Foreign Relations of the United States: Diplomatic Papers, 1945, European Advisory Commission, Austria, Germany, Volume III

740.00119 Control (Germany)/10–1145

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

Berlin, October 11, 1945—6 p.m.
[Received 8:55 p.m.]

751. Following is the gist of telegram of Oct 10 dispatched by General Clay to the War Dept:

“Reference your W–74072,⁴⁴ Hoover’s study represents only the opinion of his committee as you were advised on his return to Washington. It has not been approved by this office pending correlation with industry studies now under way. It was placed before quadripartite subcommittee as a basis of discussion only, with full understanding that it did not represent a finalization of US views but would provide a basis for discussion of principles so that details could be agreed quickly as industry studies are completed. However, there can be no challenge of identity of report as the directive to Dr. Hoover contemplated obtaining his considered and unbiased views based on analysis of all available data under terms of Potsdam.

Present status of study is that each industry group is gathering complete data on existing capacity in Germany and estimated capacity required for minimum economy. These studies are scheduled for completion by 1 December to be presented in appropriate quadripartite subcommittees. Finalization of our views and quadripartite consideration of proposed standard of living can not be completed until all industry studies are in. Daniell’s implication that Hoover was instructed to take as starting point guaranteed German minimum standard of living not understood. The Board was instructed to recommend (a) the general standard of living, using formula laid down at Potsdam;⁴⁵ (b) broad categories of end items required for this economy; (c) estimated imports, by categories and by value, to maintain this economy; (d) sources of exports required to pay for imports; (e) general percentage required to maintain German peacetime economy in basic industries. Hoover was further advised that standard of living in Germany should not exceed average of surrounding countries and that exports essential to finance imports were to be obtained from light industry and from industrial sources not directly connected with war potential. No guaranty of maintenance of this standard of living was implied and exports in the light industry field were figured at high levels to permit rigorous destruction of heavy industry as contemplated in report.

Soviet point of view as described by Daniell is unknown to me.⁴⁶ Both Soviet and ourselves are using rule of thumb to determine industrial resources available for advance reparations. We have already reported 16 large plants in this category and others will be reported periodically. Only difference of views known to exist in Economic Directorate relate to turnover now to Soviets of plants declared available for reparations. Our instructions do not permit such turnover until machinery has been established to allocate between western claimants and the Soviets under terms of the Potsdam agreement. However, we do not anticipate full agreement with Russians as their views with respect to standard of living to be left in Germany may be extreme. Our views are fully dictated by the Potsdam Agreement and comply with it in both spirit and letter. However, these possible differences in degree of execution rather than in principle have not yet come into conflict.

I know of no way to proceed in determining reparations program other than by calling for studies of the type of the Hoover report. Its entire purpose was to apply the Potsdam formula. I do not know where Daniell got his figures with respect to steel production.⁴⁷ However, they are not accurate and our own official figures have not yet been established. There is no objection to release of Hoover report provided it is stated that it is study presented to this office for consideration and used as a basis for discussion in quadripartite subcommittees, which has not yet received official approval either of this office or of quadripartite subcommittees. Emphasis should be placed on its conclusion that further destruction of industrial capacity than contemplated in report can be accomplished by further decrease in proposed standard of living and that ultimate decision in this respect must be quadripartite. Any prophecies with respect to effect of this report on reparations are entirely premature at this time. The extent of reparations, which must be determined by 1 February 1946 at latest, will show how the reparations policies agreed at Potsdam are to be carried out in detail.”

In the foregoing connection see my despatch 998 of Sept 22, enclosing a copy of Hoover report.⁴⁸

Murphy

44. Not printed; this telegram, dated October 8, from General Hilldring, Director of the Civil Affairs Division in the War Department, to General Clay, requested information concerning a story by Raymond Daniell in the New York Times, October 8, 1945, p. 1, col. 8, summarizing the content of the memorandum entitled “A Minimum German Standard of Living in Relation to the Level of German Industry”, a copy of which had been transmitted to the Department with despatch 998, September 22, from Berlin, neither printed.
45. See Conference of Berlin (Potsdam), vol. ii, p. 1504.
46. The Soviet point of view referred to here was to apply a rule of thumb, leaving Germany with the bare essentials necessary for existence and allowing it to work up gradually to the standard of living of the liberated countries.
47. Mr. Daniell’s story indicated that a capacity of 10 million tons was then being discussed in Berlin; the figure in the Hoover Report was 7%o million tons.
48. See footnote 95, p. 1320.