THE PORT OF HAMBURG WITHIN THE GERMAN ECONOMY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83-00415R010900110004-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 14, 2016
• Document Release Date: August 9, 2001
• Sequence Number: 4
• Publication Date: January 1, 1952
• Content Type: MAGAZINE

?d For Re2001/
tRTSCH
AFTSDIENST
"MONTHLY REVIEW ? ENGLISH EDITION
Air Mail Digest for our Readers Abroad
Edited by HAMBURGISCHES WELT- WIRTSCHAFTS-ARCHIV
in connection with
JANUARY 19 5 2 INSTITUT FtIR WELT-WIRTSCHAFT AN DER UNIVERSITA.T KIEL
The Port of Hamburg Within the German Economy
By Senator, Prof. Dr. Karl Shciller, Hamburg
The year of 1951 confronted the German economy
with a lot of problems. During this period, bottlenecks
in the basic industries developed into threatening
dimensions and their effects on the overall economy
have been serious and increasingly harmful so that a
clear conception will be required to tackle them
effectively. After a flood of programmes for economic
policy - I shall only mention Niederbreisig, luxury
tax and special turnover tax, the Dusseldorf Pro-
gramme - a partial conception took shape slowly,
but fairly steadily. This was the Investment Aid of
German Industry which is now to come into force after
9 months' delay.
During the year, Hamburg's economy which is situated
at a great distance from the collieries, has had to
suffer badly from the effects of the bottleneck prob-
lems. The coal supply position is like the sword of
Damokles which will go on hovering above our indu-
strial production until the menaces of winter are gone.
The iron and steel supply has become the key prob-
lem for Hamburg, too. It was not shipbuilding alone -
but it was this branch of industry
in particular - which had to
directly suffer from the conse-
quences of a production and dis-
tribution policy that was without
direction until autumn. Thus, the
building of quay sheds, for one
thing, was badly handicapped by
long terms of delivery for steel
products and by difficulties in the
supply of timber and of building
materials depending, in their pro-
duction, on coal. We do hope,
therefore, that the regulation direct-
ing the distribution of iron and
steel which has been issued at long
last, will be applied in a fair and
appropriate manner. I have said it
quite often that, on account of the
importance of German shipbuild-
ing and of an own merchant ser-
vice for foreign trade and foreign
currency earnings, our interpret-
ation of what is just and fair can-
not render us suspect of pursuing
a policy which is to serve the inter-
ests of Hamburg or the coastal Lan-
der only, but our interpretation is,
and must be, valid for the economic
policy of the entire country.
But not only in the supply of materials have we been
sharing the general problems of the year 1951. Under
the influence of general stagnation, the production and
employment position also took an unfavourable course
as was to be expected in view of the peculiar econo-
mic structure of our city state. The slow-down of
industrial production in summer prevented the employ-
ment figure from rising during 1951. Even today, we
are by 35 points of index below the average for the
Federal Republic. The employment figure rose in Ham-
burg by nearly 14 000 which is 2.3 per cent of the
overall rise in the Federal Republic, while Hamburg's
share in the overall employment is put at more than
4 per cent. During the entire year, unemployment in
our city remained at an average of about 95 000,
recently it has even exceeded 105 000. At roughly
13.7 per cent, Hamburg's unemployment burden is
about the same as that of the "refugees' Land" Lower
Saxony, and only in Schleswig-Holstein the figure is
even higher. Slowly, it is being generally appreciated
what I have said over and over again: the region of
structural unemployment is not
confined to the three refugee Lan-
der; after the loss of its hinterland,
The Port of Hamburg Within the
German Economy
Coal and Steel Union Before the
German Federal Parliament
The Schuman-Plan and Inter-
European Trade
Decentralization as a Principle?
2952 - A Year of Investments
Germany's Distressed Areas:
A Task of Regional Policy
Do Branded Goods Require Price
Maintenance?
We recommend also to read the
German Edition
Hamburg too has become a center
of structural unemployment.
The bottlenecks in the supply of
materials and in employment are
accompanied by the notorious
bottleneck for capital which, since
1950, has made itself felt as a
particular handicap to port and
shipping. Our strained budgetary
position does not allow us to make
all the investments required for a
full reconstruction of port facilities.
The second Port of Hamburg Re-
construction Plan (for the period
1950/52) shows that, in view of the
extent of destruction of the harbour
and its facilities through the war
and its aftermath, there was no
other way but to make a thoroughly
planned start, In 1946 when the
first Plan was drawn up, we had
unsparingly struck a balance, and
we had set our reconstruction such
targets as can be realized. If we
consider the extent of damages in
the port area which comprised, inter
alia, about 654 000 square metres
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(or 90.2 per cent) of quay shed floor space, it will be
obvious that honesty was a necessary part of our
planning which was aimed at regaining 70 per cent of
the 1936 turnover capacity for which about 50 per cent
of war damages had to be repaired. We were aware
that, under present political and economic conditions,
it would be utopian to attempt a 100 per cent recon-
struction. We knew that the appropriation of munici-
pal budgetary funds to the amount of, up to date,
176.5 million RMarks/DMarks could only be justified
if the means were used to rebuild certain centres of
gravity, with all the technical and economic know-
ledge that had come to hand in the meantime. As
regards the turnover of goods in the port, the esti-
mates for our second reconstruction plan were
exceeded by actual developments. In Timm's opinion
of September 1949, it had been estimated that turn-
over would amount to 13.5 million tons in the years
1952/53; we can now say, however, that already in
1951 the aggregate turnover will have come to at least
14.2 million tons. So our expectations for 1952 have
been. even exceeded one year in advance. As regards
the composition of turnover, however, by export and
import, by bulk goods and piece and bag goods, we
have not as yet achieved all we are aiming at and
what has been made the target until the end of the
second reconstruction plan - that is to say for 1952.
The proportion of exports in the port's total turnover
has dropped negligibly to 30.5 per cent as against
32.5 per cent in the previous year. Also the proportion
of piece and bag goods which, according to the struc-
ture of the port, we want to raise to 40 per cent of
turnover, is at present at only 36.4 per cent and has
not yet come up to what we had been expecting. In
exports, however, piece and bag goods account for
over 59 per cent, a figure not even reached before
the war.
The expanding trade should, of course, have been
accompanied by a corresponding rise in the floor
space of quay sheds. But, unfortunately, development
during 1951 was unfavourable in this respect. Already
in the previous year, the city's budgetary position
had led to the withdrawal of 19 million DMarks
originally earmarked for port reconstruction. In the
current fiscal year, too, the actual appropriations of
22.8 million DMarks did not fully meet our wishes and
the requirements of the port. For the first time now,
a Federal loan has been granted, if only to the mode-
rate amount of 7.5 million DMarks, This figure in-
cluded, public funds invested in the port by the end
of the 1951 fiscal year reached the considerable
amount of approximately 184 million RMarks/DMarks.
Assuming a pre-war level of utilization of the shed
floor space, there would have to be 150 000 square
metres of newly built quay sheds during the second
stage of port reconstruction (1950-52), or 50 000 sq.
metres per year, in order to ensure a smooth working
of the planned turnover of 5.6 million tons of piece
goods per year half of which is to be handled at quay.
In 1950, the target figure was nearly reached, but in
the calendar year 1951, not more than nearly 12 000
sq. metres were constructed. Even when all present
building projects totalling 55 000 sq. metres will have
been finished, we shall still be 37 000 sq. metres short
of the target figure by the end of 1952. And this,
although the building of quay sheds is the nucleus of
port reconstruction. Even during the first 5 months of
1951, an average of 12.4 per cent of the liners calling
on the port could not be properly worked. Fortunately,
this figure dropped to 7 per cent for the second half
of the year, and it would have been even lower if it
were not for the disturbances that were created in
some parts of the port in October. The turnover figures
for the last two months, at 1.4 and 1.3 million tons
respectively, are evidence in itself. The willingness to
work and the unceasing industry of the dockers, along
with the modernization and rationalization of port
facilities and services, raised the turnover coefficient
per person employed in the port from 870 tons in 1949
to 1050 tons in 1951.
The number of incoming ships which amounted to
9763 units in 1949 and 11 454 units in 1950, exceeded
the 13 000 mark in 1951. With 17.2 per cent of the
aggregate net tonnage, the German flag is again hold-
ing second place; in the case of actual turnover of
goods, the young German fleet is far ahead of all
others, having turned over 4.5 million tons of which
3 million tons were in foreign trade. Moreover, the
German fleet was increasingly engaged in liner ship-
ping - for 60 per cent of the fleet, Hamburg is the
home port. Of the 186 regular lines serving the port,
60 routes with 206 sailings per month are being opera-
ted by German shipping companies. Since the be-
ginning of 1951, our ship yards have constructed
79 800 GRT which is more than twice the production
figure for 1950. The total value of all units completed
by the Hamburg ship yards during 1951 is put at
172 million DMarks. New constructions which
accounted for 105 million DMarks rose by twice the
previous figure, and repairs which totalled 67.5 million
DMarks rose by three fifths as against 1950; repairs
for foreign orders absorbed about one half (33.3 million
DMarks) of the entire repair business.
An enumeration of all the forces actively engaged in
the port must not omit to make special mention of the
performance of the Deutsche Bundesbahn (the German
State Railways) and its contribution to the despatch
and reception of goods. The Bundesbahn's share in
the transportation of export goods into the port rose
by one sixth over the figure of the previous year, now
covering nearly two thirds of all exports. In the
handling of imported goods, too, the Railways in-
creased their share during the year and are now
heading the list before any of the other means of
transportation. The extent to which Hamburg depends
on railway services, is shown by the very lay-out of
the sheds.
Thus, various factors are cooperating in the port of
Hamburg, in competition as well as in planning. And
this cooperation has brought us a good step forward
during 1951. Naturally, there are many difficulties yet
to be overcome. There is the task of ensuring that the
quay shed construction can be pushed further ahead
in 1952; today, the quota of floor space utilization is
8.9 tons per sq. metre per year as against a pre-war
annual average of 7.2 tons per sq. metre. Beside-build-
ing the required quay sheds, we shall also have to
deal, during the coming year, with the construction
of quay walls which is expensive and rather difficult
technically. There are no longer any such construct-
ions which need merely be reconditioned because
there was sufficient material which could be reclaimed.
