Oral History Interview with
Representative of the Federal Republic of Germany to the Economic Cooperation Administration (ECA), 1949-52.
November 12, 1970
by Theodore A. Wilson
[Notices and Restrictions | Interview Transcript| Appendix | List of Subjects Discussed]
This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.
Numbers appearing in square brackets (ex. ) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.
This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.
Opened April, 1989
Harry S. Truman Library
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Oral History Interview with
November 12, 1970
by Theodore A. Wilson
QUESTION: Would you describe the political, economic and social climates into which United States aid was introduced?
HARKORT: When in 1947 Secretary of State Marshall announced the Marshall Plan, the war in Europe had been over for two years.
The Potsdam Conference had divided the German "Reich" into four zones. Contrary to the conference provisions, the Allies had not succeeded in preserving -- even loosely -- an economic unity. In fact, the Soviet Occupying Power sealed off its zone completely, demanding from it high reparations and organizing it according to Soviet ideas. On January 1st, 1947 the British and American Zones had been joined together economically to form the Bizone; the
French Zone however, remained separate and on its own. A political amalgamation of only the three Western Occupation Zones loomed very remote at that time.
In the preceding very, cold winter of 1946-47 food and heating supplies to the population had dropped to their lowest point.
Industrial production in 1947 was stagnant at a very low level: vis-a-vis 1936, coal at 70 percent, iron and steel at 25 percent, machinery and optical instruments at 40 percent, textiles a little over 30 percent (Bizone Joint Report, September 1948, pp. 72-74).
It is true that exports (of the three Western Zones and Berlin West) in 1947 amounted to $318 million which was $112 million higher than in 1946, but half of this amount consisted of coal; another quarter was made up of other raw materials (coal and wood were compulsory export items) and only 10 percent were manufactured goods. Imports amounting to $843 million were $155 million higher than in 1946, of which only $243 million were financed through Germany's own import proceeds. (Wiederaufbau (Recovery)), p. 79).
The currency reform had not yet taken place; the new currency, the "Deutsche Mark," was not introduced until a full year after Marshall's speech on June 21, 1948. Thus, we might say that it took a very, long time until the foundation was laid for a recovery of the German economy. The dismantling process was continuing, even though in the summer of 1947 a new directive from the Chiefs of Staff had reduced the number of factories and other establishments to be dismantled.
By the end of 1947 a total of eight million expellees and refugees had poured into the West Zone. (St. Jb., 1952, p. 30)
In summary: the Marshall Plan aid reached West Germany in the middle of a political and economic predicament which in essence did not differ greatly from the catastrophic condition immediately following the end of the war. This climate of stagnation in misery, of hopelessness and despair, could not have endured much longer. The fact that no social disturbances arose may have had three reasons: Everyone was fully occupied in keeping his family and himself alive from day-to-day; distress and privation were general and evenly distributed,
with only a very few faring relatively better; and resignation and the need for rest were widespread, as well.
QUESTION: What economic problems did you consider most serious and urgent?
HARKORT: The most urgent problem was the importation of foodstuffs and raw materials to afford the chance of resuming and raising production. For a solution, foreign currency was lacking -- and this lack was compensated for by the dollars of the Marshall Plan aid. At the same time it behooved Germany to increase her imports as quickly as possible and earn her own foreign exchange. Therefore, a liberal trade policy, a liberal economic policy, and a policy of strict price stabilization were advisable.
Import figures for the later area of the Federal Republic (with Berlin West) amounted to only $689 million in 1946, reaching $2.237 billion in 1949. Respectively, 68 percent, 71 percent, 65 percent and 43 percent of imports during these four years were financed through the foreign aid. Without foreign aid, increased imports and consequently a rise in German production would not
have been feasible. German exports in the first three years were substantially less than the amounts of foreign aid. (Recovery, p. 79)
QUESTION: Did American representatives hold different views of the situation?
HARKORT: Differences of opinion did exist. In 1951, under the effect of the balance-of-payments crisis, the ERP representative at the German Federal Government, Mr. Jean Cattier, who had only recently arrived in Germany, demanded the reintroduction of exchange control measures. On the German side there was little willingness to acquiesce, in spite of the prospect of an early end to the aid program. In the fall of 1951 there was a report by Professors Hansen and Musgrave which became known to the public only much later and which Professor Erhard firmly rejected. The American professors were recommending an economic policy of credit expansion, putting up with the danger of stronger price increases than Professor Erhard deemed acceptable.
QUESTION: What were the conditions which you, your government,
believed were necessary for the achievement of complete recovery?
HARKORT: If West Germany's economy was to get going again, i.e., if it was to be reconstructed, the German view considered the following to be necessary: an increase in production of goods and services in all areas; a rise in productivity; large-scale return and new investments; an increase in exports; an only limited increase in consumption in the less vital areas in order to facilitate capital buildup; a currency reform in order to create a stable new currency in lieu of the inoperable "reichsmark."
QUESTION: How was "recovery" defined?
HARKORT: The recovery, as envisioned by the Germans in 1947, did not set any high goals for itself. No one had thought that the standard of living of the prewar era could be reached again in the foreseeable future; the starting condition did not permit such hopes. What people did strive for was a certain prosperity sufficient to enjoy social peace at home and to ward off extreme political systems. And even such a state of affairs,
it was believed, could not be reached without foreign assistance over many years.
Moreover, the return to a gross national product as high as in 1936 would have made possible only a substantially lower standard of living per capita, in view of the influx -- by 1947 --of eight million refugees, in view of the annihilation and dismantling of manufacturing plants, and in view of the destroyed cities and dwellings.
