862.6511/1–3146: Telegram

The United States Political Adviser for Germany (Murphy) to the Secretary of State

secret   us urgent

303. General Clay asks that following telegram which was sent to War Dept be brought to attention of the Secretary:

“Reference Secretary of State’s radiogram No. 253 dated Jan 29 [28].

“United States, Russian, and French position is that 5.8 million tons allowable annual production for steel would form basis to establish level for industry and production of all kinds. British position is that upper figure of 7.5 million tons would be used in establishing this level. There is no question in my mind that our commitment in Allied Control Council was based upon 5.8 figure being used for level of industry study.

[Page 495]

“It is our understanding that level of industry determination now under way will fix the minimum level of German industry to be left in Germany, although long range control will undoubtedly be established in war potential fields. We feel strongly that we should tell the German people at the earliest possible date those industries which are to be removed and those which are to be limited. They must know their future if they are to embark on any plan for long range economic rehabilitation. I can think of nothing worse to our other objectives in Germany than to continue the removal of capital industry over an indefinite period of time. I also feel that if the level established proves too low, additional plants can be permitted in the future. Industry does not stand still.

“We quite agree with Mr. Bevin that we should determine an upper production limit for other industries just as has been done in the case of steel. However, computation of steel-using industries level based on 5.8 annual production with a reasonable reserve capacity is quite different from this calculation on a 7.5 basis with reserve capacity also left. In point of fact, actual determination of capacity in steel-using industries will necessarily leave a substantial margin of production. It is our view that the capacity of such industries should be based on normal operation of two shifts daily. If this is agreed, three shifts operations would always be possible to permit full utilization of steel production capacity within the 7.5 figure. However, utilizing 7.5 figure in level of industry studies would result in depressing light industry levels as compared to utilization of 5.8 figure which would increase light industry capacity to remain in Germany.

“While no agreement has been reached as to the exact meaning of the initial control period, nor in fact as to the controls to be continued in Germany, it has always been our thought that these controls should apply only in the heavy industry field. It is our view here that light industry in Germany should not be restricted at this time nor in the future if we are to hold out hope to the German people for eventual rehabilitation and rebuilding of a reasonable economy.

“Our studies originally contemplated a 7.5 production figure but compromises with others led to acceptance of 5.8 figure. We do not believe that the difference is sufficient to make the difference between a living economy and a wilderness in Germany. We recognize that all figures used in level of industry studies are estimates of a future economy based on many intangibles. Their acceptance does not necessarily preclude expansions which time may prove necessary. We are convinced that the 5.8 figure does combine the principles enunciated at Potsdam for the destruction of German war potential on the one hand while leaving a reasonable standard of living on the other hand. Moreover, in view of the same interpretation placed on the agreement by three members of quadripartite government, it would be a dangerous precedent for the fourth member, making an independent and different interpretation, to succeed in having that interpretation accepted. Manifestly, on the merits, we can not argue against the British figure of 7.5, since it was approximately our own first proposal. Nevertheless, quadripartite government must be government by compromise. We believe that in reaching this compromise by bringing the Russians up from their original single figure of 4.6 to [Page 496] an agreed annual production of 5.8, with reserve capacity to 7.5, was a major achievement. We have no reason to doubt our ability to secure appropriate reserve capacity in steel-using industries provided that the calculated values used in the level of industry study are based on the lower figure.

“Recently, my opposite, Robertson, has advised me informally that he will authorize his representatives to join with the rest of us to prepare level of industry plan based on 5.8 figure, without commitment was [as] to final acceptance. It is possible that we may find an answer in preparing this plan. Respectfully suggest, therefore, that Mr. Bevin be urged to agree to proceed with preparation of level of industry plan based on 5.8 production figure to determine the possibility of reaching agreement on other industries using this basic steel production figure and without commitment as to acceptance of 5.8 figure until plan has been fully considered.”27

  1. In telegram 1115, February 1, 5 p.m., to London, Secretary Byrnes instructed Ambassador Winant to convey to Mr. Bevin the hope that the British Government would agree to carry through the procedure tentatively agreed upon by Generals Clay and Robertson (862.6511/2–146).