From 1952 onwards, extensive new constructions of
quay walls will become necessary. To construct a
stretch of 100 metres of quay wall, capital to the
amount of roughly 1 million DMarks would be re-
quired. For several years to come, the investments
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required in the port will not yet drop to below
40-50 million DMarks; moreover, reconstruction and
new investments cannot much longer be granted such
a priority over current repairs and reclamation which
had been stopped during recent years and now amount
to some 35, million DMarks.
From these statements, the problems may be gathered
which we are facing at the start of the year 1952.
There are no signs that the financial position of our
city should become less strained. This means that, if
the port is to be further developed and planfully
expanded in accordance with its importance for the
Federal Republic and for German relations with over-
seas, Federal loans (or a general capital market
respectively) would be required in much greater
amounts than have been available during 1951.
Coal and Steel Union Before the German Federal Parliament
The Atmosphere of the Debate on the Division
By a Supporter:
The expression, "the historic
hour", so often used in inappro-
priate contexts, really fits the
occasion for once. By ratifying the
Schuman plan, Germany has ab-
dicated forever an important part
of her sovereign rights in favour
of the union of the European
peoples, for the treaty's duration
of fifty years is tantamount to an
indefinite space of time, The rights
which we have given up are im-
portant ones. To permanently ab-
jure the use of tariff barriers for
iron and steel products and the
right to make reprisals in trade
with our European neighbours
through cutting off coal deliveries,
may have serious repercussions
on our national economy in times
of coal shortage or steel surplus.
The surprisingly favourable out-
come of the division underlined the
importance of the step which has
now been taken,
The same parties which cast their
votes in favour of the Federal
government's proposals, however,
have also endorsed its misgivings,
What was the nature of these mis-
givings, which were, after all, so
considerable that the Social Demo-
crats believed they could not accept
the plan?
The Saar Question
The Social Democrats have ac-
cused the government of betray-
ing the population of the Saar. In
the course of the debate, all par-
ties gave expression to their regret
that Germany and France had not
yet settled the Saar question. In
recognition of the psychological
difficulties with which the French
government would have had to
contend, the Federal government
demanded, and declared itself to
be satisfied with, a declaration
appended to the treaty and stating
that Germany's acceptance of the
Schuman plan does not imply assent
to the present regime of the Saar.
Should the Federal government
have done more? Should it, in par-
ticular, have made the ratification
of the plan dependent on the pre-
vious solution of the Saar question?
The debate in the French Chamber
of Deputies showed that Schuman
and Pleven had to overcome great
difficulties with the plan in its
present form. It would have been
impossible for Schuman - who
also has to contend with a resolute
opposition, much preoccupied with
the past - to achieve simultane-
ously the long overdue settlement
of the Saar question in favour of
Germany. To do this would have
meant to wreck the Schuman plan.
The Federal government, more-
over, did not wish to give up this
measure and acted on the right
assumption that, if progress were
achieved in the integration of
Europe, this would advance a settle-
ment of the Saar question and, at
the same time, render impossible a
heightening of national tensions.
Berlin and Eastern. Germany
Those who opposed the plan
claimed that its acceptance would
be tantamount to the abdication of
all claims on Eastern Germany and
would jeopardize the position of
Berlin. It is difficult to grant the
seriousness of this argument. Ber-
lin's senate, under its social demo-
cratic mayor, Herr Reuter, has de-
manded that the plan be ratified.
The Germans in the Soviet oc-
cupied zone are officially dumb.
What we hear from thousands of
refugees, however, is the injunc-
tion that Western Germany should
strengthen herself. The wish that
Western Germany, in alliance with
Western Europe and America,
should bring about the liberation
of the Soviet occupied zone by
actually taking aggressive mea-
sures is certainly merely the ex-
pression of despair; it is, however,
symptomatic of the desires of these
fellow citizens of ours.
Decartelization
The ratification of the plan has
been preceded by years of Allied
interference with the structure of
the German coal and iron industry.
Whether, and to what extent, these
interventions will damage the eco-
nomy of the coal and iron industry,
only the future will show. Certain-
ly, it is thanks to the hard bar-
gaining on the part of the Germans
that it has been possible to thwart
on decisive issues the Morgenthau
policy followed by the occupation
powers. It is equally certain that
without a determined German
foreign policy working towards
European federation, those forces
in the councils of the occupying
powers which are hostile towards
us would alone dominate the situ-
ation in Germany today. It is only
through the foreign policy of the
Federal government that it has at
all become possible to discuss such
matters. It is certain, moreover,
that the ratification of the Schuman
plan will bring to an end all inter-
ference with the German economy,
on the part of the Allies, whether
through the agency of the military
security office, decartelization or
the Ruhr authority. Those who
hold that this is a desirable out-
come must give their blessing to
the plan.
Problems of Integration
The opposition's strongest criti-
cisms were directed towards the
fact that we would allow the Euro-
pean signatories of the plan un-
impeded access to German coal
and steel. During the debate in the
French Chamber of Deputies, those
who defended the plan against the
attacks of its numerous opponents
from France's heavy industry had
pointed out that, under the plan,
Germany would lose the possibility
to keep its steel production from
the French automobile industry in
order possibly to allocate it to the
Volkswagen works. This cannot be
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denied, but the other countries
which are signatories to the treaty
also lose this possibility. Precisely
where coal and steel are concern-
ed, access to the. French produc-
tion may prove to be at least as
important to us as the access of
French purchasers to the German
production. - As far as the coal
industry is concerned, however,
the situation is undoubtedly of
quite a -different nature. One can
really ask whether the Schuman
plan would have come into ex-
istence if the French had not seen
in the present coal shortage the
spectre of future drastic cuts in
German deliveries to other coun-
tries. But will this shortage last
for ever? The European coal mar-
ket is, over longer periods of time,
characterized not by shortage, but
by surplus. Only extraordinary
disturbances, such as wars, produce
in a normal economy shortages of
longer duration. Coal is lying in
the earth in unlimited quantities
and, in a balanced economy, can
be produced in amounts sufficient
to meet all needs. As far as this
question is concerned, French long-
ings for economic security and
Socialist desires for a planned
economy have been fused in the
strangest fashion. A planned econ-
omy does not, indeed, know a sur-
plus of goods, for the consumption
is planned too. The experience of
the last few years has clearly shown
that a planned economy is rather
characterized by a situation in which
production actually lags behind
demand. It is, therefore, impossible
for the planners to imagine that
they may have to give up the
privilege of "misplanning" the eco-
nomic goods produced in their self-
contained sphere. Those who be-
lieve in free enterprise see in short-
ages only temporary disturbances,
which can be overcome by the
exercise of energy and industry.
Therefore, whoever believes that
the time when there will be a
European surplus in coal must in-
evitably come, must be interested
in securing free access to the
European coal markets. This is also
precisely why the German indu-
stry advocates the Schuman plan,
whereas the French industry re-
jects it.
The opponents of the Schuman
plan have impressively conjured
up in the Federal Parliament the
danger that Germany may be out-
voted in the bodies responsible
for the execution of the plan. This
is undeniably true. However, this
risk must be run upon becoming
a member of any community. If
one believes that the advantages
of European union outweigh its
disadvantages, then one must take
the risk of being outvoted in one's
stride. As for those who hold that
the creation of a European union
within a very short time represents
the last chance for Europe to sur-
vive in face of the Russian danger,
they must agree to the plan even
if it implies serious disadvantages.
The Federal government has
been sharply criticized because,
during the debate, it conjured up
the vision of a greater Europe on
numerous occasions and thus simul-
taneously covered up those defects
whose existence it would be the
last to deny. But should one refuse
to take a decision at a time when
extraordinary circumstances pre-
vail, on the pretext that it is di-
rected to a great aim? Are there
any small measures still at our
disposal today in order to save
the well-nigh hopeless situation of
Europe on the edge of the Russian
continent? - One can support
without a moment's hesitation the
opposition's demand that, if one
wants to achieve the integration
of Europe at all, then the Schuman
plan should be only the first step
as well as its assertion that the
structure which has begun to be
erected will merely collapse if
other "plans" do not immediately
follow.
Democratic Discipline
The debate in the Federal Par-
liament gives one an impressive
picture of the resurrection of the
democratic functions. Government
and opposition stated their point
of view with restraint, but also,
with firmness. Both groups showed
exemplary discipline. The exchange
of views between the Chancellor
and Herr Ollenhauer (who spoke
for the Opposition, in Herr Schu-
macher's absence) concerning the
necessity for, and possibilities of,
a common foreign policy will have
fruitful consequences.
It is certain that the opposition
will loyally cooperate after the
plan has been ratified. It is justi-
fied, therefore, in claiming ad-
equate representation on the exe-
cutive bodies of the plan. (lc.)
By an Opponent:
Even the fixing of a date for the
debate on the Schuman plan was
the subject of sharp disagreement.
The Chancellor wished to wrest
Parliament's approval in special
sessions to be held before Christ-
mas and to follow immediately
upon the committee stage; he
would, then, have been able to
present Germany's agreement to
the coal and steel union at the
European Army conference which
took place in Paris on December
27th, 1951.
Had the parliamentary debate
taken place before Christmas, no
time would have been left for the
members to order and evaluate
the arguments and considerations
brought forward during the com-
mittee stage. Thanks to their
specialized knowledge, the civil
service experts would have been
masters of the situation, and the
political aspects of the question
would not have received sufficient
consideration. In addition, the im-
portance which was attached to the
fixing of a date revealed that the
coal and steel union was closely
inter-connected with the European
rearmament treaties which are
being prepared.
