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The chaos which characterized Germany's condition after her defeat in
World War I found its most graphic expression in an uncontrollable inflation
which was more than a symptom economic distress. The mark skyrocketed
and the resultant social, economic and political disintegration seriously
weakened the Weimar Republic and provided a basic underlying cause for the
emergence of the new Nazi

The nations that defeated Germany in World War II desire if possible to
avoid another such inflation that would interfere with the prescribed occu-
pational aim, “to prepare for the eventual reconstruction of German political
life on a democratic basis and for eventual peaceful cooperation in international
life by Germany".

The framers of the Potsdam Agreement specified that Allied controls were
to be imposed upon Germany to the extent necessary “to assure the production
and maintenance of goods and services . . . essential to maintain in Germany
average living standards not exceeding the average of standards of living of
European countries (excluding U. K. and U. S. S. R.)” and that the four occu-
pying powers shall establish common policies for "wages, prices and rationing".

These decisions furnished U. S. Military Government price officials with three interrelated objectives:

(1) to set into operation responsible, efficient and de-Nazified German price machinery;

(2) to achieve, in the U. S. Zone, a stabilized price level as a cornerstone for a stable German economy in which democratic social and political institutions could grow; and

(3) to work at the quadripartite level toward the goal of treating Germany as a single economic unit and achieving stabilization of prices throughout Germany.

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Price Machinery Reconstituted

Early in the occupation, United States Army economic administrators took their first major step the reconstitution of the German price control machinery. The Price Formation Offices in each of the three Laender in the U. S. Zone with their subordinate Price Supervision Offices and the local Price and Rent Offices were reactivated. During the summer if 1945 these officesrecruited and trained new personnel to replace the 500 price control officers removed under the de-Nazification program. Today, twelve months after defeat, German price control machinery is operating effectively in the U. S. Zone.

This machinery has proved itself capable of carrying out the policy directives of Military Government and represents an area in which the newly formed German political organization has been able to stand on its own feet. It stands as a successful demonstration of the Military Government policy of reestabilshing German administrative organizations to operate subject only to Military Government review. As the months passed, increasing responsibilities have been placed on the German price offices. Of well over 150 price increase adjustments granted by these offices, only 5 have been formally revoked by Military Government officials. Thus the price control system for the U. S. Zone, containing a population of some 17,000,000 people, is administered entirely by German officials under the policy directives of an exceedingly small staff of Military Government officials.

In each of the zones of occupation this basic pattern of utilizing the existing German price system of regulations and organizations has been preserved in one manner or another, subject to varying degrees of Military Government direction. In each Zone measures have been taken to assure the general maintenance of prices and rents at pre-Occupation levels, and to assure that price increases would be made only as exceptions and when specifically authorized.

Since each of the occupying Powers had adopted the same general pattern in its zone and since the same problems were developing in each of the Zones, it was logical to move on to the consideration of overall measures for uniform treatment throughout Germany of the various problems which price administration imposes. Because of this basic similarity of aims, interests and problems, it has been possible for the four occupying Powers to agree on an important Statement of Price Principles for Germany-wide application.

Thus, in the development of German price control machinery, substantial progress has been made towards the attainment of two of the three price control objectives: institution of a responsible, efficient and de-Nazified German price machinery, and quadripartite cooperation to secure uniformity of treatment of price problems throughout Germany. The only requirement to complete the machinery is a central price agency for Germany..

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The result of this progress is apparent in an examination of the third objective - stabilization of the price level. The German price control machinery had been an efficient administrative organization. During the war and the earlier years after the "Price Stop" of 1936. the German price structure had been held remarkably stable. Since defeat, the German price agencies in the U. S. Zone, operating under policies determined by Military Government, have continued to hold legal prices under control. The vast bulk of transactions takes place at these legal prices. The existence of a black market cannot be denied. Tlegal transactions, whether at exorbitant prices or by unauthorized barter, continue and will never be completely suppressed as long the shortage of goods exists. German authorities have been strenuous and vigilant in their efforts to break up flagrant black markets, but these irrepressible markets reappear in new sites. The important fact is that the volume of black market transactions has not significantly increased, and, more important, black market prices have not risen in the progressive pattern which characterizes inflation. The salient feature is that prices are in general holding in the face of the almost unbearable pressure of too much money and too few goods. Ne ertheless, the price situation today is on the surface more satisfactory than underlying economic and political facts would seem to warrant.

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Rationing OBST GE Germany, today, there are shortages of food, clothing, housing, and et

. SÜDFR sential services for consumers. Fuel, raw materials and equipment for all

productive activities are scarce on a scale almost beyond comprehension. This is the meaning of total defeat in a modern industrial economy. The Allied occupation aims must be achieved within the framework of defeat and economic disorganization. In view of these shortages, only a controlled distribution can prevent a complete breakdown of organized life and economic activity. Controlled distribution of scarce supplies requires control of prices. At the same time, successful control of prices requires effective rationing measures for distributing the scarce supply. If the pressure becomes too great on either, the price system or rationing system, or both, will break down. .

In the German economy, between January, 1935, when the Nazis rose to power, until the outbreak of the war, there was no formal rationing system for consumer goods. There were prohibitions on the use of certain raw materials and the enforced use of substitute materials, this being prompted by a plan of self-sufficiency. The day war broke out rationing of food and soap was introduced immediately; textiles, footwear and household articles soon followed. To bacco rationing and a systematic control of distribution of other consumer goods were introduced later.

The general basis for rationing most commodities other than foodstuffs was the "point" system. Beginning February 1940, it was introduced to control only the distribution of goods from manufacturers to wholesalers and from wholesalers to retailers. Subsequently, however, the system was expanded to control sales to consumers as well. ARACE

During the the war, the point system was applied to most consumer commodities. This system continued in operation until the last year of the war when the German economy was no longer able to support this method of distribution. Instead a strict system of issuance on a priority needs basis was substituted in order to secure the most efficient use of dwindling supplies.

Because of the extreme scarcity of consumer goods, such as shoes, textiles, soap, and the like, a point system of rationing cannot be used at the present

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