Western Germany

on the World Today

IN the highly disordered world which followed the surrender in 1945, with the almost total loss of its markets in eastern and southeastern Europe, Germanv has pulled off a social and industrial miracle in the past five years.

From 1945 to 1948, the occupation authorities made rigorous application of strict measures of control. The destruction wrought by our massed bombings and bombardments was appalling; the industrial structure of the country had been demolished; hordes of wandering refugees sought shelter in cellars, in sheds, and in the wrecks of buildings; crowding reached the dangerous level of 2.5 persons per room throughout the land. Commodities and food were unobtainable, largely because manufacturers, producers, and merchants refused to accept the worthless paper money offered in exchange.

The currency reform of 1948 was the magician’s wand which changed this situation overnight, and Germany has now emerged from chaos and again challenges the free industrial world.

Hard-money Erhard

One of the leaders in the new Germany, and an enormous asset to Dr. Adenauer’s government, is the Minister for Economic Affairs, Dr. Ludwig Erhard. A firm believer in a free enterprise system with a minimum of state control, he is also a stanch supporter of European economic union. He recently declared: “Europe’s problems can only be solved by orderly agreement. Germany will not try to go it alone.”

The essential element, he believes, in such an orderly European agreement is the tree convertibility of currencies, which all forward-looking German economists and businessmen consider the next and most important step. But they also believe with a growing number of American economists and businessmen that the United States must be a full member of any free world economy.

One suggestion to accomplish free convertibility would be through a stabilization fund, a broad expansion of the basic ideas on which the World Bank in Basle was founded in 1920, and which fathered the Bretton Woods agreement of 1946. But this plan could hardly operate without the free movement of goods, money, and probably labor throughout the free-money area, as in the United States.

Minister Erhard believes that only in a free trailing area for all of Europe, which with the I nited Kingdom would comprise 250 million people, can efficient production, lower costs, greater individual purchasing power, and a higher standard of living be attained. Such an “orderly agreement" would certainly revolutionize the fragmented economy which has si ifled Europe for decades: and if it could be realized, the effect on the Atlantic Community would be elect ric.

How such a miracle can be brought out of theory into actual practice. Dr. Erhard does not attempt to predict. However, he believes that by building on the Schuman Plan and on NATO as a foundation, it should ultimately be made possible by the process of economic evolution.

He further feels that the problem of American la rills will lend to disappear and fear of cheap foreign labor will fade as the European mass-market for American goods absorbs our surplus products. Eventually “the two areas will deal with each other on a mutually profitable basis,”he declares.

Dr. Erhard’s plea for such an economic union, with all its various moneys hard and freely convertible, is most laudable. But until those independent lions, the pound sterling and the dollar, are willing to lie down with the European currency lambs and share their risks with them, the economic Utopia of tomorrow will remain a dream.

Resettling the uprooted

The restless shifting of the people, in search of a roof and a job, was such a distressing factor in 1945 and 1946 that every community set up a dwelling and an employment bureau, which with methodical efficiency surveyed and listed every available living space and every opportunity for employment.

In 1945 there were about 40 million persons in the three western zones, and about 20 million in the Russian zone. Since then 8 million expellees from annexed and satellite territories and 2 million refugees from the Soviet-dominated eastern zone have poured into Western Germany, raising the population to 50 million, an increase of 25 per cent in less than ten years.

There are also about 450,000 foreigners living mainly in the Rhineland, Bavaria, and WürttembergBaden — chiefly Poles, Dutch, Austrians, Italians, and Yugoslavs. In 1939, population density in Western Germany was 160 persons per square kilometer; today it stands at 200. One of the most difficult problems for the west zone is handling the 10 million refugees from the east.

About 7.5 million of these either were uprooted in the fierce fighting of 1944-45 on the eastern front, or escaped from or were expelled by the Russian Communists after they swallowed up the satellite states. They swarmed into those parts of Germany which had not suffered greatly from the bombing. Six million settled in Schleswig-Holstein and bovver Saxony in the north, and in Bavaria in the south. Since 1949, new arrivals have been distributed more evenly among the eleven states of the Federal Republic.