After some hesitation, Parliament
decided to postpone the debate to
January 9th-llth, 1952, when it
was conducted with a thoroughness
which the Federal Parliament had
never known before. The sober
debate was characterized by the
fierce onslaught of 12 social demo-
cratic speakers on all aspects of
the treaty; speakers from the
coalition and smaller parties alter-
nated with the Social Democrats,
Nevertheless, the result of the vot-
ing was not in doubt for a single
moment, for the coalition fought
the issue on two platforms. For
instance, Herr Stegner, a Free
Democrat, agreed with most of the
factual arguments brought forward
by the opposition, but he believed
in Europe and, for this sake, was
prepared to accept the obvious
disadvantages and risks involved
in the treaty. Thus the struggle be-
came unequal, because faith is not
to be shaken by arguments since
it rises above the world of facts;
on the other hand, however, faith
itself becomes a factor to be
reckoned with in the dealings of
the world.
The difference in the points of
view adopted in judging this treaty
became even greater when the dis-
cussion turned from the single pros
and cons of the 100 clauses and
the equally long supplement, to the
general political aims of the treaty.
Here, thesis confronted thesis: the
government look upon the coal and
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specific form of the treaty now be-
ing discussed, which was going in
the wrong direction.
Should the parliaments of the
other countries involved also ratify
the treaty, then the latter will
sharply affect the national econ-
omies. The foundations for Ger-
many's policy within the frame-
work of this treaty were laid dur-
ing this debate. (tz.)
Old and New Clouds
The result of the division on the ratification of the Coal and Steel
Union Act, which came out to be so favourable to the Federal govern-
ment, has by no means swept away all thunder-clouds from the parlia-
mentary sky. Quite the contrary, fairly dangerous clouds are anew
piling up on the horizon overshadowing any hope that the government
coalition and the opposition might agree on a joint course of foreign
policy.
It might have been advisable to use the brief space of relaxation
which seemed to evolve after the end of the generally objective debate
on the Schuman Plan, for a joint action for all-German elections and for
an early re-unification of the zonal states. And an attempt in this
direction appears to have been made by a ready amendment of the
bill on such elections. Unfortunately, it seems that the good atmosphere
will be spoiled too early by granting priority to the defence problem.
The faith in Europe has led the Schuman Plan to victory within the
Federal Republic. And this faith in Europe, or in the fact that the
creation of a European community is essential to us, is upheld both
by the government coalition and the opposition - although their
respective conceptions are diverging.
Things are different with the issues of universal conscription and of
the defence contribution, problems which are affecting principal and
much more deep-seated contrasts. In other member countries, matters
concerning the defence of Europe are approached with very great re-
servation. Such reservation, we should also observe; for we cannot
afford.to create grave conflicts of home policy on behalf of a conception
of foreign policy which is as yet fictitious. It is this question more than
anything else which calls for a solution on which both sides may be able
to agree. (sk)
The Schuman-Plan and Inter-European Trade
steel union as a condition for
Franco-German agreement, render-
ing future wars impossible. They
believe an economic discrimination
of Germany as against the other
partners to be excluded by the
existence of the general clause
which lays down that no member
of the union must be discriminated
against. They hold the reunification
of Germany to be possible only if
the Federal government ally them-
selves closely to the West and use
their strength to induce the Rus-
sians to leave.
Finally, the Chancellor accused
the Social Democrats in sharp
language of having hurt the feel-
ings of the Western peoples with
their arguments, inasmuch as they
had frequently interpreted the pre-
vious debate of the French Chamber
of Deputies as indicating that the
French wanted, by means of the
union, to achieve an expansion of
their heavy industry and to per-
petuate their political position as
conquerors as far as Germany and
the Saar were concerned.
The deputy leader of the op-
position, Herr Ollenhauer, explain-
ed that the frequent references to
the debate of the French Chamber
of Deputies were meant to serve
the purpose of demonstrating the
different points of view involved;
had they been covered up, they
might have wrecked the union
later. His strongest objections were
directed at the omission of the
German delegation to clarify ques-
tions concerning the Eastern zone,
Berlin and the Saar. It was dis-
astrous, he said, that the treaty
made trade relations with the
Eastern zone dependent on the
approval of the High Authority;
before the negotiations were open-
ed, one should have demanded re-
cognition of the principle that the
Federal government spoke on be-
half of the whole of Germany. He
did not reject European co-oper-
ation as such, but merely the
in British industrial circles that
even a close cooperation with the
Continental heavy industries could
succeed in solving the existing
problems of supply. Experiences
gained in the supplies of steel from
Belgium and of scrap from Ger-
many have been disappointing for
London. It is feared also that co-
operation among the Schuman Plan
countries would lead to increased
exports of semi-finished products,
thereby reducing exports of finish-
ed goods and adversely affecting
British hard currency earnings for
the benefit of countries with lower
wages in the finishing industries.
When it is suggested to establish
a permanent British delegation to
the Schuman Plan Administration
BRITAIN: Developing Own Resources Firstl
From Our London.Correspondent
Iron and coal have become bottle-
necks in the British economy. The
coal output is not high enough to
supply the traditional. export mar-
kets even if cuts are made in
household coal at home. The iron
gap is so wide that the licensing
system of the war years had to be
reintroduced. For the first time in
her history, Britain is forced to im-
port coal, and valuable hard cur-
rency markets for British industrial
products are neglected because
steel is in short supply.
Under these circumstances,
Britain is naturally taking a vivid
interest in availing herself of any
opportunity on an international
level to increase her coal and iron
supplies. This being the position,
how is it, then, that the Schuman
Plan can arouse so little enthusiasm
in Great Britain - among politic-
ians as well as in industry? The
main objection no doubt is of a
political nature: Britain will not
and cannot place her key industries
under the authority of a supra-
national body whose policy might
be determined by factors yet un-
known; the less so as her certainly
reasonable requests for previous
technical deliberations had been
bluntly refused by the French at
that time. Moreover, it is doubted
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as was the latest British proposal
at the present stage of negotiations,
political circles would think of a
form of diplomatic representation
while industrial circles would
rather intend a sort of informal
and uncompromising liaison such
as the British steel industry had
maintained at times - fairly suc-
cessfully, at that - with the Inter-
national Crude Steel Community;
incidentally, it is by no means
thought impossible to have this
delegation later develop into a
British Section of the Schuman
Plan Administration after some
practical experience has been gain-
ed. Although all efforts at inter-
national cooperation in the mining
industry have been unsatisfactory
so far, it is not intended to bar out
any chance of profitable cooper-
ation. That is why "association" is
wanted rather than "participation".
At present, all endavours by the
British coal and steel industry are
aimed at increasing production as
well as imports. Unfortunately,
hopes for an increase of coal out-
put have not been realized so far
although at least a negative pro-
gress can be reported in that out-
put did not drop through the con-
tinued migration of miners away
from the pits. In the steel industry,
too, it is only with difficulty that a
substantial drop in production can
be prevented; the plant and man-
power required for increasing pro-
duction are well available, but raw
materials are in short supply, above
all scrap. Joining the coal and steel
union could solve neither the man-
power problem in the coal pits nor
the raw materials problem in the
steel industry.
British industrial experts hold
the opinion that, in the long run,
the supply of coal and steel may
be increased by a planned develop-
ment of the production resources
at home rather than by subjecting
British interests to an international
authority. It is also thought in
Britain that the Schuman Plan
negotiations of the past would not
seem to justify the assumption that
at a later date, when marketing
problems may again be more
important, the coal and steel union
could be capable of a policy sup-
pressing national interests and
pursuing a common cause. The
post-war experiences of the British
mining and foundry industries re-
veal that normalcy on the markets
can be only achieved by a planned
and troublesome modernization,
rationalization and expansion . of
production plants, but not by an
organizational construction, be it
ever so genial. (A.)
the Schuman Plan which it thinks
could not properly function at all
unless there was a continually
promoted expansion of production.
Hence, French misgivings are
limited to the home market, i. e.
they concern the possibility of in-
creased imports from Belgium and
Germany after the coal and steel
union was established. So far, import
duties and differences in the freight
charges have been affording a
solid protection, leave alone the
quotas. When the customs barriers
will' have been torn down, Ger-
many will be in a position - even
at the same prices off factory -
to supply certain districts in France
with cheaper steel and cheaper
coal than could the country's own
industry. This goes not least for
regions which from within France
can only be supplied by rail while
for supplies from Germany the
cheaper waterway transport can be
used. Steel works in Northern
France, on their part, are worried
by their Belgian competitors who
hold so favourable positions geo-
graphically, but they never made
any mention of the German danger
which is so often cited by the
works in Lorraine, The last attempt
which the entrepreneurs made prior
to the ratification of the Schuman
Plan by the French parliament, was
therefore aimed at having customs
duties reduced only gradually, i, e.
at delaying the realization of a
uniform market for several years.
It must be said, however, that
there has always been more than
one opinion on the Schuman Plan
amongst French industrialists. The
solidarity of enterprise is merely
for the outside observer. The steel-
consuming industries by no means
agree with the fear which the
Lothringian heavy industry has of
competition, and behind the scenes
they accuse it in rather plain
language of defending the customs
barriers for the only reason that
they may go on supplying the
French market at conditions more
profitable than those at which
they are supplying their foreign
customers. An independent member
of the French Economic Council (a
University Professor of Economics)
went as far as to maintain that,
during the last 50 years, the
French economy had been financ-
ing a periodically recurring export
dumping by the French steel
industry.
As France is at present forced
to import coal from the United
FRANCE: Rivalry Behind the Scenes
From Our Paris Correspondent
When French trading circles con-
sider the repercussions that the
Schuman Plan might have on the
foreign trade in steel and coal,
their greatest 'concern obviously is
that imports might increase. France
has never been a coal-exporting
country. For steel, things are dif-
ferent, and home production con-
siderably exceeds the capacity of
the home market including over-
sea territories. And yet, during all
the lengthy debates on the Schuman
Plan nobody in France - not even
the people from the steel indu-
stry - expressed the fear that the
coal and steel union might badly af-
fect French steel exports in future.
The reason for this may be sought
partly in the knowledge that the
wording of the treaty will allow
the steel works - over and above
the uniform market further free-
dom of action and competition as
regards exports to third countries,
and partly in the special position
of French steel exports which, in
the past, were marketed in other
Schuman Plan countries in neg-
ligible quantities only and the
greater part of which went to South
America, the British Dominions,
and since recently to the USA.
