ABSTRACT
Throughout the winter of 1945/6 the Economic Directorate of the Control Council, putting the horse after the cart, laboured to spell out what the broad conclusions of the Potsdam Conference would mean in concrete terms. By the end of March they had managed to agree on the shape which German industry should henceforward assume. Fourteen of its branches were to be prohibited altogether, twelve more to be limited to a percentage of pre-war output varying from eleven to eighty. The steel industry was to be allowed an output only slightly larger than pre-war Germany had needed for miscellaneous uses in light industry. Such plant in these branches as was surplus to requirements was to be made available for reparations or dismantled. In all, 1,636 factories were to be closed down in the UK and US Zones. In spite of the confiscation as reparations of Germany’s merchant marine and overseas assets, and so of the cessation of the invisible income flowing from them, the balance of trade was to show a surplus by 1949. But this assumed that the money earned before the war from the exports of heavy industry would be replaced by sales of coal and consumer goods, although the total output of these was still expected to be below the 1938 level. No allowance was made for the loss of output caused by the shift of resources, by the amputation of territory in the east or the need to sustain a population swollen by refugees. The German standard of living was to be reduced to 74 per cent of the pre-war average, which happened to be the figure reached in 1932, the slump year paving Hitler’s way to power.