Schleswig-Holstein, which absorbed over 35 per cent of these unfortunate people, was frightfully congested, while its southern neighbors in the Rhineland and Palatinate had only 2.7 per cent, although in these latter states some of the worst destruction is still to be found. As jobs were scarce in the already crowded areas where they first settled, the government set up a special section, the Ministry for Expellees, to study the problem and relocate those who would volunteer to move to other parts of the country.

Planned migration wins out

Early in 1950 the first big move was made when about 300,000 persons — 150,000 from Schleswig-Holstein, 75,000 from Lower Saxony, and 75,000 from Bavaria — were moved into prepared dwellings and jobs. North Rhine-Westphalia, including Düsseidorf and the Ruhr, and RhinelandPalatinate, including Köla, Koblenz, the Mosel Valley, and Trier, took 90,000 each; Baden took 48,000; Württemberg took 49,000; the remaining 23,000 went to other sections.

When this first Disk was completed in 1951, a second plan for 300,000 more was undertaken, which was finished late in 1953, and a third has recently been launched which should be accomplished by the end of 1954. Although the refugees were at first hostile to the idea of moving again, the success of the plan is amply attested by a poll recently taken in North Rhine-Wcstphalia, where 84 per rent slated that they were perfectly satisfied, 15 per cent partly pleased, and only 1 per cent frankly dissatisfied — an excellent result.

Aside from the physical difficulty of providing adequate housing and finding jobs, there hits sometimes been a psychological block. All of the Germans who settled in the east — in Poland, Czechoslovakia, Romania, Hungary, Bulgaria, the Ukraine, and along the Volga lived in closely knit groups holding tight to their traditions and with a very strong sense of their racial solidarity. In the forced migration to the west they moved much as their tribal ancestors moved and often willingly accepted hardships in order to stick together and re-create a settlement similar to the one they had heen obliged to abandon.

As it was not always possible for the resettlement ministry to keep those groups together, a “trekking" movement started. Roaming bands frequent invaded territories without [ the approval of the ministry and upset its plans. However, as the success of the organized movements became known, the “trekking associations” slowly disintegrated, thus facilitating orderly planning.

Low labor costs

According to the figures of the employment exchanges the number of persons in gainful occupations, including civil servants, is now 16,046,256 — over the 16-million mark for the first time. This represents 32.7 per cent of the entire population of the Republic and compares very favorably with the United States, where approximately 38 per cent of the total population is employed. Of the total, 68.5 per cent are men and 31.5 per cent tire women, although the number of women employed is at present rising at faster rate than the number of men. During the past year, only 54.5 per cent of the new jobs went to men.

One of the most important factors in Germany’s competitive position in world markets is the high productivity of the German worker and the comparatively low wages paid. In the present work-week of 49 hours, the industrial worker averages only 39 cents per hour, although special social security and other taxes increase labor cost to the employer by another 14 cents. Thus, with wages around 55 cents per hour, even if productivity were only half of what it is in the United States, the labor cost per unit in Germany would be definitely lower than ours.

As the cost of living has been practically unchanged since 1951, the 5.7 per cent increase in wages in 1953 has resulted in more available cash to spend for consumer items, which should be a stimulus to business.

Financing the government

The Federal Statistical Office reports that since 1950 the total national income has risen over 50 per cent, to reach almost 100 billion Deutsche marks (25 billion dollars). As Germany has only one third of our population, far less natural resources, and is only six years along the road from economic chaos, this showing is highly commendable.

From the published figures, the government took only 6 per cent of total national income for the fiscal year of 1952—53, which is far lower than in most of the western countries, where the cost, of government is nearer 20 per cent of the national income. Sales or turnover taxes account for 40 per cent of revenue, and corporation and individual income taxes contribute about 22 per cent. Excise duties, customs taxes, and taxes on coffee, tea, tobacco, and liquor account for another 27 percent of government income.

Contrary to the popular belief that German prices compete unfairly in world markets because Germany is spending nothing for defense, it is interesting to note that 40 per cent of Federal expenditure is for defense and occupation costs, which cancels out the entire revenue from the sales tax. Thus Germany, notwithstanding the political mess due to its truncated condition, has given a startling proof of its energy, discipline, and determination to survive in what was only ten years ago a terribly hostile world.