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to the USSR as reparations. State-owned en-
Upon the US has fallen most of the burden
terprises receive heavy subsidies from the Ger-
of reactivating the western German economy.
man Laender under Soviet direction, and their
War damage and the disruption of transpor-
uneconomical operation is a heavy drain upon
tation facilities had brought industry almost
the zonal economy. Soviet land reform dis-
to a standstill at the beginning of the occu-
organized zonal agriculture and produced se-
pation. The influx of displaced persons in-
rious food crises in what was once a surplus
creased the population 25 percent and created
agricultural region in prewar Germany.
a critical food problem with which the de-
Nevertheless, the USSR has maintained an in-
pleted agricultural resources of western Ger-
dustrial production level satisfactory for its
many could not cope. Heavy imports of food
own purposes, compensating for shortages and
and essential raw materials were required to
other production difficulties by intensifying
keep the economy operating on a bare sub-
the exploitation of German labor. Since the
sistence level. Despite these efforts, little im-
good harvest of 1948, the USSR has been able
provement was effected during the first three
to increase considerably the basic ration as
years of the occupation. Export trade had
well as the amounts of food flowing into the
practically disappeared, money had lost value,
state-owned "free shops." The Allied counter-
and barter became the principal means of
blockade established in July 1948 aggravated
commercial intercourse. Under such condi-
internal difficulties somewhat and compelled
tions, key industries could not be rehabili-
the USSR to postpone integration of the So-
tated, and most consumer goods were unpro-
viet Zone economy with the satellite region
curable except in the black market. German
until the Zone could occupy a stronger eco-
discontent as a result of this economic stag-
nomic position to support Soviet policies. In-
nation and the punitive policies of the Allies
dustrial expansion under the Two-Year Plan
culminated in a series of protest strikes and
of the German Economic Commission (DWK)
demonstrations in 1947 and early 1948. The
of the Soviet Zone is expected to effect im-
June 1948 currency reform furnished the Ger-
provement in the zonal economy, in conjunc-
mans with an incentive to cooperate in raising
tion with increasing trade with the countries
the general level of their economy in line with
of Eastern Europe.
the European Recovery Program, under the
In the western zones France, in the past,
stimulus of considerable ECA assistance.
followed an economic policy somewhat similar
Greater economic responsibility was accorded
to that of the USSR although on a less im-
the Germans, and the next nine months wit-
pressive scale. The French occupation forces
nessed a marked increase in industrial pro-
lived off the land, and French expropriation
ductivity, export trade, and domestic sales.
of German industry was carried on in a vari-
The general shortage of investment funds,
ety of ways. Consequently, economic recovery
which also resulted from currency reform, be-
in the French Zone lagged far behind that of
gan after March 1949, however, to result in a
the Bizone and only substantial assistance un-
temporary stagnation of the west German
der the European Recovery Program averted
economy.
an almost total collapse. Under the terms of
In its present relatively helpless condition
the trizonal merger, signed 18 October 1948,
Germany presents no military threat to the
France began to align its policies with those of
US, although the extent to which the war
the US and the UK in the interest of an over-
spirit has been chastened by defeat or by the
all rehabilitation of western German industry
postwar Allied policies of denazification and
and agriculture. Basic rations for the normal
demilitarization is problematical. The coun-
consumer were substantially increased, occu-
try still possesses considerable war potentials
in manpower, natural resources (principally
pation costs adjusted to relieve the financial
coal), production facilities, and the technical
burden on the German Laender, and the ex-
skill and ability that can be utilized in war
port-import trade of the zone gradually inte-
preparations by such a power as the USSR if
grated with that of the Bizone.
bent on military aggression. As the major
ECRET
iii
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"ocrText": "ECRET\nto the USSR as reparations. State-owned en-\nUpon the US has fallen most of the burden\nterprises receive heavy subsidies from the Ger-\nof reactivating the western German economy.\nman Laender under Soviet direction, and their\nWar damage and the disruption of transpor-\nuneconomical operation is a heavy drain upon\ntation facilities had brought industry almost\nthe zonal economy. Soviet land reform dis-\nto a standstill at the beginning of the occu-\norganized zonal agriculture and produced se-\npation. The influx of displaced persons in-\nrious food crises in what was once a surplus\ncreased the population 25 percent and created\nagricultural region in prewar Germany.\na critical food problem with which the de-\nNevertheless, the USSR has maintained an in-\npleted agricultural resources of western Ger-\ndustrial production level satisfactory for its\nmany could not cope. Heavy imports of food\nown purposes, compensating for shortages and\nand essential raw materials were required to\nother production difficulties by intensifying\nkeep the economy operating on a bare sub-\nthe exploitation of German labor. Since the\nsistence level. Despite these efforts, little im-\ngood harvest of 1948, the USSR has been able\nprovement was effected during the first three\nto increase considerably the basic ration as\nyears of the occupation. Export trade had\nwell as the amounts of food flowing into the\npractically disappeared, money had lost value,\nstate-owned \"free shops.\" The Allied counter-\nand barter became the principal means of\nblockade established in July 1948 aggravated\ncommercial intercourse. Under such condi-\ninternal difficulties somewhat and compelled\ntions, key industries could not be rehabili-\nthe USSR to postpone integration of the So-\ntated, and most consumer goods were unpro-\nviet Zone economy with the satellite region\ncurable except in the black market. German\nuntil the Zone could occupy a stronger eco-\ndiscontent as a result of this economic stag-\nnomic position to support Soviet policies. In-\nnation and the punitive policies of the Allies\ndustrial expansion under the Two-Year Plan\nculminated in a series of protest strikes and\nof the German Economic Commission (DWK)\ndemonstrations in 1947 and early 1948. The\nof the Soviet Zone is expected to effect im-\nJune 1948 currency reform furnished the Ger-\nprovement in the zonal economy, in conjunc-\nmans with an incentive to cooperate in raising\ntion with increasing trade with the countries\nthe general level of their economy in line with\nof Eastern Europe.\nthe European Recovery Program, under the\nIn the western zones France, in the past,\nstimulus of considerable ECA assistance.\nfollowed an economic policy somewhat similar\nGreater economic responsibility was accorded\nto that of the USSR although on a less im-\nthe Germans, and the next nine months wit-\npressive scale. The French occupation forces\nnessed a marked increase in industrial pro-\nlived off the land, and French expropriation\nductivity, export trade, and domestic sales.\nof German industry was carried on in a vari-\nThe general shortage of investment funds,\nety of ways. Consequently, economic recovery\nwhich also resulted from currency reform, be-\nin the French Zone lagged far behind that of\ngan after March 1949, however, to result in a\nthe Bizone and only substantial assistance un-\ntemporary stagnation of the west German\nder the European Recovery Program averted\neconomy.\nan almost total collapse. Under the terms of\nIn its present relatively helpless condition\nthe trizonal merger, signed 18 October 1948,\nGermany presents no military threat to the\nFrance began to align its policies with those of\nUS, although the extent to which the war\nthe US and the UK in the interest of an over-\nspirit has been chastened by defeat or by the\nall rehabilitation of western German industry\npostwar Allied policies of denazification and\nand agriculture. Basic rations for the normal\ndemilitarization is problematical. The coun-\nconsumer were substantially increased, occu-\ntry still possesses considerable war potentials\nin manpower, natural resources (principally\npation costs adjusted to relieve the financial\ncoal), production facilities, and the technical\nburden on the German Laender, and the ex-\nskill and ability that can be utilized in war\nport-import trade of the zone gradually inte-\npreparations by such a power as the USSR if\ngrated with that of the Bizone.\nbent on military aggression. As the major\nECRET\niii"
}