Berlin Mission files, lot 58 F 62, 500 crisis Sov: Telegram

The Director of the Berlin Element of HICOG (Page) to the Office of the United States High Commissioner for Germany, at Frankfurt1

confidential

1727. Chairman of State Planning Commission Ban’s Jun 14 report to Central Committee of SED on economic developments first five months of Five-Year Plan today’s Neues Deutschland is frankest and most comprehensive revelation of GDR economic problems since war. Deals with fundamental problems of economic policy, implementation and organization. Highlights of report: While first quarter gross production value exceeded plan by 5% this was achieved by excessive [Page 2007] production of economically unimportant goods rather than by plan fulfillment of key projects. Thus machine construction produced agricultural and food industry machinery for which there is no internal or foreign market but fell short of target of power plant equipment, mining equipment and long list of machine tools. Generally, production aimed at quantitative increase of output of goods already in production process irrespective of demand. This failure of carrying out production plan in detail has cumulative effect since it primarily endangers investment program.

Importance political necessities also emphasized, i.e. “making GDR independent of West imports”. Developments thus far said to show insufficient attention to this objective. Failures attributed to lack of initiative of engineering and construction bureaus, insufficient mobilization of local material stocks and primarily to over-centralization of planning and to failure of trade organizations to act as link between consumer and producer. Therefore State Secretariat for Material Supply will henceforth retain direct control of material distribution only over certain key materials in short supply. Its functions in other fields of material supply will be transferred to various ministries. Control of trade organizations will also be transferred to ministries. Of further interest is critique of inadequate fulfillment of plans for national “material reserve”.

Rau’s report confirms information on serious economic difficulties of GDR (ourtel Fkft 1662, rptd Secstate 1472, pouched Moscow, Warsaw, Prague June 82). Emphasizes internal causes of difficulties as compared to material shortages arising from insufficient imports. Criticism is believed well taken since envisaged structural changes in industry appear dominant factor in causing shortcomings. While industrial development up to beginning Five-Year Plan aimed by and large at revival of traditional production lines of GDR industry as whole and of individual factories, Five-Year Plan and notably 1951 Plan calls for substantial structural changes in production programs. Rau’s report rightly points to biggest stumbling blocks in accomplishment of goals, i.e. lack of engineering and construction skills, lack of managerial talent and overbureaucratization of planning.

Attention invited to clear-cut admission of autarchic economic policy toward West.

Page
  1. This telegram, drafted by Anthony Geber of the Eastern Element and approved for transmission by Morgan, was repeated to Washington, Warsaw, Prague, Budapest, and Moscow.
  2. Not printed.