Although the French steel indu-
stry went any length to fight the
Schuman Plan and although it
brought forward every argument
that could even slightly serve its
purpose, at heart it is so strongly
convinced of its own dynamics and
its possibilities for development
that it does not consider the coal
and steel union to be of any danger
to its policy of expanding its own
production and exports; at the
same time, it does not speculate,
by any mental reservation, on an
eventual discrimination against its
German competitors by suitable
majority decisions -- the relations
of the French steel industry with
its Belgian or even its Italian com-
petitors are definitely not better
than those with Germany - but
the reason for its optimism for the
future can be traced back to its
conception of the true essence of
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States, the value attaching to
estimations and considerations by
the national coal mines is primarily
theoretical. Lorraine need not fear
the competition of the Ruhr, nor
do the basins in Middle and
Southern France which are favour-
ably located from the transport
point of view. For the coal pits in
Northern France, there exists no
doubt a structural inequality which
is to be somewhat balanced by
suitable measures of modernization
by 1955. Even in the event of
Western Europe producing surplus
coal, the Ruhr would only be cap-
able of selling France 2 or 3 mil-
lion tons of coal more than it is
now, that is after deducting ad-
ditional French supplies to Southern
Germany. At the present consump-
tion of from 70 to 75 million tons,
that is a negligible quantity and
this is admitted by all the re-
sponsible industrial circles in
France. As regards crude steel,
only factories with a capacity of
less than 100 000 tons have any-
thing to fear from German com-
petition. At worst, 6500 workers
and 3.7 per cent of French steel
production will be concerned. For
cast iron, the figures are 1400 wor-
kers and 13 per cent of production,
and for rolling mills, finally, 6000
workers and 10 per cent of pro-
duction.. Even without the Schuman
Plan, these rather inefficient works
would get into trouble as their
production is not exportable and
as, on the home market, the big
works would choke them at the
slightest recession. It is the opinion
of independent observers that all
other French iron and steel works
have to fear no encroachment on
their vitality by the Schuman Plan,
but only the destruction of their
cartel-like monopoly position on
the French home market.
There is no doubt that the French
economy does not like the exemp-
tion of steel from customs duties
being extended to the overseas
territories of the French Union
which, then, cari be supplied for
the first time by other European
countries under the same con-
ditions as by the French com-
petitors. This provision in the
Schuman Plan must certainly be
regarded as a concession France
is making to her partners, for,
things being as they are, French
steel works will have to face a
decline in sales. (fr.)
ally effective, she will sooner or
later come to terms with it, as in
1935. At any rate, Italy's raw
material resources are poor and
her steel industry is producing at
costs which are 30 per cent and
more up on, say, the French or the
German industry and the country
cannot afford the luxury of freely
competing with the big production
community which is coming into
existence in the northwestern part
of central Europe. To protect her
own industry from ruin by sur-
rounding herself with a wall of
high-protective duties, would have
the same effect as a further in-
crease in Italian production costs
and a substantial rise of consumer
prices. In consequence, Italy really
had no other choice if she was to
protect her interests.
The problem presenting itself
with strong urgency today, is that
of modernizing the production
plant which is inadequate, anti-
quated, and worn out, and of rais-
ing the necessary capital from
public funds. The government are
aware that private means of in-
vestment do not exist and that
crediting by financing institutes
must be ruled out not only because
of the prohibitive rates of interest,
but also because of the impos-
sibility to redeem even long-term
loans out of current production;
they are also aware, however, that
in this sector the required invest-
ments must no longer be delayed.
It is pointed out that, in France,
the big works have been nationaliz-
ed and, hence, are operating under
State protection and that, in that
country, roughly 115 thousand mil-
lion francs had been raised even
by the end of 1950 to increase iron
and steel production, and a further
130 thousand million francs are to
be appropriated for the same pur-
pose. This is compared by the big
Italian works who apparently can-
not but organize for closer co-
operation, with the advantages that
the steel union will offer by
regulating the' allocation of raw
materials and the marketing of
their products. But, as in France,
ITALY Had No Other Choice
Report Front Rome
When Italy declared herself a
party to the Schuman Plan, she
accepted - in a sense -- the role
of the lame who has to try and
keep pace with robust sprinters.
When she did this, she was
apparently convinced that she was
chosing the lesser evil in order to
prevent a greater one. The govern-
ment have collected advice and
have conducted lengthy deliber-
ations before they could force
themselves to pass a decision.
When this decision finally came
out to be a positive one, it was
presumably believed that the coal
and steel union can be rated an
important contribution to the realiz-
ation of a European Union which
Italy is wholeheartedly supporting.
And it was probably intended to
prevent the Italian iron and steel
industry from sliding back into the
position it had been holding at the
time of the International Crude
Steel Community. For, also. the
Schuman Plan is lastly heading for
cartelization and, hence, for the
protection of the participating pro-
duction areas.
In Italy, the conviction soon
prevailed, and this was shared by
big industry, that to stand aside
would mean to frivolously play
with risks. It was not overlooked
that Britain had again avoided
binding herself - as she had done
in 1926 and 1933 -but it is believ-
ed in Italian industrial quarters
that, after the European coal and
steel union having become practic-
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the innumerable small and middle-
sized firms are more worried by
the prospects of the future.
As regards Italy's present supply
position which has not much of a
foothold in the country's own
mining industry, special mention
should be made of the increase in
the requirements of the iron and
steel industry which was largely
brought about by the production
of finished goods for exports and
which is evidenced by the import
statistics in a degree ever increas-
ing from year to year, from month
to month.. As far as is possible,
Italy is trying to switch her import
requirements to the supply of ore
for her blast-furnaces (this ore
comes mainly from Algeria, and
that is why the exclusion of that
area from the treaty is regretted
by Italy). With the realization of
the shipbuilding programme and
with increasing rearmament re-
quirements, a further and rather
substantial increase in iron and
steel consumption can be envis-
aged.
Finally, it may be mentioned
that the Italian considerations cf
the problems connected with the
Schuman Plan are based on the
assumption that the steel union
is a tie between the producing
countries and will therefore, con-
trary to private cartels, grant the
(political) interests of the nations
priority to the interests of pro-
duction firms and groups. (-st-)
SCANDINAVIA Believes in Expanding Foreign Trade
From Our Stockholm Correspondent
If leading circles in the Scandin-
avian economy have so far been
displaying some reservation toward
the coal and steel union, it was
not because they were still doubt-
ful as to its realization, but because
it is known that the execution of
this plan which is to lead to
European integration in one of the
most important spheres of econ-
omic activity, will necessarily be
accompanied by extreme difficul-
ties. It is believed in Scandinavia
that the interests of the member
countries of that union will be
diverging so greatly that it should
be hard to reconcile them all. Yet,
this project attracts the attention
of the Scandinavian countries for
the simple reason that it directly
concerns such groups of com-
modities of their foreign trade as
are of great importance to their
supply position.
In their demand for fossil fuels,
all the Scandinavian countries al-
most completely depend on foreign
supplies. Furthermore, Sweden's ex-
ports of high-quality iron ore will
- or can - be decisively influenc-
ed by the steel union. And Scan-
dinavia's foreign trade in iron and
steel must also be seen in this
light although in quantity it is of
much less importance. In normal
times, Scandinavian imports of coal
and coke amount to an average
annual volume of about 15 million
tons. It need, not be considered
that present imports of fuel are
substantially lower since that is
only a temporary phenomenon as
far as can be seen. With an annual
average of approx. 12 million tons
during recent years, Swedish ore
exports hold second place in the
country's foreign trade statistics.
For judging the effects of the
Schuman Plan first on the Scan-
dinavian, but then also on the
European foreign trade, it is symp-
tomatic that the Swedish Minister
of Finance recently tabled a motion
to raise the so-called right of
transportation of the leading ore-
mining company, the Loussavaara-
Kiirunavaara A/B (Grangesberg
trust), from 12 million to 15 million
tons. In the first line, the motion
was certainly prompted by the
world shortage of iron ore and the
improved prospects of marketing
which this entails for Sweden. At
the same time, however, one has
the impression that the motion to
raise the right of transportation -
which practically equals the actual
amount of ore exports - anti-
cipates the eventual boom in the
European iron industry when the
steel union comes into operation.
It is believed in prominent quarters
of Swedish industry that, quite in-
dependent from any influences of
armament, the world demand for
iron ore will rise for a long time
to come, and they think that it
should more or less go without
saying that the impulse to come
from the coal and steel union will
even reinforce this upward-trend.
The same holds true for Scan-
dinavia's fuel supply and for the
foreign trade in iron and steel. For
all the commodities affected - by
the steel union, the Scandinavian
economies have always been so
closely interwoven with the world
market or with Europe respectively
that Scandinavia can do without
foreign supplies as little as the
other countries can do without
Scandinavian exports. As, more-
over, it is one of the major objects
of the union to provide for a better
and more even supply of the
markets, it is believed in Scan-
dinavia that in the long run the
consequence of the creation of the
coal and steel union can only be
an expansion of European foreign
trade.
There is, however, one limitation
to what has been set out above.
The iron industries of all the Scan-
dinavian countries, with Sweden at
the head, are being vigorously ex-
panded. Through this development,
their dependence on foreign im-
ports of finished goods will gradu-
ally diminish. (dt)
BELGIUM: Between Doubt and Rejection
From Our Correspondent in Brussels
There are economic, social and
political reasons for the Belgian
attitude which is hesitant between
doubt and rejection.
As regards the e c o n o m i c
aspect of the matter, it is said in
mining quarters that the Plan will
result in a gradual reduction of the
Belgian potential - the figure for
this is put at 4 million tons of
coal - while the German collieries
will be able, through financial
assistance, to raise their output.
Hence, the Federation of Belgian
Collieries, for one, fears that the
Belgian market will be flooded
with cheap German coal and that
neither the High Authority of the
Schuman Plan nor the Belgian
government will be able to stop it.
