been permitted to continue operating in its "dismantled" condition on account of the great need of its products in Germany or for export.

The Germans had been led to assume that the arrival of the ECA revision committee meant a halt in reparations deliveries. The


Württemberg-Baden Ministry of Economics had been informed, in a letter written by the United States chief of the Commerce and Industry Group of the Bipartite Control Office in Frankfurt on October 11, that removal of equipment from five plants in that area would be held in abeyance until completion of the ECA review. But a week or two later orders had come to crate and rush shipment of this same equipment out of Germany in record time. I was told that the United States official in Berlin who had given these orders had said on the telephone that the European Recovery Program might or might not be a good thing, but that in any case it had nothing to do with him. Nor had he any interest in the contrary orders given by the United States Commerce and Industry authorities in Frankfurt.

The Germans, in addition to their impotent resentment at being deprived of their means of livelihood, could not but reflect that this democracy, which we told them was such a good and just thing, could not be trusted, since the official promises made by one set of United States authorities were not honored by others.

One of the factories which came under the hammer as a result of the determination of the Berlin Reparations Office of Military Government to forestall the ECA, was the Kiefer Works. In Stuttgart I visited this plant which produces ventilation and heating equipment for factories and hospitals. Although the only factory in Bizonia producing air-conditioning equipment for hospitals, it was to be shipped to Greece. The Greek mission which had visited the factory had told the Germans that they had neither the market, nor the raw materials, nor the technical experts to make use of it.

The machinery would, no doubt, end up on the scrap heap but it was "on the list." Its main equipment had been shipped and the Germans were trying to carry on production by cutting sheets by hand and nailing instead of soldering the parts.

I also saw the Zaiser Works in Stuttgart, now stopped from producing elevators and electric cranes, although the dismantlement by the Russians of the Flohr Works in Berlin and Vienna had left Germany with only five plants of this type, one of which was also being dismantled; and although British dismantlement of a multitude of cranes in the Ruhr had led to a large demand for new cranes which could not be met. Nor was there any hope of Zaiser's being able to acquire new machines : most of those they required are produced only in the Russian zone. I visited several other factories in Stuttgart, none of which could be classified either as po-


tential armament factories or as "surplus" to Bizonia's needs, but all of which were having their machinery taken away, presumably to forestall any action to save them by the ECA authorities.

All over the United States zone the same thing was happening. One case brought to my notice was that of the Frank factory in Birkenau in Hesse, which produced artificial eyes for the blind, measuring instruments for the textile industry, and fine optical instruments. It should presumably never have been put on the dismantlement list. After representations to the Military Government by the owners, they had been informed that dismantlement would be halted pending review by the Humphrey Committee. But in the second week of October, orders came from Berlin to start crating and shipping the machinery at once. By October 22, before the ECA experts could arrive, the whole plant had been stripped and carried off.

Another example is that of the Gendorf factory in Bavaria which produced chlornatrium, a chemical required by the artificial fiber industry, which the Germans have been told is to be built up into one of their major export industries. The other major producer of chlornatrium in Western Germany, at Rheinfelden in the French zone, was long ago stopped from working. In September the United States Military Government ordered the Gendorf plant dismantled and shipped to Czechoslovakia.

The outstanding example of the determination of someone, somewhere, to sabotage the Marshall Plan, and strengthen the Communists, was the order given on October 4 to dismantle the power plant of the Norddeutsche Hütte at Bremen and ship it to Czechoslovakia.

Bremen is America's only large port in Germany and the gate of entry of all United States Army and ERP supplies. The hasty shipment to a Soviet satellite country of its main power plant at a time when Berlin was being blockaded and after an announcement that shipments of reparations from the Western zones would be halted pending the ECA review of the dismantlement list, could, it seemed, have no other explanation than the influence of the "Morgenthau boys" in Berlin or in Washington.

Dismantlement of the Bremen power plant caused an immediate drastic cut in the supply of current to the town and port, and one of the ECA experts informed me that it might be necessary to use United States Navy vessels operating off shore to supply the deficiency. While the United States Air Force had to be used to supply


blockaded Berlin, the United States Navy might have to be called in to make good our voluntary curtailment of Bremen's power supply for the benefit of Communist Europe.

Under military government it is always difficult to fix responsibility. It is therefore impossible to say whether Washington or General Clay's economic advisors were responsible for the curious decision to ship as much machinery as possible out of the United States zone before the ECA could stop it. To the Germans it seemed that it was impossible to trust any American promises. The hopes raised by various official pronouncements that the dismantlement program was to be reviewed and shipments halted pending the ECA investigation were dashed. The assurances given that Germany was to participate in the Marshall Plan for European reconstruction could no longer be believed, since the Military Government had given orders to rush shipments even of the machinery recognized as vital to the minimum requirements of the economy of Bizonia.

When the German Economic Administration ventured to protest, it was forbidden by both British and United States military governments to approach the ECA authorities directly. In a letter sent on September 21, 1948, to Dr. Pünder, head of Bizonia's Economic Administration, and signed jointly by Mr. Wilkinson, economic advisor to General Clay, and Sir Cecil Weir, who holds the same position in the British Military Government, it was written :

"It is not appropriate for you to communicate directly with ECA, since the Military Governors, as the supreme authorities, are responsible for the relations of the Bizonal areas with the ECA."

ECA's representatives in Germany never admitted that they were precluded from any direct contact with the Germans. Unfortunately, however, Paul Hoffman, when he paid a flying visit to Germany in November, spent only twenty minutes with the German Economic Administration representatives who had come to meet him at Frankfurt. The latter were able to hand him the printed report they had drawn up on "The Effect of Envisaged Dismantling on Germany's Economic Situation and Her Role in European Reconstruction," but they were given no opportunity to discuss their case. Hoffman spent weeks in Paris, but either never had time to study the German situation, or was unwilling to challenge the Military Government's claim to exclusive power by a


conference with the German representatives of Bizonia, or with German industrialists and labor leaders.

