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June Ration for normal consumers in cities over 20,000 population increased to 1,330 calories per day, and to 1,185 in smaller communities.

Record monthly imports of 164,000 net long tons of food provided by United States to feed German civilians.

Program to salvage nitrogenous fertilizer, scrap metals and other raw materials from captured stocks of enemy ammunition inaugurated.

July General McNarney informs Allied Control Council that the United States is willing to join with any or all other occupying powers in treating Zones involved as economic unit pending full quadipartite implementation of the Potsdam decision.

Meeting of German Economic Ministers from U. S. and Soviet Zones agrees on purchase and sale of needed commodities.

Interzonal trade meeting between German officials in U.S. and British Zones.

The U. S. offer of economic unity accepted in principle by British Government.

August Secretary of State Byrnes states "there should be changes in the level of industry agreed by the Allied Control Commission if Germany is not to the administered as an economic unit as the Potsdam agreement contemplates and requires."

For first time since Occupation, German delegates representing the four zones meet to discuss price control.

September German Bi-Zonal Agencies formed in fields of food and agriculture, finance, communications, transportation and trade and industry. Dr. Hermann Dietrich, Commissioner for Food and Agriculture in the U. S. Zone, named chairman of the Bi-Zonal Food and Agriculture Executive Committee. Dr. Rudolph Mueller, Minister of Economics of Greater Hesse. named Chairman of the Executive Committee for Economics.

October Allied Control Authority agrees on procedure for liquidation of Germany's war potential.

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uring the year under review July 1945 through June 1946 – industry in the U. S. Zone progressed despite numerous interruptions and setbacks from what amounted to a practical standstill to an operating level somewhat under one-third of estimated capacity. Measured in terms of activity in July 1945, when the great majority of industrial establishments were not in operation and industrial activity was confined largely to essential services — food processing, electric power, water, sewage – the improvement has been considerable. Compared, however, with minimum civilian requirements, actual existing capacity, or the general scale of industrial production provided for by the Reparations Plan for 1949, output in June 1946, the highest since occupation, remained at a low level.

Progress during the year in the U. S. Zone has been greatest in the basic industries electric power, coal, iron and steel. Most of the gains in ferrous metals were made in the second quarter of 1946. As the stimulating effect of more steel permeates industry, output in plants heretofore restricted by steel shortages should expand.

This progress was achieved in the face of enormous difficulties. One of the most highly industrialized economies in the world had utterly collapsed. When the fighting ended on 8 May 1945, the closely integrated German economy was shattered. The great industrial machine which had enabled the Nazis to wage for six

years was reduced to debis. With the cessation of rail and water traffic, each town, village and city was cut off from the outside world and thrown on its own resources. Neither postal, telegraph or telephone services were functioning. Slowly the occupying armies restored a minimum of road traffic to bring urgently needed foodstuffs from the country into the urban settlements to prevent starvation. Gradually, Military Government detachments, as they took over, reestablished

some semblance of order in the vital fields of food, electric power, water supply and sewage disposal. Where possible, individual industrial plants making such essential peacetime items as soap, leather, shoes, textile fibers, and similar commodities, were put into operation to supply urgent local needs.

By July 1945, more than three-fourths of the rail tracks in the U. S. Zone had been restored. But railroad facilities, severely limited by single track bridges, rolling stock and coal shortages, were being used almost wholly for military traffic and for the return to their homes of millions of displaced persons. Only a few urgent industrial civilian needs could be served by the railroads.

From July through December 1945, the main efforts of industry were devoted to housecleaning and repairs. The rubble resulting from bombing and the debris left as a result of invasion were removed from plants and equipment. Stock was taken of machinery and equipment which had survived and of the war damage to installations. As non-war plants were authorized to begin operations by Military Government, the first productive steps toward resumption of manufacturing activity were undertaken. Damaged machines were repaired, factory buildings were roofed over, at least temporarily, or useable equipment moved into undamaged shops. The extensive war profits of most German manufacturers made it possible to maintain, and often even to enlarge, working crews for these essential but non-revenue producing tasks. The fact that many manufacturers had accumulated large amounts in cash before the collapse facilitated the meeting of these non-productive payrolls, especially during the brief period of two or three months during which most banking facilities were not functioning.

For example, a paper mill in the U. S. Zone obtained an initial allocation of coal in July and, by utilizing stockpiles of raw materials on hand, turned out the first paper urgently needed for the allied program of reeducating the Germans through the publication of democratic newspapers. By September, the crying need for stoves for cooking and heating in the millions of partially repaired dwellings prompted the reopening of the first sheet steel rolling mill in the U. S. Zone. A few days later, the first window glass, critically needed by the Army for the displaced persons program and for high priority German civilian requirements, was produced in Bavaria. A month later, a chemical plant in Wuerttemberg-Baden turned out the first soda ash, without which neither glass nor soap can be made. Also in October, the first 50-ton a day open-hearth steel furnace began to make steel ingots in the U. S. Zone. By November, it had become possible to provide sufficient coal, coke and electric power to begin operation of the four-unit Trostberg plant which produces calcium cyanamid for nitrogen fertilizer; this was the first important industrial contribution to the food and agriculture program in the U. S. Zone.