Furthermore, a very important
person from the General Direc-
torate of the Collieries has stated
that the uniform market would
lead to the closing-down of most
of the pits producing bituminous
coal as, well as of some pits min-
ing sub-bituminous coal. It is
pointed out in this connection that
a decline in production by 3 per
cent would increase the unemploy-
ment figure by 25 000.
Finally, it is feared that the coal
supply to industry will become
irregular. For, in times of coal
shortage nobody would be in a
position to stop the coal-producing
countries from granting priority to
their own industries. In the event
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of depending on foreign supplies,
Belgian industrial output would
consequently go down. The Feder-
ation points out that even a shift
in production which can at best be
expected, would seriously upset
Belgium's economic structure since
the country's mining industry
accounts for 18 per cent of the
national product as compared with
9 per cent in Western Germany
and 6 per cent in the case of
France. At the time of a boom,
Belgium might be forced as a result
of the Plan to have to purchase
10 million tons of coal for which
payment would have to be effect-
ed in foreign currency.
The social objections to the
Schuman Plan are directed against
the differences in wages and social
contributions which, it is claimed,
are about 40 per cent higher in
Belgium than they are in Germany.
The Paris negotiations had shown,
it is said, that for the sake of
national interests the other coun-
tries were not prepared to level off
these differences. In social-minded
quarters, an important role must
naturally be attributed to the fear
that a participation in the Plan will
bring about unemployment among
the miners.
Belgium's foreign trade position
largely depends on the German
customer, as goes also for the
other Benelux countries. If it now
came to Germany even dominating
the inland coal market, it is argued
here, there would be nothing to
stop an eventual German pressure
on the economy, and hence the
policy, of the country. And these
p o l i t i c a l misgivings can be re-
futed neither by the High Authority
nor by the Statutes of the Schuman
Plan, for they do not possess
political power nor would they be
capable of opposing the economic
reality of a German position of
domination, particularly so since
Britain is not an economic or polit-
ical partner in this respect. (an)
Decentralization as a Principle?
The German Coal Marketing Board to be Liquidated
From the Ruhr:
The policy of the Allies vis-a-vis
the Federal Republic is characteriz-
ed by strange discords which time
and again surprise the Federal
government as well as people in
industry. At second thought, how-
ever, it is obvious that we ought
not to let ourselves be surprised if
we are aware of the motivating
forces behind the Allied attitude
towards Germany. But we are apt
to forget this at times and our
opportunistic hopes make us neg-
lect that critical reservation which
would keep us from disappoint-
ments.
The desire for increased pro-
ductivity of the West German
industry as a part of the defence
efforts is still opposed by the fear
of concentrations of economic
power which has survived from the
era of the Morgenthau Plan. There
is no doubt that the coal shortage
is one of the most dangerous
hurdles checking the further devel-
opment not only of the German,
but of the European industry as a
whole. An increase of the coal out-
put depends on pre - conditions
which to fulfill requires some con-
siderable length of time. Within
the limits of what is feasible, a
rational distribution of coal is the
only means of sparing the key
industries as many as possible of
the harmful effects of the shortage.
And then, there is more than one
type of coal. The immense dif-
ferentiation of requirements and
offers calls for a system of dis-
tribution which will at all times
allow to chose from among the
many types of coal at the utmost
economy. The centralization effect-
ed by the German Coal Marketing
Board ensured a supply to the coal
consumers with a minimum of
economic friction.
Under the influence of the Amer-
ican ideology of decartelization
which meets the intentions of Ger-
man utopians of competition, the
Sales Syndicate for Ruhr coal -
which, for 60 years, proved to be
an excellent thing - is to be
liquidated, and the marketing of
the coal to be split up between at
least six sales groups. The permit-
ted joint organization of all the
Ruhr collieries which is to have
only advisory functions, but none
of direction, is likely to constitute
nothing but a time-consuming inter-
mediate office since any decision
not agreed on would be taken to
higher level, viz. the Coal Board
to be established With the Federal
,government. What this means in a
sphere so important as coal mining,
every entrepreneur knows when
he remembers the existing un-
certainty and the delays of ad-
ministrative decisions. The said re-
organization is to be effected al-
though coal consumers at home
and abroad, mining companies as
well as trade unions have been re-
commending, for reasons of econ-
omic common sense, to retain a
central marketing organization.
Let me enumerate only a few
objections to this absurd re-organ-
ization: the multitude of institutions
to be newly established in the
course of decentralization action -
which would be without trained
personnel -- would make smooth
working difficult, the more so as
they will have to apply to the
Coal Board for any direction to be
issued. The problems that can arise
in the coal industry are manifold,
often they are very aggravating
and must be overcome quickly.
They may be the results of various
causes: sudden drops in production,
shortages of some types of coal,
stoppages in the distribution, sud-
den rises of demand, mistakes in
estimate, so that re-dispositions
are often required on a great scale.
After a decentralization of coal
marketing, such re-dispositions can
only be effected by ultimate con-
sumers, traders, and all the in-
stitutions of the coal mining indu-
stry carrying the matter through
several channels of administration
until they finally reach agreement,
or even by referring it to the
highest level, the Coal Board, for
decision. Naturally, when differ-
ences of opinion arise, it will in-
variably be tried to force the issue
to the final stage.
A particular trouble created by
the decentralization will be the
problem of types, primarily when
one sales group attempts to with-
hold such coal as is distributed by
it, but in short supply, from those
plants which can also work on a
type distributed by another sales
group.
The decentralization of the Ruhr
coal marketing board creates the
danger of . collieries increasingly
returning to the practice of build-
ing up their own trade organiz-
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ations so that, at times of surplus
coal, they may have good firms
among their customers; a rational
distribution would thus be rendered
impossible.
Should such regulation which all
the economic partners reject a
priori, really be forced upon them
for the benefit of an inanimate
principle, or should it not rather
be asked whether or not there are
other means of avoiding the dan-
gers of hyper-cartelization? (b)
The Consumer's Opinion:
The demand to liquidate the Ger-
man Coal Marketing Board (the
Deutscher Kohlenverkauf) is only
one part of the huge wave of de-
cartelization which was produced,
on the one hand, by the American
conception that economic policy in
Western Germany should be limited
in ppwer and, on the other hand,
by the missionary idea of "Ordo"
as originating from the Freiburg
school of thought. This fact must
be borne in mind when the demand
is considered. For, that a relatively
uniform sales organization, perhaps
a coal syndicate or two (say one
for the private companies and one
for the State collieries) would be
more efficient than if sales are
split up between each of the
existing collieries, is not doubted
by any one having acquired more
knowledge about the multitude of
types of coal, and of the require-
ments for coal and coke, than can
be easily learnt from text books.
To raise only one problem: who is
to produce the mixtures of several
types which at times are necessary
from the technological point, if
there is no liaison at least between
groups of coal mines?
If the coal mining industry were
entirely nationalized, the question
of liquidating a joint coal sales
organization would probably have
never cropped up. Hence, there
would remain one way out to
preserve the German Coal Market-
ing Board, namely that of complete
nationalization! Great Britain has.
taken this step and has been
paying for it ever since by getting
less and dearer coal.
Things look a little different,
however, in view of the nearly
completed decartelization of the
processing industries. Now, a Coal
Sales Syndicate which would re-
main untouched as the only com-
pulsory cartel yet in operation,
would appear as a giant compared
with the poor dwarfs the con-
sumers. One remembers well
enough the paralyzation of favour-
able geographical locations through
the policy of instituting certain
bases from which all freight rates
were calculated so that, to cite`
just one example, a simple piece
of paper imposed on the foundries
at Aachen a fictitious distance of
coal transports. True, it is con-
sidere'd to establish a Coal Council
as a corrective to the dictatorship
of supply; but the experiences
gained with such mostly clumsy
bodies make it doubtful that ap-
preciable practical results should
be forthcoming; for who would
have the courage to offer inde-
pendent advice when even a
Federal Minister of the Economy
must not voice heterodox ideas?
Now, the demand for splitting up
the Marketing Board must not
only be opposed from the objective
technical point of view, but there
is also the objection which cannot
be talked away that this would
mean self-victimization on the part
of the consumers.
One should look for an optimal
way out of the situation created by
the demand for liquidation and the
concessions made in this respect.
There are many ways offering:
e. g. to newly permit and gener-
ously promote the establishment
of coal wholesale organizations :or
entire branches or regions on the
principle "force contra force",
which would be a re-organization
of the coal trade as the second
stage following the syndicate at
the highest level - incidentally,
it is surprising how little attention,
and probably how little thought,
has been given to this possibility
furthermore, to establish fair,
and fair in the long run, competitive
conditions in respect of imported
fuels, which would also include fuel
oils; or to truly desist from de-
manding every colliery to be a
compulsory member of the Sales
Syndicate. The very history of the
Ruhr Coal Syndicate of the years
prior to 1934 is an instructive
lecture on competition inside and
outside private cartels; I am re-
ferring to the chapters on the great
outsiders, Wurm and Inde and the
de Wendel collieries.
If all this is not what is really
wanted, the generally propagated
Productivity Drive should not lead
one to break up historic develop-
ment by an abrupt liquidation and
to split up the Coal Marketing
Board simply on principle. It would
be acting like a school kid if,
because of the breakage that has
been produced out of the agree-
ments of the processing industries,
one would now make it a point to
also produce breakage with the
basic group of industries. Fractures
are known to be producing crises.
Although it is admitted that the
Coal Marketing Board is handling
the lion's share of the coal output
- opinions vary only as to the
amount of this share - it remains
a fact that at present the smooth
functioning of the general distribut-
ion of coal depends on it. The big,
privileged consumers are getting
their coal at least relatively with-
out troubles, if only after demon-
strations at times. And, up to date,
those groups which are called upon
to sacrifice have always been
helped by the Coal Marketing
Board if their forges were really
about to run out of coal. (H.)