The Germans hate waste. These economical, hard-working and practical people simply cannot understand why, in the British zone, huge quantities of dismantled machinery lie rusting in the open or in unheated warehouses; why so much unallocated machinery is dismantled and converted into scrap; why the Germans are not allowed to work to repair the damage done by the Nazis in the countries they occupied instead of being converted into paupers supported by an American dole.

"We can understand the justice of demanding that we make reparations to the countries which suffered from German aggression," I was told over and over again in the British zone by German officials, workers, executives, and factory owners. "But we cannot understand the decision to destroy factory equipment taken from peacetime industries. This is not reparation; it is just waste." Of course, not all the machinery taken from German factories in the British zone is thrown on the scrap heap. But even in the case of machinery shipped abroad the huge gap between its economic value in Germany, and its "residual value" after dismantlement, as listed on the reparations account, is a measure of the waste entailed. If the cost of labor involved in the dismantlement and re-erection process is also taken into account the whole reparations program appears ridiculous.

The far-reaching effects of dismantlement on the German economy are obscured by the method adopted in valuing the machinery. This is done by first establishing its value in 1938 and then deducting not only war damage but a fixed yearly rate of depreciation which takes no account of repairs and improvements. This frequently results in machinery being valued at nothing, although prior to dismantlement it was working full time. From the German point of view it seems wholly unjust that a good proportion of the machinery they lose through dismantlement is not even booked to their credit on the reparations account.

This method of reckoning the value of the machinery taken as reparations is of no help in determining the effect of dismantlement on the German economy. The replacement cost of the machinery, or its "economic value"—capitalization according to the net profits obtained before dismantlement—would be much fairer methods of calculating the loss.


According to figures furnished by the United States Military Government in October 1948, the value of the factory equipment already dismantled was as follows in 1938 value Reichsmarks :

U. S. zone
British zone
French zone*
million marks
million marks
million marks

This makes a total of only about a billion prewar Reichsmarks, equivalent to $400,000,000. According to German calculations, however, the 1938 value of the plants already dismantled in the Western zones was about $1,800,000,000 and would cost far more to replace today.

According to an estimate made by Senator Harmssen of Bremen, the 1938 value of the machinery and equipment already taken from rump Germany is as follows :

Russian zone
French zone
1.6 billion Reichsmarks
1.2 billion Reichsmarks
3.5 billion Reichsmarks
1.5 billion Reichsmarks

This calculation, although it may be exaggerated, gives a truer picture of the losses the Germans have suffered, than the "residual value" figures of the Military Government which obscure the effect of dismantlement on the German economy.

The value of the 335 plants still to be dismantled in the Western zones is about two billion dollars, according to German estimates, but appears as only a fraction of this sum on the reparations account which gives its residual value. The cost of replacement of the dismantled machinery is reckoned by the Germans as ten times its residual value.

Since correct total estimates cannot be obtained, the best method of ascertaining the loss to the European economy through dismantlement is to consider individual cases of dismantled factories, concerning which precise details can be obtained.

In the great G.H.H. (Good Hope) Works in the Ruhr, which I visited after their dismantlement, the cost of moving the machinery and of shipping it to the eleven nations to whom it had been allocated, amounted to between 800 and 1,000 marks a ton.

* Exclusive of the machinery taken by the French for their own use without reference to the Inter-Allied Reparations Authority.


The cost of producing and installing new machinery for delivery as reparations would have been only 400. This plant could have "reproduced itself," that is to say, manufactured new machinery for delivery as reparations, in less time than it took to dismantle it. It had had a big export trade but its products had been lost for years, perhaps forever, since it was unlikely that the various nations to whom its equipment had been sent would ever be able to make use of the "bits and pieces" they received.

Nowhere was the waste entailed by dismantlement better illustrated than here. The Yugoslavs, who had received the lion's share, had got the press and hammer works and other shipbuilding machinery, and had insisted on shipment also of the bricks and girders and wharves. The Greeks had received the boiler house, including its roof which had been built in 1871. The Australians had been awarded a five-thousand-ton press for pressing steel ingots which they had no place to house—it was lying on some rail-way siding. England had taken an old freight wagon and some molds as scrap. Pakistan had received a crane capable of lifting 125 tons which it probably had no use for; India received the equipment which should have gone with the crane. A press, a pump, and an accumulator taken out of one department of the works had each been sent to a different nation.

Prior to the dismantlement the G.H.H. Works had export orders on their books for a million D marks of oil-burning machinery, and the Germans believed it had been torn down by the British to eliminate its competition with their less efficient industry.

Fifteen thousand workers had lost their jobs through the dismantlement of this one plant.

In the case of the Hörde Iron and Steel Works at Dortmund the estimated cost of dismantling its 16.5-foot rolling mill was 1,000,000 D marks and the minimum cost of re-erecting it, including the building, foundations, and the furnaces that served it, was 13,000,000. But the residual value as stated on the reparations account was only 2,200,000.

In the case of the famous Thyssen Works in the Ruhr, dismantlement costs were calculated at 65,000,000 marks, while the residual value came to only 40,000,000. The cost of "putting Humpty Dumpty together again" abroad was estimated to be 263,000,000 marks. Thus, if allowed to retain the plants, the Germans could easily have supplied new machinery in less time and worth far more than the equipment removed.


Rubble and steel scrap represent the end result of dismantling blast and open-hearth furnaces. Huge rolling mills and presses cannot be moved because their weight or size are too great for bridges or for rail clearances. Hydraulic piping, steam lines, electric conduits, automatic controls, and some other equipment cannot be economically dismantled and are a complete loss.

The State Department, in November 1947, said that the cost in labor and materials involved in the dismantling process is "relatively negligible." But the ECA experts I talked to in Germany estimated that the dismantlement program would cost about ninety thousand man-years of labor in Germany, and that at least the same amount of labor would be needed in the recipient countries to get the machines set up and working. In sum, their view was that the dismantlement program is wasteful, inefficient, and impractical. They said that if the high cost of moving the equipment, the time losses, and the production losses due to the separation of the tools and dies from machinery as well as the cost of replacing them, are all counted in, the value actually realized by the European economy through the recipient nations is negligible, when measured against either the cost of European recovery or the cost to the United States of meeting the deficit in Germany's balance of payments.