During the fall and early winter, progress was made in other fields essential to a revival of industry. In August, the great Rhine waterway had been opened for traffic in the U. S. Zone, and several months later, direct water communication on the Rhine had been reestablished with the Ruhr. Month by month the railroads improved their service and a growing share of larger available loading and hauling facilities could be devoted to non-military needs. Top civilian priority went to coal. As additional railroad trunk lines between the Ruhr and U. S. Zone were reopened and more freight cars were put back into service, coal loadings from the Ruhr rose from 517,000 tons in August to 658,000 tons in December. By September, all essential electric power requirements of the U. S. Zone were met for the first time, and a month later, all the high tension lines within the U. S. Zone had been repaired and put back into service. This was an essential prelude to the opening of the Trostberg nitrogen fertilizer plants, whose operation requires very substantial amounts of electric power.

In the vital field of communications, full mail service was resumed in the U. S. Zone in September; a month later, Germany-wide letter mail service was reestablished.

During the summer and early fall of 1945, before railroads and waterways were able to cope with more than a fraction of high priority German civilian traffic, road transport played a major part in moving goods necessary to maintain a minimum of essential civilian production, notably food. Despite shortages of tires, tubes and batteries, the 37,000 trucks and 20,000 trailers then available in the U. S. Zone proved able to cope with the task. Improved coordination between Military Government and the German authorities and among the Germans themselves was an important factor contributing to the progress made in all economic fields.

Status at Year-end 1945

At the turn of the year, the visible results of the tasks accomplished during the last six months of 1945 seemed meager indeed. Over-all production in the U. S. Zone had risen from perhaps 1 to 2 percent of existing capacity in the summer to around 10 percent by the end of the year, with the average for the half year probably well under 5 percent. But as production went up, even to this low level, the shortcomings of the industrial economy stood out more glaringly. Nowhere was there adequate coal. Shortages of freight cars were reported from many quarters. Excessive use had resulted in the breakdown of many trucks. Stockpiles of raw materials, notably steel, and of semifabricates, which had been the mainstay of the normal manufacturing activity during the fall, were running low, with little new output to replace what was used up.

The Second Half-Year

Much of the rehabilitation work done in the closing months of 1945 bore no visible fruit until the first half-year of 1946. Several fortuitous circumstances helped greatly to tide over the dreaded winter months. On the whole, the winter was mild. There was an unexpected absence of epidemics or of widespread serious illness. Even the complete lack of coal and the shortage of wood for home heating and fuel proved less serious than could have been anticipated. Not only were food rations maintained but their prompt and equitable distribution throughout the first quarter of 1946 aided in keeping people's spirits up and in maintaining some measure of faith in the soundness of the Reichsmark, at least as far as legal transactions were concerned. The cut in rations, on 1 April, did not come until spring was well under way. By March, industrial output in the U. S. Zone, expressed in terms of estimated capacity, had reached 20 percent, or double that of the years end.

With the slow but steady improvement of coal output in the Ruhr, which continued throughout February, the U. S. Zone received solid fuels at the rate of about 1,000,000 tons a month in the first quarter. The sharp drop in coal output in the Ruhr in March, following the radical curtailment of food rations in the British Zone, was not wholly reflected in a decline in coal shipments. This was made possible by heavy withdrawals from the considerable stockpiles of coal built up in the Ruhr during the fall and winter of 1945-46 when transport facilities were unable to move coal from the mines as fast as it was being produced. As a result, the weekly average of solid fuel loadings to the U. S. Zone in May were 3 percent above those of February. However, maintenance of coal availability in the U. S. Zone at the January-February level, gratifying though it may have been under the prevailing conditions, is in reality a major unfavorable development. Coal is the key to further industrial progress in the U. S. Zone, and an increase in the supply of solid fuels is imperative to permit continuation of the present upward trend of industrial activity or even to support its maintenance at the current level.

The basic groundwork laid in 1945 in the industrial field, accompanied by improvement in the closely related fields of transportation, communications and manpower, has continued to contribute to industrial recovery throughout the first six months of 1946. June production is estimated to be about 29 percent of operable industrial capacity excluding war plants in the U. S. Zone.

Other significant developments in fields related to industry and contributing to the revival of manufacturing activity, were the establishment of interzonal telegraph and telephone service between the three western zones in January, and with the Soviet Zone in February, thus restoring telegraph and telephone service on a Germany-wide basis; and the reestablishment of international mail

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