VACUUMSCHMELZE A.G. (16) HANAU
VAC
VACU UMSCHMELZE
Special Alloys for Electrical Engineering
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1952 - A Year of Investments
By Dr. Clodwig Kapferer, Hamburg
In the long run, economic life follows. causal necessi-
ties. Within brief spaces of time, however - and the
period of one year with which we are concerned here,
is such brief space - politics and the prevailing
system of economic policy can overlap economic law
and can weaken, or temporarily interrupt, its effec-
tiveness. To discriminate between the normal and
the abnormal, to weigh their heterogenous effects
against one another and to prognosticate them in
the future, is a task to be put to economic research
at the beginnning of a new year.
Foreign Financial Aids and National Policy
The influence of political events on the world econ-
omy, and hence on the economy of the Federal
Republic, was particularly deeply felt when the boom
of an exaggerated demand on the world markets
which had started developing quite some time ago
and which had been predicted at long notice, was
topped - at the outbreak of the Korean conflict -
by another boom which threatened to upset the
equilibrium between supply and demand. The efforts
made by the USA. to prepare their territory, and
that of the West-European countries, for defence
prompted Western Europe to now make a powerful
effort of its own in the same direction. Thus, the
latent threat of war had been banished for the time
being. What remained, however, was a state of cold
war, and under its influence rearmament which has
been generally decided on will continue and will
encroach lastingly upon the economic life of all con-
cerned.
This international cooperation is being closely related
to the problem of foreign financial aids which for
ten years has been playing an important part in
international politics in the shape of lend and lease,
Marshall plan and armament assistance payments.
We may well say today that the Federal Republic
has put the means allocated under the Marshall plan
to better use than have some other countries to whom
American policy has been far more generous in its
allocations. But we may also say that we have not
failed to actively cooperate in achieving as great as
possible an efficiency in that we have rebuilt our
production plant by way of financial means raised
from the economy's own sources which was only
made possible by broad masses of the population
partly foregoing consumption, and in that we have
endeavoured to make up for the inadequate supply
of our money and capital markets by increasing the
velocity of cash and book money circulation. This
latter thing, we had to do simply because the money
volume did not keep pace with the growth of indu-
strial production. The following 'diagrams are to illu-
strate the position which the Federal Republic occu-
pies in these respects in relation to other industrial
countries of the Western world. Fig. I compares the
development of the volumes of money and industrial
production, Fig. II that of the velocity of money and
new investments in the Federal Republic and some
of the major industrial countries.
It is to be asked, however, in how far economic
policy can unhesitatingly base its long-term dis-
positions on the granting of foreign aid. Foreign
financial aids which are prompted by political con-
siderations - as is the case with the American
capital exports - contain a high degree of un-
. Increase in Money Volume and
Increase in Industrial Production Since June 1950
+35
(in a/s)
0
Q
+30
Frankreirh
Deutschland
Ni Oki.)
V
(bis Oki.)
?
?3talien Ibis Sept.)
? U.S.A. (bit Ok.)
? Gro(lbri+annien (bis saps.)
+5 +10 +15 +20 +25 +30 +35 +40
Industrial Productiomu
certainty as to their duration, and some day it may
happen that the provisions determining their use
cease to synchronize with the political objects of the
receiving countries. This insight must not lead us to
underestimate the great importance which the Ameri-
Increase in Gross Value
of Capital Investments and
Increase in Velocity of
Currency, 2nd Quarter 1950
to 3rd Quarter 1951 4 +15
(in s/e)
+10
+ +20 +25
Velocity of Currency
can assistance has had to our reconstruction, or even
to fail to pay it the tribute it deserves; for it was
this very assistance which enabled us to achieve the
economic success. Also, we need in no way be pre-
judiced against its continuation under different
aspects, at present in the armaments sector and later,
perhaps, within the range of the Point Four Programme
for the development of backward areas. It is all the
easier for us to adopt this attitude as the Allied.
policy of restricting our production is still holding
our economic energies in check: by dismantling and
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decartelization, by freezing investment capital in the
counterpart funds, by liquidating the German
Coal Marketing Board and prohibiting the re-
construction of essential dismantled plant, by our
unfavourable initial position in the steel union,
by the prevention of free prices for coal exports
from the Ruhr, by the maintenance of production
ceilings for the chemical industries, electronics,
machine tools and shipbuilding, and by the re-
strictions on civil aviation and technical -scientifi c
research. But the principal misgivings remaining
against political financial assistance from abroad,
should lead us to concern ourselves with finally over-
coming the dangers arising from the dollar gap of
the European economy. Above anything else, this
would call for a positive attitude towards a greater
European economic area.
Investments In Competition With Private Consumption
At first, the Korean war had led to a speculative
exaggeration of the demand for consumer goods. This
demand increased the production of consumer goods
over and above the incomes of the consumers so
that the resulting saturation of demand was neces-
sarily followed by a recession which, in turn, curtail-
ed the production of consumer goods. Thus, the soil
was prepared for an increased production of capital
goods. In any national economy, the quota for in-
vestments is competing with the quota for consump-
tion, but it can be said that the expenditure for
private consumption is a more constant quantity than
the rate of investments.
The volume of the national product, meaning the
creation of values by all the branches of a national
economy, determines the amount of private consump-
tion on the one hand and of the necessary invest-
ments on the other. This way of looking at things
raises the following questions:
1. What will the national product be like in future?
2. What part of the national product will be absorbed
by private consumption?
3. What means will be available for investment pur-
poses?
There are practically no possibilities of financing in-
vestments other than out of the investments quota
of the national product, that is if one excludes the
possibility of an influx of foreign capital goods or
that of inflationary crediting at home.
Since the currency reform, the national product of
the Federal Republic has followed a steep upward
trend, and it can already be foreseen that this trend
will last for some time to come after technical as
well as manpower resources as yet unused will have
been mobilized.
Fig. III shows the development of the investment
quota of the national product, while Fig. IV shows
in what proportions to the overall industrial produc-
tion the various industrial countries of the Western
world have increased their production of capital
goods since the outbreak of the Korean war. The
last-mentioned diagram illustrates the degree in which
the USA., Germany, and Belgium are in advance,
in this respect, of the United Kingdom and France
where the increase of capital goods production is
lagging behind the development of overall production.
In the majority of the West European countries, the
transition to armaments production was started by
a curtailment of consumption. This was effected partly
by increased taxation, partly by open or temporarily
repressed inflation for which Great Britain and France
may be cited as examples. In Great Britain, the re-
quirements of rearmament became prevalent at a
juncture when the production capacity was already
fully utilized and when the manpower resources
were exhausted.
Increase inGross Value of Capital Investments and Increase
in Gross National Product, 2nd Quarter 1950 to 3rd Quarter 1951
(in ?/.)
Deutschland
?
Conditions were completely different in the USA.
itself where the armaments production could be got
under way without any substantial new investments
since there were adequate production capacities which
had been ?canned' at the end of the war and could
now be reincorporated in the economic process. In
Increase in Capital Goods Production 1) and Increase in Total
Industrial Production, 2nd Quarter 1950 to 3rd Quarter 1951
(in ?/.)
+20
+15
+10
?Deutschland
? Belgien
?Frankreich
+5 +10 +15 +20 +25 +30
Total Industrial Production
Metal manufacturing and machinery.
addition, the beginning rearmament absorbed the
available manpower resources. Incomes and the stan-
dard of living went up again. The expansion of pro-
duction made the tax yield swell up to the amount
of additional expenditure required for financing the
rearmament drive so that there was at first no fresh
straining of the budget. Moreover, the USA.'s rising
demand for raw materials sent- prices up in the coun-
tries supplying such materials so that there the purch-
asing power increased and sales prospects were creat-
ed which largely benefitted the non-American indu-
strial countries.
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Since the policy of rearmament will go on favouring
the production of capital goods, one may rightly
assume that, in all probability, the saturation of the
demand for consumer (foods will gradually become
increasingly difficult and that the more durable con-
sumer goods (such as dwellings, motor cars, furniture,
household appliances and the like) will be hit harder
by this development than will the short-lived com-
modities (footwear, textiles etc.) since the basic
materials and the production apparatus required for
producing the first-mentioned category are at the
same time essential to the armaments industry. For
the sake of maintaining social peace at home, the
Federal government will. have to ensure that rearma-
ment is not effected at an excessive tempo, but rather
gradually and that the Federal Republic's share in
the total defence expenditure of the Western world
is fixed in such proportion to her national product
as would have due regard to her peculiar geograph-
ical position between East and West, to the special
situation of Berlin which necessitates expenditure of
a particular nature, and to the great social burden
as created by the refugee population.
A
Price and Wage Trends
The absolute volume and, the distribution of the nation-
al product are not the only criteria determining its
development; these two factors have to be regarded
in conjunction with the development of prices and
wages. Since the time that the currency reform put
economic conditions in the Federal Republic back to
normalcy, wage increases have not only been effect-
ed out of profits or out of an increase in consumer
prices, but they were accompanied by a substantial
improvement in the productivity of labour. Since
Increase in Real Wages') and Increase in Productivity2)
Since June 1950
(in olo)
a +20
m
GropbrT nienn
?U. S. A. (bis Sept)
,Deutschland (bis Sept.)
s
-5
4-40 +'15 +2o +25 +30 35
Productivity
1-10
Wage Index 2) Industrial Production Index.
Cost of Living Index. Employment Index.
the currency reform until the outbreak of the Korean
war, the price index for industrial products in the
Federal Republic has declined while at the same
time the index of hourly wages has gone up. From
mid-1950 to mid-1951, the price level for industrial
products as well as the hourly wages rose in about
the same ratio. In. other words: industry could not
only cover the wage increases out of the profits made
but, in addition to that, it was capable of making ex-
tensive investments for expansions and improvements
of plant.
Fig. V. compares the development of real wages in
some of the major countries with the development
of productivity.
It was only these rises in productivity which enabled
industry to afford the wage increases. The fact that
the employment figure of the West German industry
has gone up from year to year in spite of sometimes
considerable wage increases, is evidence that the
wage claims have been reasonable economically.