Whatever the exact cost, a telling argument was made in a New York Times editorial of November 13, 1947, which said :

Having poured out billions to aid Europe in place of the reparations that Germany did not pay [the United States] is entitled to ask that these billions be counted against German reparations at least to the extent of preventing an increase in American expenditures through economic strangulation and destruction in Germany. Let the plants stand and get to work. The United States has more than paid for them. (Italics added.)

Although every American taxpayer is bearing a share of the burden of supplying food and other essential imports to a semipauperized Germany, the connection between our German policy and high taxes is recognized by few. The cost of the vengeance wreaked on Germany in the first years of the occupation is not a subject which most politicians and journalists care to dwell upon. It is nevertheless essential to realize it, if Americans are not to pay as heavily in the future as up to date for the Morgenthau concepts


which shaped our original occupation policies, and still color them in spite of assurances to the contrary.

The ignorance of the American public concerning the huge waste entailed by dismantlement is to be ascribed to a variety of reasons. In the first place, the Germans have neither a government, nor a free press, nor representatives abroad to present their case. In the second place, most American journalists, Congressmen and Senatorial committees take their information entirely from Military Government sources. Lastly, there is the fact that every one of the reports written by the experts sent out by the War and State departments and ECA have been suppressed. The Wolf Report, the Keenan Report, and most recently, the report of the ECA's Humphrey Committee, have all been kept secret. They are withheld both from the press and from most members of Congress.

The Germans had imagined that, since the United States is a democracy, all these visits and investigations would result in the American voters' learning the facts of the situation. Over and over again I was asked what had been the reaction in America to the reports of the United States experts who had carefully surveyed the situation, and had to inform them that no one knew what these reports contained nor what had been recommended.

My own method of investigation in Germany was first to go to the German authorities for information and then to see for myself on the spot whether or not what they said seemed to be true. After this I asked the Military Government for its answer to the German contentions and its explanation for what I had seen. This was apparently a novel method of procedure, and I found myself regarded, if not with suspicion, at least as unorthodox in my method of investigation, since it was unusual for journalists to listen first, if at all, to what the Germans had to say. There was a goodly number of United States officials, however, who were as anxious as I was to have the true facts concerning the effects of dismantlement presented to the American public. This was particularly true of the ECA authorities who told me their door was open to any German who had facts to give them or representations to make which concerned the European Recovery Program. So it

* The Humphrey Committee report was not made public until April 1949, after Congress had already voted the ECA appropriations demanded, without knowledge of the extent to which dismantlement is responsible for high taxes in America.


was with the knowledge that I was not alone in my desire to stop what former President Hoover has called "Destruction at our Expense," that I advised the Germans in the British, United States, and French zones to visit the ECA officials in Frankfurt and lay before them the facts relating to the retarding of European recovery through dismantlement.

Herr Nolting, the Minister of Economics for North-Rhine Westphalia, which comprises the Ruhr, told me in Düsseldorf that when the dismantlement list was handed to the Germans in October 1947, they had said to the British : "Look, you can have all the machines you ask for; only let us decide where they are to be taken from. If you will let us select the machines, present production need not be interrupted and our whole economy disorganized; if you will leave it to us to deliver what you ask for, we will also be able to ensure that the burden of reparations is equally distributed. Surely you can see the injustice of mining some employers and workers while letting others go scot free."

The British had refused, although acceptance of the German plea would have saved much time and labor as well as creating confidence in democratic justice.

The fact that the British, instead of taking general-purpose machinery, insisted on dismantling specialized factories whose production could not be compensated for by others, strengthened the impression that the objective was not reparations but the elimination of German competition.

In September 1948, after the announcement of the Marshall Plan had given hope to the Germans that the program of destruction of Germany's industrial capacity would be stopped, Nolting had had an interview with Brigadier Noel, the top British reparations official in the Ruhr. The German minister had informed Noel that, since representations to the British for changes in the dismantlement program had proved useless, he had referred the German plea to Mr. Hoffman. Brigadier Noel was very angry and said : "Mr. Hoffman is only a private individual in so far as His Majesty's Government is concerned, and the British Foreign Office will not consider any proposals brought forward by a private person." Brigadier Noel had gone on to advise Nolting not to rely on any "interference" by Mr. Hoffman.

According to what I was told by one of Minister Nolting's subordinates, Nolting had been summoned to London a few days later, and urged not to demand a general stoppage of dismantle-


ment in the Ruhr, because this would not only embarrass the British Labour Government but would cause such a furor in France that De Gaulle might come to power. He had also been assured that if he would cooperate with the British, they would "discuss" with the Germans the elimination from the dismantlement list of certain plants.

This slightly more conciliatory attitude of the British was ascribed by my informant as due to ECA pressure and the British desire to prevent direct contact between the Germans and the ECA authorities of the United States.

As I shall relate in a subsequent chapter, the British have taken advantage all along of the German Social Democrats' tendency to regard the British Labour party as an ally, and to trust it more than "capitalist" America. But the touching faith of the German Socialists in the British Labour Government was now being sorely tried by the fact that the British, in the summer and fall of 1948, were rushing dismantlement in order to present the United States ECA investigators with a fait accompli. Like Nolting, other Social Democratic ministers in North-Rhine Westphalia, were not yet prepared to reveal to correspondents the secret of their negotiations with the British Labour Government, but some of their subordinates were too outraged by the contrast between British Labour's statements and practices to be discreet.*

It would be unfair to the British to hold them mainly responsible for the dismantlement program, although today, like the French, they are opposing its discontinuance. Originally it was the United States, under Roosevelt's directives, which joined hands with the Russians to implement the Morgenthau Plan for transforming Germany into a "goat pasture." The British in 1945 and 1946 were the only Allied Power which opposed this program. They understood then that the destruction of German industries and mass unemployment and destitution in Germany was hardly conducive to the "democratization" of the German people and would, in any case, prove impossible to carry out once the British and American people came to realize the mass starvation it would entail.

