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service between Germany and foreign countries (excluding Spain and Japan) on 1 April 1946 though this is still limited to personal mail and thus has psychological rather than direct economic significance.

In February, the first commercial export sales from the U. S. Zone were concluded. In April, the inland waterway transport system had been restored sufficiently to perform its normal functions.

An event of prime importance to the industrial economy of the U. S. Zone was the blowing in of the first pig iron furnace, in Greater Hesse, in March, after several months had been devoted to building up stockpiles of coal, coke and ore to assure uninterrupted operation. With additional blast furnaces activated in April and May, June output of pig iron reached 20,700 tons, 45 percent of estimated capacity.

Labor in Industry

Since January, unemployment figures in the U. S. Zone have shown a continuous downward trend, with a simultaneous upward trend in labor registration. This reflects increased industrial activity and indicates generally improved economic conditions. However, it also presages increasing problemas in the labor field as manufacturing activity expands. Job openings often call for skills the unemployed do not possess.

In all of present-day Germany, the total able-bodied men available for work (ages 14—65) are estimated to be about 6,000,000 fewer than in the same area in 1939. This shrinkage takes into account military casualties, prisoners-of-war not yet returned to the German economy and German men still outside of Germany. In the U. S. Zone, the total male labor force in May 1946, including the employed and employable unemployed, was about 3,500,000, as against about 4,500,000 seven years previously. Thus, the shrinkage in the male labor force has been about 22 percent. To this numerical loss must be added an important qualitative loss, for the most productive age groups suffered by far the heaviest war losses. In respect to industry, the labor pool on which U. S. Zone manufacturers may draw has been further reduced by the larger employment in agriculture which, in May 1946, was 65 percent above that of May 1939. Actually, employment in U. S. Zone industry and handicraft is now about one-third less than it was in 1939. Important also is the fact that, due to lack of training, many thousands of workers have neither the skills or the experience essential to the proper functioning of an industrial machine.

Fundamental Deficiencies

Since machinery cannot be built without steel, engines cannot run without fuel, and trucks cannot run without rubber, steel, oil and rubber are


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indispensable to industry in the U. S. Zone, as indeed to any industrialized economy. The list of basic raw materials for which no satisfactory substitutes exist, must also be extended to include copper for communications and the electrical industry; lead and tin for bearings; cotton and other fibers for the production of textiles; potash, phosphates, and nitrogenous chemicals for fertilizer; lumber for construction; and many others. But while all these products are essential, it can be said safely of the U. S. Zone that one material is, above all, the fundamental key to industrial development coal.

Without coal there can be neither steel nor coke for the metal producing and metalworking industries, nor coal tar for chemicals and road repair, nor carbon black for the production of tires, nor fuel to keep the wheels turning in factories. The nature of industrial organization in the U. S. Zone, with its emphasis upon extensive fabricating and processing facilities and its shortage of indigenous raw materials sources, makes this situation especially critical. Before VE-Day the manufacturing plants in Greater Hesse, Wuerttemberg-Baden and Bavaria were always closely integrated with the coal mines and heavy industries of the Ruhr and Rhineland and Central Germany. The zonal boundaries now existing have not lessened the dependence of the U. S. Zone upon these basic materials, but they have seriously discrupted their flow.

Although the Potsdam Declaration is intended to reduce the industrial capacity of Germany and destroy its ability to wage war, it recognizes the need for retaining those resources which are essential to the ultimate reestablishment of a self-sustaining German economy. The free flow of basic materials across zonal boundaries is essential if this objective is to be achieved.

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“It is not the intention of the Allies to destroy or enslave
the German people. It is the intention of the Allies that
the German people be given the opportunity to prepare for
the eventual reconstruction of their life on a democratic and
peaceful basis. If their own efforts are steadily directed to
this end, it will be possible for them in due course to take
their place among the free and peaceful peoples of the

Report on the Tripatrtite Conference
of Berlin, 2 August 1945








One of the basic tenets of U.S. policy in Germany has been to eliminate

Nazi institutions and practices and to insure the establishment in Germany of a form of economic administration that is compatible with the functioning of a democratic government. Studies were made by American Staffs in London and in Washington on what should be done in order to carry out this over-all policy. Specific planning, however, was first undertaken by the Economics Branch of SHAEF (Supreme Headquarters, Allied Expeditionary Forces) in December, 1944. The plans were both in terms of the immediate occupation phase and of long term plans made with respect to local economic ad ministration.