If this had not been so, the wage increases would
have led to greater price increases for finished pro-
ducts than they really did, moreover they would
have resulted in greater unemployment and, possibly,
in a large-scale closing-down of industrial plant.
The armament boom sets in when the industrial
countries of the West are in a state in the neighbour-
hood of full employment where there are narrow
limits to an expansion of production while in the
Federal Republic, and to a certain extent in Italy,
such expansion can fall back on existing reserves and,
hence, can be more efficient. In 1938, when the pre-
war armament boom set in, the percentage of un-
employment in the USA. was 20 ?/a as against slightly
more than 5'0/o in the middle of 1950, in Great Britain
it was nearly 10 ?/o against 1.5 ?/o; in the Federal
Republic, however, the corresponding figures are
0.5 ?/? for 1938 and 5.3 ?/o for April 1951, and in Italy,
4.2'0/o as against 7.9 0/a today. That is exactly why,
e. g. in Great Britain and the USA., the tempo of the
expansion of industrial production is slowing down
noticeably. Compared with 1950, this expansion
amounted to between 1 and 2 per cent in the USA.
while, in the Marshall Plan countries, a recent publi-
cation by OEEC. estimates it at 5 per cent for 1952
as against 14 per cent in the previous year.
Overcoming the Bottlenecks
On the other hand, the relatively great impulses
existing in the Federal Republic are checked by the
structural handicap of bottlenecks in the basic indu-
stries and in housing construction. This handicap
prevents the favourable circumstances prevailing in
the Federal Republic in the shape of unused resources
of technical production capacity and of manpower,
from becoming fully effective. Hence, the pace of
future developments will depend on the period of
time that will elapse before these bottlenecks will
have been overcome by an expansion of present pro-
duction or an increase of imports.
The main problems are the difficulties in the c o a I
s u p p l y position which developed into an acute
crisis on account of strongly increased industrial con-
sumption and of exports ordered by the International
Ruhr Authority; it was not until autumn 1951 that
this crisis was somewhat mitigated by a vigorous
drive to raise the coal output, by additional though
uneconomical imports from the USA., and by the utiliz-
ation of the output of small collieries and single-
shaft pits. There is no doubt that, after the long-term
investment programme has become effective in the
mining industry, it will be possible to saturate the
demand at home and to meet the requirements of
mandatory export orders. - Conditions are similar in
the iron industry where investment activity
also lagged substantially behind the demand and
where, although somewhat more slowly, adequate
supply can already be foreseen.
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As for the long-lived consumer goods, the construc-
tion of housing accommodation is a top-
ranking problem. But the demand for dwelling space
is not the only factor determining the employment
position in the building business, it is rather compet-
ing with other requirements. It was learnt from ex-
perience that there is a constant relation between
building activity and investment activity; the share
which the building trade has in total investments, is
following a fairly uniform trend and came to about
60 per cent before the war. There exists a similar
constant percentage for the share of living accom-
modation in the total building investments, and this
is from one quarter to one third.
Financial Stability
Any policy of rearmament entails the danger that the
expansion of the national product cannot keep pace
with a demand. swollen by armament expenditure and
hence, that the price level will go up. In all the
West European countries, therefore, the concern about
how to maintain financial stability has become the
cardinal problem of financial and economic policy.
If this stability cannot be maintained, and the in-
flationary tendencies not checked, the danger arises
that the now prevailing will of defence may be ex-
hausted by the inevitable tensions and may then
revert to its opposite.
In its efforts to neutralize inflationary tendencies,
the finance and credit policy of a country will be
successful inasmuch as it can prevent. the price level
from rising and as it can keep the value of money
stable. To this end, it must maintain an equilibrium
between supply and demand, and it can. fall back on
quite a number of means of policy from which it may
select the one or the other or even a combination
of them. I shall only mention: increasing taxation,
cutting government expenditure for the civil demand,
promoting savings activity, delaying less urgent in-
vestments, raising the standards for the granting of
credits which would increase consumption, etc. So
far, Great Britain and France have not succeeded in
keeping stable the money value at home, while
Switzerland has been most successful of all in this
respect. The USA. has avoided inflation by expanding
production and by reducing stocks of raw material for
civil production; Belgium and Western Germany have
been able to check inflationary tendencies by deliber-
ately and energetically restricting credit facilities.
The Finance Ministers of all the West European
countries are faced with the question what possibil-
ities there are to raise means, other than out of the
tax yield, to meet the financial requirements of the
defence efforts to the extent considered essential by
America. Unless there is still room for tax increases,
all countries are depending, above all, on increasing
the production and the efficiency of their economies,
but as has already been shown above, the prospects
of development in this respect will be varying in
each individual case.
At any rate, it is the task of credit and finance policy
not to exceed the legitimate requirements of an ex-
panding economy. Therefore, the central and the
commercial banks of the Federal Republic will have
to go on, in their future credit policy, to observe
their present tactics of carefulness and reservation
if they do not want to create, by way of crediting,
a demand exceeding the production potential. De-
flationary credit policy is the necessary counterpoise
to economic expansion in an armament boom.
For the selection of methods to be applied in fighting
inflationary tendencies, it is essential to appreciate
the fact that national efforts, if they are to have
lasting effect, should be accompanied by a willing-
ness for international cooperation. International co-
operation in the fight against inflation will have to
follow the direction as set out in the late OEEC.-
Report:
1. Distribution of raw materials with a view to main-
taining as great as possible a stability of the price
level;
2. Promotion of price reductions by way of increas-
ing international competition which can only be
established through a further expansion of inter-
European trade;
3. Consideration, in the selection of means of policy,
of the effects which the measures adopted will
have on the other European countries and on
inter-European trade.
Germany's Distressed Areas: A Task of Regional Policy
By Dr. Eridi Dittridi, Bad Godesberg
The task of putting Germany's distressed areas on
their feet again can be broadly divided in to parts,
one structural and the other regional. The first que-
stion to be decided is how the distressed areas are to
be incorporated in the fabric of the German economy.
The second is, what regional centres are to be creat-
ed and what backward areas developed. The first
decision concerns general social and economic policy,
while the second is one of regional organization, or
rather of regional policy. The two complex problems
are closely bound up with one another, and though
we have just spoken of a first decision and a second
decision, this does not imply that one is more import-
ant than the other. The one problem and its solution
cannot be considered apart from the other. Structural
questions are influenced by regional considerations,
and vice versa.
REGIONAL AND STRUCTURAL DISEQUILIBRIUM
IN THE FEDERAL REPUBLIC
The above statements as such have no general appli-
cation. It is quite possible, and not so very long
since it was the case in Germany, for the recovery
of distressed areas to be a peripheral phenomenon
of social and economic policy. Although much was
written about the problems connected with the aboli-
tion of distressed areas in the 'thirties, this must not
blind us to the fact that the base of the German
social and economic order stood firm, and all that was
needed was a Certain amount of repair work. Today
no structural and regional equilibrium exists. The
economy of the Federal Republic is an artificial
structure so long as German unity is lacking. Though
to achieve structural balance must be our endeavour,
it is plain that when the approach to this task has
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to be made in presence of the hard fact of the
separate existence of the Federal Republic, and
hedged round with a thousand and one reservations,
no final and satisfactory solution is possible. But the
stump on which the new order will have to be built
up reveals deep-seated. changes compared with be-
fore the war; it is mutilated and over-populated as a
result of the influx of around 9 million refugees. And
finally it finds itself in the midst of greatly changed
general political and economic world conditions. All
these factors make the task of constructing a new
social and economic order exceedingly difficult, and
mean from the outset that it can only be temporary
and fragmentary. The same is true also of the special
task of rehabilitating the distressed areas.
For the structural disequilibrium is matched by great
regional disequilibrium. This too is a serious burden
which was unknown in this form to pre-war Germany.
It is precisely because the Federal Republic in its
present frontiers is only a part of the old Reich
that the differences between areas which may be
described, with certain reservations, as economically
favourably situated and the distressed areas are so
great. There are indeed a few regions where the
scales are balanced, but in economic dynamics they
are overshadowed by the extremes. As against
certain productive, wealthy key areas, the chief of
which are North Rhine-Westphalia, Wurttemberg, the
Rhine-Main region and some south German industrial
islands, we get a wide border zone, beginning on
the coast of the North Sea, but running along the
Iron Curtain, right from. east of Flensburg to Passau,
of areas where economic and social distress is very
great. They are mainly agricultural areas, some of
which, like the Bavarian Forest, were in a bad way
long before the war. The special feature of these
border zones with their stricken areas is the heaviness
of the burdens imposed by the last war and its
effects: masses of refugees, war damage, and the
disastrous consequences resulting from the zonal
frontier. The combination has turned many regions
once thriving into distressed areas.
This very distinct belt of depression bordering on
the Iron Curtain has what is more or less a parallel
in some frontier areas on the Western border of the
Republic, such as the "Rote Zone" (on the Western
frontier), which have been severely hit by the effects
of the war. The Ems region is in a special position.
But running from East to West between the two
frontier zones following the course of the central
mountain chain (the "Mittelgebirge"), is a series of
old depressed areas: the Rhon, the Vogelsberg, the
Westerwald, the Hunsri ck and the Eifel.
Even this short survey of the main centres of social
and economic depression in Federal Germany shows
that they cover a considerable area and that, in view
of their situation, potential tensions and dangers are
liable to be extremely serious. This means that the
problem which confronts Germany's economic and
regional policy, i. e. social and economic recovery
in the shape of structural and regional coordination,
is also a very serious political one. The individual
Lander affected cannot., possibly deal with a task on
a scale such as this. How could Schleswig-Holstein,
the whole of which is a. distressed . area,, ' achieve, re-
covery by her own ? efforts? Problems which are the
result of the war generally - and most of them are
due to the war - can only be brought nearer to a
solution by the community, that is to say by the
Federal Government,
CHARACTERISTICS OF THE DEPRESSED AREAS
The diversity of the distressed areas and the struct-
ural factors have added a number of new symptoms
to the classic characteristics of distress. In one of the
first reports published by the former Reich Working
Community for Regional Research, for instance, we
read that the 'depressed areas are regions where the
density of population was below the average for
Germany, which can only maintain this thin popul-
ation at a sub-standard level and are unable, there-
fore, to support an increase in their population corre-?
sponding to its numbers, keep these people in the
area and find employment for them, and which, for
all these reasons, were for years supported by the
charity of the Reich and by welfare measures. This
was the definition of the characteristics of the back-
ward mountainous districts in the West, the Huns-
ruck and the Eifel, attempted as 'recently as 1938.