* According to the October 1948 report of the British Control Commission for Germany reports "continued progress" in dismantlement, with 25 plants completely dismantled that month. This made a total of 216 for the year with a further 208 plants in process of being dismantled. The volume of machinery already torn out of German factories was given as 528,000 tons, of which only 270,000 had been shipped to recipient nations.


Even if all occupied Germany had been administered as an economic unit, as promised by the Soviet Government at Potsdam, millions of Germans would have been condemned to die of hunger under the original occupation directives. For the Polish and Russian seizure of Germany's bread basket east of the Oder and Neisse rivers not only deprived Germany of a quarter of its arable land, it also drove the millions of Germans who had lived in these territories for hundreds of years into the truncated Reich.

If the Soviet Government had not at once proceeded to cut the British, United States, and French zones off from the food supplies of Soviet-occupied Germany, there would still have been no possibility for the Western Germans to obtain enough food to keep alive under the Morgenthau Plan, which incidentally also advocated detaching the Saar, the Ruhr, and some slices of German territory next to Holland and Belgium. It is, therefore, no exaggeration to say that in comparison with the Morgenthau Plan even the Nazis would have appeared as comparatively humane conquerors. Its recommendation that the Germans should become self-subsistent farmers on the already overpopulated German soil is shown to be only a disguised program for genocide by the fact that the average yield per acre in Western Germany is already 50 per cent higher than that in the United States. There is obviously no room for a larger agricultural population in Germany than already exists.

American soldiers were too humane to be capable of watching masses of the defeated enemy people dying before their eyes. Moreover, it was recognized even in Washington that the health and safety of Americans would be endangered by widespread "disease and unrest." So almost from the beginning the United States started importing food into Germany to provide a minimum ration, just sufficient to maintain life and prevent people from dropping dead of hunger in the streets.

Nevertheless, in 1946, a "Level of Industry Plan" was worked out with the Russians which, if carried into effect, would have precluded any possibility of the Germans ever being able to produce enough for their own support, and converted millions of them into paupers.

This result was in fact recognized by General Draper and his experts in the economics division of the United States Military Government. The Potsdam agreement with Soviet Russia had stipulated that the German standard of living was to be no higher than the average in Continental Europe, excluding England and


the U.S.S.R. The Draper memorandum stated that "the data indicates that the German standard in 1932 was near the average for the remainder of the Continent for the years 1930 to 1938. For this reason figures for 1932 consumption in Germany can be used as a secondary basis of comparison or guide."

In Germany the worst year of the Great Depression was 1932, when there were some six million unemployed. Thus, it was the declared aim of the United States in 1946 to reproduce in Germany the conditions which had brought Hitler to power. Since the Level of Industry Plan then drawn up would actually have reduced millions of Germans to far worse destitution than in 1932, the logical result could have been expected to be a bigger and worse Hitler in the future—in a word a German Stalin.

It is not necessary to go into the details of this plan, since it was based on the fictitious assumption that the four zones of Germany would be administered as an economic unit, and since the program for the huge destruction and removals of German industrial equipment it envisaged, was modified after it became obvious that the Russian zone would continue to be treated as a purely Russian preserve.

In 1947 a "Revised Level of Industry Plan" was worked out by the American and British Occupation authorities on the assumption that Western Germany would have to exist without the resources of the Soviet zone, as well as without those of the former German territories east of the Oder. A list of plants to be dismantled as "surplus" to German needs at the level of existence to be permitted by their conquerors was drawn up on the basis of this plan and published in October 1947.

A cursory examination of the Revised Plan shows unmistakably that it fails to allow Western Germany to retain sufficient productive capacity to pay its own way, even on the assumption that the Germans are to continue indefinitely on their present diet, described by the ECA's chief representative in Germany as "subnormal both in calories and proteins."

Western Germany with forty-two millions has more than half of the original Reich's population, less than half of its arable land, three-quarters of its hard-coal, and about a third of its brown-coal production. According to the evidence given to Congress in February 1949 by Mr. N. H. Collisson, Deputy Chief of the ECA mission to


Bizonia, Western Germany can never produce more than 50 per cent of the food it needs to feed its non-self-suppliers within reasonable dietary levels. The remaining 50 per cent must therefore be imported, and this can only be done if Germany can "so revive its industries that it may produce cheaply and efficiently and compete on world markets."*

Mr. Collisson pointed out that production per acre in Germany is already 50 per cent higher than in the United States, so that there is little or no possibility of increasing the yield. He further stated that even the bountiful harvest of 1948 had only increased the average daily diet of the nonfarming population to about 2,400 calories; that the 1949-50 program plans for a still lower ration, and that the goal of the long-term recovery program is only 2,700 calories. By 1952-53 the Germans are expected to be still existing on a diet consisting mainly of potatoes and other carbohydrates, and insufficient for productive efficiency.

Mr. Collisson stated that even the maintenance of the "sub-normal" diet in Western Germany and the continued denial to the Germans of "desperately needed essential commodities" and adequate housing, would require imports of $2,800,000,000 worth of food and raw materials and a correspondingly high level of exports of German manufacturers and coal.

As against these ECA estimates, the 1947 Level of Industry Plan envisages exports amounting to only two billion dollars to pay for Western Germany's essential imports of food, fertilizer, and raw materials. This figure of two billion dollars, although well below the ECA estimate, requires a 15 per cent increase over the 1936 figure of German exports.

