740.00119 Control (Germany)/9–3045
The United States Political Adviser for Germany (Murphy) to the Secretary of State
[Received September 30—6:10 p.m.]
655. Reference our despatch No. 998, dated September 22, 1945, with which were forwarded copies of the report on “A Minimum German Standard of Living in Relation to the Level of Industry”.95 This report concluded that, on the basis of a period “3 to 5 years hence”, the various objectives of industrial disarmament, standard of living, and German absorption of the costs of occupation constitute an “insoluble” problem in view of territory losses and population transfers.
This report is now being considered by the Level of Industry Committee under the Directorate of Economics of the Allied Control Authority. From discussions that have taken place to date, it becomes clear that policy decisions must soon be arrived at concerning the extent to which de-industrialization will be pursued, the amount of exports that Germany will be allowed in order to obtain essential imports, and in general the standard of living that will be within the reach of the German economy. Quadripartite decisions will have to be made in terms of specific industries—as, for example, the domestic capacity of steel ingot production. If the Department’s views have been formulated in terms of specific industries, I should be immediately advised in order to present such views at the appropriate time.
As part of the specific industry problems, overall policies will tend to evolve around two general issues. The first issue will be as to how far we are determined to pursue de-industrialization if it becomes obvious that at least for the next year or two this will require enlarged costs to the US in terms of assistance that will need to be given to Germany to limit starvation, disease, and unrest, if not to support our own military forces. The second issue relates to the problem of the relationship of the German economy to the rest of Europe. It is gradually being realized by officials here that any wholesale transfer [Page 1321] of German plants to liberated areas will greatly disturb production generally for several years and is likely to drag down living standards for all concerned. In other words, it is becoming clearer that extreme, ill-considered de-industrialization of Germany may well have the effect of creating and extending chaos in Europe. I should appreciate the Department’s views.
- Despatch 998 not printed; the attachments were designated LOIG/P (45) 3 (amended) and LOIC/P (45) 3, dated September 21 and 17, respectively. This report became popularly known as the Hoover Report, for its principal author, Calvin B. Hoover, Economic Adviser to General Draper, Director of the Economic Division, U.S. Group, Control Council; for a summary of the content of the Hoover Report, see B. U. Ratchford and W. D. Ross, Berlin Reparations Assignment (Chapel Hill, University of North Carolina Press, 1947), pp. 79–782.↩