The initial directive was issued in January, 1945, as the SHAEF Technical Manual for Industry and Trade, Rationing (Other Than Food), and Price Control in Germany, re-issued in revised form in May, 1945. A manual for food and agriculture was published in May of the same year. These manuale and directives pointed towards the elimination of Nazi institutions and were for guidance of Military Government officers. They laid the groundwork for a reorganization of economic administration which would be compatible with German traditions.

The first detailed proposed directive, which provided for economic administration up to Land level only, was issued in preliminary form in June, 1945, to ascertain whether the concepts that had been developed on the basis of the planning period were sound, and was finally issued on 14 August 1945. A continuous effort was made to explain to the German authorities the basis and the objectives of U.S. policies.

On 9 October 1945 the first over-all conference of the German economic and food and agriculture officials from each of the Laender of the U.S. Zone was held to lay the basis for committees which were to operate under the Laenderrat. Along with the development of German economic administration and the over-all development of government in the Laender, there has since been an increasing delegation of authority to the German officials.

The Minister Presidents

The Minister President of each Land in the U.S. Zone is charged with the responsibility for implementation of the policies and instructions of Military Government. The pattern of the organization through which the Minister Presidents carry out this responsibility in the field of economics is set forth in Military Government Regulations. The details of organization within the pattern are left to their discretion and amendments to the basic directive are worked out in conjunction with them before being issued.

The Minister Presidents are authorized, with a few exceptions involving major decisions, to take all necessary action without obtaining the prior approval of Military Government, except where required under decisions of the Allied Control Council or for matters requiring quadripartite action or coordination.

In certain matters, however, the Minister Presidents are required to coordinate with each other through the Laenderrat before action is taken. Proposals for changes in the policies and instructions in the implementation of Military Government Regulations must be submitted to Military Government for approval. In turn, proposals initiated by U.S. Military Government for changes in policies and instructions set forth in the Military Government Regulations are coordinated with the German authorities before they are adopted.

few exceptions, Military, Government does not operate; control is exercised through the reports the German authorities are required to submit and by spot checks to insure that policies and instructions are being complied with by the German authorities.

Military Government must continue to operate in the field of foreign trade, inasmuch at German officials and individuals are forbidden to trade directly with areas outside of Germany. Strict supervision is also carried out by Military Government to insure compliance with instructions of Military Government with respect to the evaluation, dismantling, and packing for shipment of plants allocated for reparations.

Land Economic Administration

In Bavaria and in Greater Hesse there are separate Ministers for Economics and for Food and Agriculture. In Wuerttemberg-Baden the Minister of Economics is also responsible for food and agriculture. The Minister of Economics in each Land, under the Minister President, is responsible for industry, trade and commerce, price control, and control of scientific research, and is responsible for insuring that Trade Associations, Chambers of Industry and Commerce, and Handicraft Chambers are organized and operate in accordance with established policies and do not exceed their authorized powers. He is also responsible for the encouragement and general supervision, in conjunction with the Minister of Food and Agriculture, of cooperatives. He is charged with implementation of the instructions issued to the Minister President with respect to the evaluation, dismantling, and packing of plants allocated for reparations. Each Minister has a staff which functions on a policy and planning level. The organizations of the staff in each of the three Laender differ considerably, but roughly are divided into sections corresponding to the functions for which the Ministers of Economics are charged.

Administrative Agencies

The administrative organization under the Minister of Economics is much the same in each Land. The Land Economic Office is charged with the control and supervision of rationing (other than food), internal trade, export and import trade, industry, handicrafts, and public utilities. The Land Economic Offices function through local Economic Offices. Bavaria and Greater Hesse also have Regierungsbezirk Economic Offices, and Wuerttemberg-Baden has a Sub-Economic Office for Baden. Bavaria, in addition, has certain Land offices which function under the Land Economic Office and which are in charge of major industries such as mining, textiles and chemicals. These offices operate on a functional basis throughout the Land. Control and supervision over prices are carried out in each Land by the Minister of Economics through a Price Formation Office, Price Supervision Offices and local Price Offices Each Minister also has agencies for reparations and for the control of scientific research.

Prohibited Organizations

Private or semi-private organizations are not permitted to exercise govern

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