The authors of the plan themselves recognized that this estimate is probably too low, difficult as it is to imagine where in the world such a volume of consumer goods is to be sold. They say that "at least" two billion dollars is the minimum import requirement, but

* In a pamphlet entitled Is There Still a Chance for Germany? (Hinsdale, Ill., Henry Regnery Company, 1948), Karl Brandt, Professor of Agricultural Economics, Food Research Institute, Stanford University, and an internationally recognized authority in this field, maintains that "doubt is warranted that Western Germany, as presently constituted, will ever be able to attain the degree of productivity that will permit her to pay her food bill" (p. 14). Brandt is not alone in this opinion; it is shared by other competent experts. But it is studiously ignored in public discussion, whether unofficial or official, because, if the thesis is true, it takes away all ground from under Allied policies since Potsdam.


they add : "Since trade between the Bizonal area and the rest of Germany is subject to greater uncertainty than former internal trade, the result may be to increase still further the need for trade with other countries."

In other words, as late as 1947, American authorities, in deciding how much machinery to tear out of the German economy, still refused to recognize as the basis of their calculations the fact that the Eastern zone under the Russians is completely severed from the rest of Germany.

Even assuming that two billion dollars is a correct figure for the volume of exports required to meet Western Germany's minimum needs, the Revised Level of Industry Plan makes it impossible for her ever to export this much, for it drastically limits her production of steel, and thus precludes large exports of the machinery and construction materials in greatest demand on the world market, which made up the bulk of Germany's prewar exports. Instead, Germany is envisaged as having the possibility of exporting unlimited quantities of textiles, ceramics, and other products of light industry. The difficulty of finding outlets for the planned huge increase in consumer-goods exports is recognized, but not taken into account. The preamble to the plan states :

Before the war, the broad fields of metals, machinery and chemicals accounted for two-thirds of the total exports. Production of textiles, ceramics, and consumer goods can be raised, but the extent to which additional sales above prewar levels can be sold on the export markets is difficult to predict. Exports from the unrestricted industries would need to be increased approximately 90 per cent if the higher export requirements were provided entirely from the unrestricted industries, which is obviously impracticable. Therefore the level of exports from the restricted industries will need to be greater than prewar.

Having cut the ground from under their own feet by this statement, the authors of the plan proceed to outline the cuts to be made in the productive capacity of the German steel industry, mechanical and electrical industries, chemicals and other vital branches of a modern economy. It also expressly states that no provision is made in the plan for repayment of the advances made by the occupying powers for imports of food, seed and fertilizer. Reparations are thus given priority over Germany's debt to the United States.

The plan limits Western Germany's steel production to 10.7 mil-


lion tons a year, as against her 1936 production of 17.5 million tons, and the United States estimate of 19.2 million tons as her end of the war capacity. According to the Germans this latter figure takes insufficient account of air-raid damage. They claim therefore that the 6.5 million tons of steel capacity being dismantled will actually reduce Germany's capacity below the 10.7 million tons allowed in the Revised Level of Industry Plan.

Whichever figures are accepted as correct, there is no doubt that the planned dismantlement must deprive Western Germany of any possibility of becoming self-supporting. It envisages a Germany producing far less, and exporting more, than before the war. It makes no provision for the rebuilding of Germany's bombed cities and bridges, the repair of railroads and rolling stock, and the replacement of the engines and freight cars looted by the Russians, Poles, and French; nor for the housing of the millions of expellees from the East; nor for the support of the uncounted numbers of disabled men, women, and children; nor for the hospitalization of the many prisoners of war sent home from Russia, France, and Yugoslavia only after they have become too ill and weak to be of any use as slave laborers.

Like the old Level of Industry Plan it provides, even theoretically, for a German income at the lowest level of the Depression years, when Germany had six million unemployed. It is specifically stated that per capita productive capacity is to be reduced to 75 per cent of the 1936 level, which is precisely the 1932 level. In practice, Germany's per capita income would be reduced even lower than this, for the plan gravely underestimates the present and expected population increase of the Western zones.

The number of expellees from Silesia, the Sudetenland, and other parts of Eastern Europe was about twelve million. Some three million are estimated to have died of starvation and exposure, and some are in the Soviet zone. But against this reduction of the total figure of those who have to be provided for in Western Germany, there is the constant and increasingly large influx of refugees fleeing to Germany both from the Eastern zone and from all the countries under Communist dictatorship. These refugees include many nationalities, even Russians, but are not, for the most part, admitted into the DP camps, and have to be provided for by the German economy (see Chapter 7.)

If all these factors are taken into consideration the envisaged reduction in the standard of living of the population of Western


Germany is almost 50 per cent below prewar. Without American subsidies it is bound to be even more miserably inadequate than at present.

Since it provides only for minimum German needs, the Revised Level of Industry Plan is also incompatible with the Marshall Plan, which envisages German industries and skills contributing to the rehabilitation of Western Europe. The ceiling placed on German steel production is alone sufficient to preclude any possibility of Germany's contributing to the reconstruction and defense of Western Europe.

As the London Economist pointed out on August 6, 1946, Germany used five million tons of steel before the war for the output only of such necessary peacetime requirements as nails, sheet iron, cutlery, stoves, furnaces, pipes, tools, and household utensils. Even in the last year of World War II 40 per cent of Greater Germany's steel output (8 or 9 million tons out of 22 to 24 million, according to the Economist figures) was used for civilian purposes.

According to the calculations of German economists, Western Germany needs, not 10.7, but at least 14 million tons of ingot steel a year for the next five years for domestic use, even if a very low standard of living is maintained. No one who has seen the havoc wrought by bombing and battle all over the Western zone will quarrel with this estimate. With rare exceptions every town, large or small, is in ruins. British and French removal of vast quantities of timber from German forests has increased the need of metal in place of wood for rebuilding. Yet Germany's structural-steel production is being reduced by 40 per cent.

Steel allocations for highway maintenance and repair of the Rhine bridges alone came to 8,000 tons in the first half of 1948. The future need is calculated at 40,000 tons a year for the next seven years. Rail repair requires a minimum of 150,000 tons a year for several years to come.

To anyone not blinded by the desire for revenge, it is obvious that Western Germany can never support itself unless permitted to produce at least as much steel for its own requirements, and to export even larger quantities of machinery, than before the war. As Mr. Collisson told Congress :

The industries of Western Germany need steel for the processing and manufacturing of the machinery, apparatus and precision goods which constitute the bulk of its export trade. Into these finished goods


go the skills and craftsmanship which represent the ingredient contributing the most to the value of the finished article. . . .