The American authorities themselves were far from being optimistic. In Country Studies XVII Western Germany (1948) p. 41, it says: "The recovery program for Germany assumes an austere standard of living throughout the entire period....because food consumption per capita will be only about 80 percent of the prewar figure, the population will be about 25 percent greater, and housing will be considerably below prewar."
QUESTION: What were the most serious obstacles to recovery and to further economic development in your country?
HARKORT: The most significant obstacles to the economic recovery of West Germany were the following: 1. The division of Germany, which had dismembered a uniform economic body.
According to an estimation by the OEEC, the trade of the area of the Federal Republic with the remaining parts of Germany in 1936 amounted to 4.4 billion reichsmark, whereas the turnover in interzonal trade (1950) was only 670 million DM. (Fdnf Jahre, ((Five Years)), p. 30; Stat. Jb, 1952, p. 233) The Western Zones had been severed in particular from the agricultural surplus areas of Middle and East Germany. Of the total production of the German "Reich," the three Western zones' share in percentage figures was: sugar beets 32, rye 41, potatoes 42, wheat 52, hogs 53, milk 59, cattle 62 (Five Years, p. 14). The bulk of some branches of industry (brown coal, clothing, optics, electrical industry, glass, ceramics, paper) had also been located in German districts outside the Western zones.
2. The destruction of numerous production plants in the war (about.12 percent vis-a-vis 1938), and their reduction by dismantling (8 percent) [Five Years, p. 32]. [Also, there was] a wrong structuralization by force of the war economy; enormous wear and tear which had not yet been replaced; and obsolescence.
3. The lack of raw material to the extent that even those production plants left intact could not be operated.
4. For this reason and because of less efficient work performance (famine, lack of housing and heating, occupation with providing survival-level needs) there was a very low job productivity.
5. No foreign currency to finance the most necessary imports. Very little export, ironically consisting -- above all -- of coal, wood, and scrap metal which would have been in urgent demand for the country's own reconstruction.
6. Eight million utterly destitute expellees and refugees; later, even more arrived (in 1952, approximately 20 percent of the total population).
7. A currency which had become unable to function and with which practically only rationed goods, rent and taxes could be paid. No incentive to earn more money by increased efficiency.
8. Money in extremely short supply; no money market.
QUESTION: In all of the countries included in the European Recovery Program?
HARKORT: In all European countries, to which the ERP provided
aid, the central problem was the "dollar gap": the term for the lack of that one foreign currency with which alone one could acquire the necessary food, industrial raw material, fuel, fertilizer, etc. Even where actual war destruction was relatively slight, industry found itself in a run-down state due to the war; it was obsolete, its structure distorted. It would have taken a long, long time for a country to once again produce enough by its own efforts in order to defray the cost of imports from self-earned means. The governments would have had to adhere to a regime of austerity that probably might have been beyond people's strength.
QUESTION: What were the most significant political, economic, and social conditions within your country which contributed to recovery and to economic development?
HARKORT: The most important factor for the success of foreign aid was the willingness on the part of the Germans to find their way back to a halfway normal standard of living.
Millions of people had been bombed out, millions had fled. Whoever had salvaged his house saw his pecuniary assets worthless, his stockholdings devaluated. Food and rudimentary
supplies left everything to be desired, neither matches nor sewing cotton being available at the outset. As late as 1948, six million households did not have their own living quarters, versus 0.8 million in 1936 (Five Years p. 15). The desire to change this situation as quickly as possible aroused every bit of work energy of an industrious people. It was clear to every individual, even to the trade unions, that the primary concern was increased production. Everything else had to wait.
Likewise, the German authorities (Professor Erhard) viewed as their main task the unfettering of every productive force in the country; more elbowroom was given to private initiative, and economic and financial policies were organized so that private initiative became worthwhile.
The refugees and expellees, posing at first seemingly unsolvable problems, in later years formed a reservoir of ready and willing workers, such as no other European country had available.
QUESTION: In those states included in the European Recovery Program?
HARKORT: The reasons for the success of ERP aid in the other
European countries were on principle the same as those applied to Germany, the urgent desire to return to normal conditions and to work for it. But nowhere were the hardship and privations as acute as in Germany, and therefore nowhere the readiness for hard work so general and constant. Also, the psychological situation of nations who felt themselves to be victors was quite different. The Germans knew that they had to start from the. very beginning and that without the utmost efforts of their own they would not regain a lifestyle worthy of human beings.
In 1948 industrial production reached only 52 percent of the 1938 level; by way of comparison, in Great Britain it was 116 percent, in France 110 percent, in Italy 99 percent (Five Years, p. 31).
As late as 1949 the export volume index (1936 = 100) amounted to 37, compared to Great Britain's 146, Italy's 131 (St. Jb. 1952, p. 61*).
QUESTION: What were your expectations regarding the nature, extent, and duration of United States aid at the end of the war?
HARKORT: This question can be directed only to the inhabitants
of the countries allied with the United States. The Germans, at the end of the war, were not expecting any American aid; they could not expect it. Our hopes were much more limited; no excessive war indemnities and dismantling, not too much compulsory exportation, no excessive interference -- of the inexpert or inexpedient kind -- in our way of organizing and restarting the economy.
QUESTION: At the time of Secretary of State Marshall's speech in June, 1947?
HARKORT: When two years later, in June 1947, Secretary of State Marshall presented his plan, the situation was substantially different. We knew that the Americans were interested in Germany's economic recovery for political, economic and humanitarian reasons. They had realized -- and we were aware of it -- that they were not giving the European recovery a c