Germany is a country with practically no raw materials except coal; her "riches" consist in the skills and industry of her working population. Unless allowed to use them for her own benefit and that of Europe she cannot support her people. At the same time Europe desperately needs German machinery. Nevertheless ninety-four iron and steel plants were placed on the dismantlement list handed to the Germans in October 1947. The list included Germany's most up-to-date and efficient plants.

As every American iron and steel man will tell you, a blast furnace, or melting or annealing furnace, can not be transplanted. It can only be destroyed. Thus a "dismantled" iron and steel works yields as reparations, at most, 20 to 25 per cent of its former production facilities. Germany's loss of her capacity to produce steel constitutes a lasting loss to the whole European economy.

The American public has not been permitted to see the Wolf Report on the German iron and steel industry. It is, however, no secret that Mr. Wolf reported that even the 10.7 million tons of steel ingots permitted under the Revised Level of Industry Plan would be useless if the machinery necessary to roll it at low cost in labor and materials is not retained in Germany; and that scheduled dismantlements of rolling mills would make this impossible.

Some 80 per cent of German steel production consists of rolled products. According to the German Bizonal Economic Administration the dismantlement of rolling mills being carried out will reduce productive capacity far below the 10.7 million tons steel level prescribed, and nearer to the 6 million tons level insisted upon by the Russians in 1946.

Since the capacity of the United States to meet even the home demand for sheets and strips is estimated to be insufficient, where is Europe to obtain its basic requirements if the British insist on carrying through the scheduled dismantlements in the Ruhr? As Mr. Collisson said in his evidence before the Senate Foreign Relations Committee, "The critical shortage of steel in the world today demands maximum use of facilities permitted to remain in Germany."

According to the Herter Committee report, the United States, up to 1951, will not be in a position to supply either the home market or the European and Near Eastern demand for rolled pipes of large diameter. Yet 46 per cent of Germany's welded-pipe producing ca-


pacity is being dismantled, and her large-diameter pipe production entirely destroyed.

Ten per cent of Germany's rolled milled products consists of steel wire. Thus she should have been left the capacity to produce 800,000 tons, but scheduled dismantlements are reducing it to only 530,000.

In visiting the Ruhr I was made aware of the fact that the manner in which dismantlement is carried out also greatly increases German costs of production, coal consumption, and transport charges. With an eye mainly to the elimination of German competition, the British are crippling a large number of plants instead of completely dismantling only a few. By this method they raise German costs of production to noncompetitive levels, while making it appear that the total reparations removals are comparatively small.

In a modern iron and steel works the whole process of extracting iron from the ore in a blast furnace, making steel ingots from pig iron or scrap in a furnace, and shaping the red-hot steel into bars, plates, wire, or tubes is carried out in the same plant. This economizes fuel, power, and transport. The British in the Ruhr disrupt the process by removing a part of the equipment.

In one plant they remove the rolling mill, in another the presses, and in others they destroy the furnaces. Thus, in one iron and steel works the steel used can no longer be produced on the premises, while in others it can no longer be rolled or pressed and has to be sent elsewhere for processing.

At the Hörde Works in Dortmund, for instance, I saw the giant 16.5-foot rolling mill, which is the only one of its kind in Europe and has a production capacity of 200,000 tons of rolled steel a year, standing idle by British order. It had been producing some 7,000 tons a month before the British ordered it dismantled in the fall of 1948. The greater part of the steel produced at Hörde's and formerly immediately processed, now had to be cooled and sent elsewhere for use, with consequently greatly increased coal consumption and transport costs. The latter charges were high since there was no water transport and no other rolling mill in the vicinity to make use of the steel produced at Hörde's.

Not only would the Hörde Works no longer be able to operate profitably. The Dutch, Swedes, and Norwegians had placed orders in the Ruhr for 200,000 tons of wide metal plates for shipbuilding, which England and France could not supply, and which dismantlement of the Hörde 16.5-foot rolling mill prevented Germany from


producing. There was no other rolling mill in Europe making such large plates. The two German plants in existence producing 14.7 and 13.5-foot plates had insufficient capacity to fulfill the whole foreign shipbuilding order in addition to their existing commitments, since the demand in Germany for wide steel plates was also very great. The Hörde Works had, for instance, produced the plates for rebuilding the bridge over the Rhine at Cologne, reopened in the fall of 1948, and there were many other destroyed German bridges waiting to be rebuilt.

In February 1949, following the visit of the Norwegian Foreign Minister to Washington to discuss Norway's adherence to the Atlantic Pact, it was reported in the press that the United States had promised to deliver American steel plates for the reconstruction of Norway's mercantile marine, in place, presumably, of the German deliveries which had been cut off.

The Germans had offered to deliver a new rolling mill in place of Hörde's. This new equipment was already half finished and could have been completed in nine months, whereas three and a half years would be required to dismantle, pack, and ship the Hörde mill, if it could ever be accomplished, and this was most unlikely in view of its huge size and weight. Nevertheless the offer was refused by the British Reparations Office in Düsseldorf.

The Hörde workers, at the time of my visit, had succeeded in preventing dismantlement by forming a picket line and preventing the wrecking crew from entering the plant. The giant mill stood idle, since use of it was forbidden, and no one knew whether the British would use troops to force the workers to give way, and use DP's to destroy the mill should German workers refuse the task.

The workers had put up notices on blackboards which read :

"Hands off! You are taking away the livelihood of 8.000 workers and their families."

"Marshall Plan : Reconstruction or Destruction?"

"Let us work! We want to help in the rebuilding of Europe!"

I spent several hours at the Hörde Works where thin and undernourished German workers left their arduous labors in the smelting works to ask me if there was any hope that America would intervene to prevent the destruction of their livelihood. I gave them all the encouragement I could, saying that I was sure that in time the American people would stop the senseless and cruel destruction of Germany's industrial capacity. But not wishing to raise false hopes


I admitted that America's awakening might not come in time to save their jobs.

Early in 1949, while writing this book, I received a letter from Herr Wilms, the engineer in charge of the 16.5-foot rolling mill. He wrote to tell me that after stopping dismantlement according to their promises to the ECA the British had removed and shipped to England the turning lathe and grinding machine without which the mill cannot operate. He added :

On November 1, 1948, in "honor of the visit" of Mr. King, the Wolf Commission expert, the first of these machines was removed; and now, on Christmas Eve, the second one has been torn out and both essential machines shipped to England via Hamburg. Yet there is no one in England who wants them. The Thomson Houston Company in Rugby has refused to take them, and Messrs. Francis Shaw in Manchester have accepted delivery with reluctance.

At the end of his letter Herr Wilms remarks :

The belief in Germany that the American view concerning European rehabilitation would prevail and bring an end to dismantlement, is fading. I myself still hope for the best while preparing for the worst. Can you give us some good advice? Perhaps now that masculine reason is in eclipse, feminine feeling will achieve better results!

Unfortunately for the Hörde workers, the ECA Commission deferred to the British, who presumably wish to prevent reconstruction of the Norwegian and Dutch merchant marine. So the giant rolling mill is now being torn down.

In Dortmund I also visited the Dortmund Union Works which after the decartelization operation had been cut off from its coal mines, subsuppliers, and markets. Here again I found that the whole works was not being dismantled, but measures had been taken to ensure that the steel produced in its foundry could no longer be used on the premises in its molten state. A gigantic press, far too big to be moved but nevertheless placed on the reparations list, was being destroyed. The ovens which served it had already been torn down, and the press itself being irremovable would presumably be broken up and converted into scrap. It had originally been constructed on the premises and was the largest press in Europe. Two other presses and four steam hammers had already been dismantled


and 29 ovens destroyed; one crane able to lift a weight of 250 tons had been torn down, and five smaller cranes removed.

This plant had formerly manufactured equipment for the mining and electrical industries, and gears for large sea-going ships, all of which production depended on the presses which were being destroyed or dismantled.

The value of the annual output of the Dortmund Union Works prior to dismantlement had been 25,000,000 marks a year. Its residual value on reparations account was only a fraction of this sum. The plant could not be reconstituted because its former affiliated works, the Wagner Company which made presses, had already been dismantled and its equipment shipped to India.

The Germans had offered to supply new machinery to India instead, and India would have preferred to receive machinery made to its specifications, but the British had insisted that Wagner's be dismantled. It could only be presumed that from the British point of view it was better that the Indians should receive factory equipment they could make no use of, than machinery with which to compete with the British. Dismantlement both eliminated German competition and prevented the creation of effective new competitors.

Following its dismantlement, the Wagner Company in Dortmund had made a contract with the British to use its labor force to dismantle other factories. But, faced with the rising tide of German resentment at the destruction of their country's assets, the reluctance of all German workers to dismantle the machinery which their fellow trade-unionists depended upon for their livelihood, and the general opprobrium attached to all Germans who collaborated with the British in destroying Germany's productive capacity, Wagner's in October 1948 had refused to renew their contract. As punishment the British, at the time of my visit to Dortmund, had announced their intention of tearing down the empty Wagner buildings which had hitherto been spared and used as a storage depot for the machinery torn out of other factories in the town.

The "captains of industry" I met in Dortmund considered the Revised Level of Industry Plan limiting future German production worse than dismantlement, costly as the latter is. This was also the view of the trade-union representatives with whom I talked in the Ruhr. Executives and workers, indignant as they all were at the senseless destruction of machinery going on, had faith in German capacity to repair the damage if only they were allowed to work.


The most terrible thing about Allied occupation policies was the setting of limits to man's endeavor, inventiveness, and willingness to work.

Germany's coal, iron, and steel industry was formerly the most closely and economically integrated in Europe. Combines used their own locally mined coal to produce steel and roll it immediately into plates or strips or press it into shape while still red hot. In many plants production from blasting to finished products, such as pipes and wire, was all carried out on the same premises, with a minimum cost for handling and transport.

Dismantlement, coupled with so-called "decartelization" is wiping out these economies and reducing Germany's coal, iron, and steel industry to a nineteenth century level of efficiency.

"Decartelization" was originally sold to the American people under a false label. It was represented as a method of eliminating "monopoly," and clearing the ground for free private enterprise. In fact, however, under the influence of Communist fellow travelers in key positions in the economic division of the United States Military Government, decartelization became an instrument for undermining the capitalist system. "Operation Severance," as it was called, first set 1,000 employees as the maximum for any German enterprise. Later the figure was raised to 10,000, but even this number of permitted workers destroyed the former economic and efficient vertical integration of the German coal, iron, and steel industry.

Communist sympathizers, in combination with the disciples of Morgenthau, no longer enjoy predominant 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 considerable 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 productive 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 enterprise is the August Thyssen works in the Ruhr. This was the most efficient smelting works in Europe. It formerly produced 1,250,000 tons of crude steel, all used on the spot to turn out high quality dynamo and transformer sheets, materials for bridge building, and


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 statements by ECA and United States Military Government spokesmen, 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 electrical sheets for transformers and dynamos the power shortage cannot be remedied. Fifty per cent of Bizonia's capacity for the production 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 generating 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 requirements 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 a 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 increase 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 importance to the American taxpayer, since it drastically reduces Germany's capacity to export high quality tools, and perpetuates the unfavorable balance of trade now met by American food subsidies.


It also cripples the chemical industry because Germany will henceforth 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 dismantled 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 essential 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 following removals of productive capacity :

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

Twenty-three per cent of the capacity of the light machinery industry.

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


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 dyestuffs is to be retained. The production of atabrine is to be reduced 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, organic and inorganic" chemical industries.

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

Under a temporary provision Germany has been allowed to continue producing some ball bearings until such time as her exports shall enable her to buy them abroad. Both the British and Americans 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 competition 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 industry" 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 materials, 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


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 equipment 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 Europe's needs. The answer reveals 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 production (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


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 "careful" 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 questionnaires 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 productive capacities at a time when no one expected to be supplied with anything but a small proportion of their needs. It was certainly the Germans' fault that productive capacities were accordingly overestimated, but the fact remains that these "Mecit" reports are not reliable, and should not have been taken as the basis for 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


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 individual machines in their zone without reference to the Inter-Allied Reparations Authority (IARA) in Brussels. Both terms are a "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 factory 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 Düsseldorf, for instance, in September 1948, the British demanded seventy-two machines, this time however from factories on the dismantlement 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 recommendations.

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 irreplaceable, 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 productive assets. Originally the term "restitutions" was taken to mean only the restoration of property stolen by the Germans 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


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 restitution is not delivered to those who originally sold it to the Germans, 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 today, 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 strengthening themselves against the "menace of American imperialism."

The only exception to this American ruling concerning the restoration 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 particularly 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


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 occupied countries. Nevertheless, Czechoslovakia, whose country was not bombed and never became a battlefield, and whose manufacturers 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 Germans without compensation, whereas the Czechs and the French find little difficulty in specifying, finding, and claiming the machines 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 represented 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 description 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 more co-operative than the Americans in enabling Poland to receive the machinery 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 Russians, on account of the similarity of their uniforms and gold and


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 restitution 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 interpretation given the term by his office, since in the future we might, like the Germans, be arraigned as "war criminals" for our failure to observe the Hague rules of land warfare concerning enemy property. 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 have acted "under duress" when confronted 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-


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 in the first years of the occupation from confiscated Wehrmacht supplies. Several thousands of automobiles paid for by the Germans are now being taken from them without compensation 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 a profit from selling confiscated Wehrmacht property to the Germans, 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 whenever it does not conflict with their vital interests, originally refused to accept restitution claims unless duress could be proved. Only such items were restituted 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 restitution 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


factories to be shipped abroad as reparations. When I left Germany, 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 reparations, 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 States 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 dismantled on the reparation account.

My German informant also wrote concerning the fresh blow delivered to the German economy by the decision to 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 machinery 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.


According to a compilation made at the instigation of the Anglo-American Bipartite Steel Production Office, restitution claims affecting 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 Marshall 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 dismantled, 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 a multitude of other peacetime needs and exports have been dismantled 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 the hypocritical excuses 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 other British


manufacturers had been told by the Board of Trade that they would be furnished suitable army or navy uniforms to go to Germany 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 livelihood, 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 England. Because British workers were less efficient and refused to work 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 endeavored 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 industry 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 a strong 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-


mercial motive which inspires dismantlement led to the appointment 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. Brailsford 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 blame 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 destruction of the German watch and clock industry. Mrs. Brailsford enlightened 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 strike 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 destruction 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 population 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 probably bring a bitter struggle for world markets.


Is America to side with the defeated enemy country which has become 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 Miss Marguerite 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 going 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 is 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 verdict of arms without benefit of American aid of the conflict between 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 situation. The old commercial rivalry between England and Germany, therefore leads inevitably to cutthroat competition, in which Britain's advantage as a victor is counterbalanced by Germany's greater capacity for hard work, and America's interest in preventing her remaining 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, Germany and England, however difficult it is for them to be reconciled, have an equal interest in preventing further encroachments on 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 a


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 policy, but also how it was that the Military Government's official statements on dismantlement failed to correspond to the facts as I 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 Morgenthau'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 economic information, or because of sentiment at home and Washington's directives, or because of the reluctance of the British and French to back up the United States against the Soviet Union, I found that the highest United States Military Government authorities 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 formation 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 resources 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-


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 Communism."

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 Germans 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 German nation, Mr. Wilkinson proceeded to tell me that the Germans, in his view, "did not deserve any consideration" from their conquerors. 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 German 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 incomprehensible policies I had seen being implemented in the United States zone. Racial antipathies, or the blind desire for retribution on a defeated 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 surprised when Mr. Wilkinson handed me a copy of the latest issue of the journal of the "Society for the Prevention of World War III," with the suggestion that I read the article it contained on dismantlement and reparations. He was, I presume, completely unaware of the manner in which this notorious organization's propaganda of hatred and vengeance helps the Communists.

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


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 be 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 dismantlement for the benefit of Soviet Russia and her satellites.

Sir Cecil Weir, the British Chief of Reparations whom I interviewed 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 humane 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 Germany's peacetime economy and that "never had a victor treated a 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 dismantled 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 Germany I have wondered if he knew that his subordinates were shipping 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 division 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 deliver the reparations promised to Czechoslovakia, Yugoslavia, and


other Communist countries. He was the model civil servant carrying 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 recovery. He never once displayed his personal antipathies as Mr. Wilkinson had done. Yet he is held mainly responsible for the sabotage 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 Military 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 replace 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 attitude. It is rather that the United States authorities, without admitting 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 produce 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 permanent ceiling in spite of the tremendous need for steel in Europe and the strain on the United States economy of supplying even a part of the present European deficit. According to the Herter Committee's report, fulfilling the most urgent requirements of the sixteen 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 Cooperation (OEEC) in October 1948. This report recommends a 10


per cent increase over the 1936 level in Germany's productive capacity, 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 required15 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 paradox 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 industries 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 existing productive capacity, and that reparations removals are therefore 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 plan, as now drawn, is carried 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 economic 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 compatible with economic political realities is incontestable." The important point is that the economic and political realities of the world situation require an end to reparations and the reconstruction 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.


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. Only 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 total 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 appreciably to the recovery essential to make Germany self-supporting.

The strain on the American economy resulting from the European 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 Western 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 modified 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 Britain's desire to eliminate German competition and the blind fears of France. When on April 13, 1949, the State Department an-


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 continued.

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 retention 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 surveyed, and allowing 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 efficient of the steel plants recommended for retention by the ECA. In spite of 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 chemical 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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