The departments of the Federal Government which
are now dealing with the matter have drawn up the
following list of the characteristic features of depress-
ed areas:
a) Natural disadvantages such as the constant threat
of swollen rivers, storm-floods and droughts;
b) Technical and material disadvantages such as bad
communications, poor living conditions, back-
wardness in industry and agriculture;
c) Economic disabilities such as over-population
generally, but also low yield per worker, low in-
comes and high rate of structural unemployment;
d) Social handicaps such as a large non-propertied
population with nothing to fall back on in times
of crisis;
e) Special disabilities which can in certain circum-
stances pervade all the main departments of life
in the area, such as disease and vice, acute poli-
tical differences, the creation of centres of social
unrest, and disadvantages due to proximity to
frontiers, cultural backwardness, etc.
Definitions such as these can serve one useful pur-
pose, and this was indeed their intention; they can
enable lines of demarcation to be drawn around the
distressed areas. It remains for future discussion to
decide which of the characteristics can be isolated
with sufficient sharpness to be put into statistical
form and serve as the basis for concrete delimitation,
whether statistics of agricultural values, unemploy-
ment, taxable capacity, etc., are to be included, and
how great the value of the statistical evidence is.
These practical questions, important though they are,
are less interesting when we come to consider the
more fundamental aspects; here it is more important
that we should try to classify the causes of distress
which are really the crucial factors in determining
the structural and regional tasks to be accomplished.
For if we are seriously aiming at bettering conditions,
we are not concerned with removing the symptoms
but the causes. The Government departments have
divided the distressed areas into:
a) Areas over-populated as a result of the war ("new
distressed areas");
b) Areas whose functions have been crippled by war
damage, where the standard of living is very low;
c) The older over-populated backward agricultural
areas ("old 'distressed areas").
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Some of these types of distress are due to a single
cause, while others are of mixed origin. Thus, the
older depressed areas have become still more over-
populated owing to the war, so that the causes of
the distress have been cumulative. Life is constantly
mixing up the separate causes and giving the simple-
sounding term "distressed" new meanings. If the
term does not appear to correspond to any reality,
it can only have arisen historically, i, e. it refers in
each case to special non-recurring circumstances.
With all these considerations in mind, the Govern-
ment's representatives have designated the following
as distressed areas, to be the object of relief measures:
1. The Bavarian and Upper-Palatine Forests.
2. The Frankenwald and the Bavarian part of the
Thuringian Forest.
3. The Hochrhon.
4. The Vogelsberg.
5. Parts of North Hesse.
6. The Upper Harz.
7. The whole of Watenstedt-Salzgitter.
8. Elbe-Jetzel.
9. All of Schleswig-Holstein.
10. Wesermarsch, Wilhelmshaven, Friesland.
11. The Eifel.
12. The Hunsriick.
13. Other war-devastated agricultural areas on the
Western frontier (the "Rote Zone").
14. The Hotzenwald.
The classification is by districts, the idea being
always to include the actual centres of distress;
in the Eifel, for instance, the rural districts of Priim
and Daun acrd parts of the districts of Bitburg, Ahr-
weiler and Mayen, in the Hunsriick the district of
Birkenfeld, and so forth. In its "Reports" for 1951,
the Institute for Regional Research gives information
about a number of individual distressed areas, to
which the reader is referred.
CHOICE AND APPLICATION OF REMEDIES
It is obvious that in view of the diversity and the
novelty of the individual causes of the distress it
cannot be overcome by the old remedies alone. The
choice of the means to be employed is a matter in
the first place of the prevailing economic order. A
free economy guided by a State with a light hand
cannot make use of the methods at the command
of a police State. Quite apart from the fact that in
a police State the case of the distressed areas has
quite a different emphasis. But they exist even there,
and a Land like Mecklenburg (in the Soviet zone)
probably presents many points of resemblance with
Schleswig-Holstein. One of the most notable features
connected with the possibilities of recovery is that,
irrespective of the prevailing economic order, sub-
stitute remedies can be found for distress in a parti-
cular area. Social distress can be abolished by
economic recovery, agricultural 'distress by industrial
expansion, industrial backwardness by improved
transport facilities, etc. This substitute relief is made
possible by the fact that the nature of the distress
in each area is attributable to structural defects, that
is, to causes which react on the whole and its diffe-
rent parts in the same way and are not isolated and
do not have to be combatted as isolated phenomena.
And the fact that the general consequences of the
war are important factors in the formation of new
distressed areas means a regional exchange of possi-
bilities of recovery on a scale hitherto unknown.
Distress in one area could certainly be abolished by
developing a suitable neighbouring area or even a
neighbouring town which afforded openings for new
industries. But conditions after the second world war
have led to recovery at long range. This is some-
thing new in Germany. It is possible to relieve or
even abolish distress in one area by investments in
an entirely different Land not near it and not included
amongst the distressed areas, or, to put it baldly, to
restore prosperity in Schleswig-Holstein by building
houses in North Rhine-Westphalia. We will revert
to this problem in. detail later. Speaking quite gener-
ally, it is a matter of alleviating social. and economic
distress in deficiency areas by deliberately promoting
industry in prosperous ones. Because the recovery
of Germany's distressed areas is the task of a struc-
turally reconstructed German economy, the nature
of the remedies and their application are structurally
and regionally determined by the problem as a whole
and are not localized.
If we are fully alive to these possibilities, the over-
simplified alternatives presented to the public, namely
whether in the recovery process the men should be
brought to the work or the work to the men, can
never rank as the crucial factor in the decisions
taken. This problem is not a new one. It was debated
in just the same primitive and extreme fashion, for
instance, in the 'thirties and again at the beginning
of the second world war when the issue was where
the new armament works and their supplying works
were to be put up or allowed to remain. To take a
concrete example, the question was asked whether
man-power should be taken away from the Erz-
gebirge and established in the Central-German indu-
strial areas so that the entire process could be comb-
ined in one place, or whether the different processes
should be kept separate and the workers left where
they were. It was not possible to come to an entirely
unequivocal decision in favour of either alternative
even at that time, when these problems could be
solved with the assistance of arbitrary employment
contracts and other means of economic compulsion.
And today the alternatives present themselves in
quite a different form, particularly when it comes
to deciding between re-settlement or industrialization
in the over-populated areas. For a long time re-settle-
ment was favoured, but now that re-settlement has
proved difficult and slow to produce the desired
results, the question of economic expansion, that is
to say the industrialization of the distressed areas,
has moved up to first place in debates and in econ-
omic planning. Now it is true that it is an elementary
proposition in economics that in order to produce,
capital and labour and the productive factor nature
belong together. But we should be adopting very
primitive methods, and methods which, particularly
in view of the diversity of the tasks which present
themselves in real life, would be doomed to failure,
if we were to try to regulate this joint operation by
such simple fundamental rules. The men and the work
must be brought together; where this is to be done
is a factual question which comprises many different
elements. Hence, the two alternatives are really
wrongly stated, and only lead us astray. It is to be
regretted that they have had unfortunate conse-
quences. For the original bias in favour of re-settle-
ment caused industrial opportunities to be missed,
16
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which at that time were more frequent than they are
now. If people were too ready some time ago to
hope for recovery through resettlement - for the
disappointment felt today about the lack of progress
made in re-settlement is due principally to an under-
estimation of the magnitude of the task - there is
a danger now of their oversimplifying the possibili-
ties offered by industrial settlement and glossing
over the difficulties by talking glibly about redirect-
ing labour to the "Mittelgebirge". As many of the
distressed areas, particularly the older ones, are
situated in "Mittel gebirge" such as the Bavarian and
Upper Palatine Forests, the Frankenwald, the RhSn,
the Vogelsberg, the Westerwald, the Hunsrii.ck, the
Eifel and the Black Forest, great importance is attached
to the argument of the direction of labour to these
industries. And yet an expert on this subject like
Johannes Muller sounded a note of warning long
ago against underestimating the importance of ob-
jective local factors in the German Mittelgebirge. He
came to what was doubtless the correct conclusion
when he said that the :Erzgebirge and the Thuringian
Forest, which are usually claimed to be characte-
ristic examples of the industrial life of the German
Mittelgebirge, are quite the opposite of characteristic,
and are indeed in a class by themselves. He did not
mean by this that they were unlike the other moun-
tain regions, but that their industrialization represent-
ed as it were the ideal type, and that the other
German Mittelgebirge lagged some way behind them,
many of them in fact so far behind as to make con-
ditions there completely different. In any case, indu-
stry in the German Mittelgebirge, from the historical
aspect, is built up on objective local factors, and
these factors still continue to play a significant role.
We shall have cause to revert to this point later,
REDISTRIBUTION OF POPULATION
Now there is no doubt that of all the measures aimed
at the general betterment of economic and social
conditions in the Federal Republic, the most important
is the achievement of a satisfactory redistribution of
population. This is realized, moreover, as we have
already shown, by the Federal Government depart-
ments. But redistribution of population cannot be
taken as meaning that the density of population per
square kilometre would necessarily be the same
everywhere. There will always be areas of industrial
concentration, and they will have much greater
importance in the Federal Republic than they had
in the Reich. For it is precisely to the fact that the
Federal Republic possesses the most important con-
centrations of industry in Europe in the Ruhr that
its regional disequilibrium is due. As re-settlement
in the process of the redistribution of the population
will divert population from what are mainly agri-
cultural districts, it will inevitably enhance the im-
portance of the industrial concentrations. We may
not like this, but there is no getting away from it.
The Institute for Regional Research has expressed
its views in various memoranda, opinions and other
publications both on the question of the redistribution
of the population and on its most important con-
stituent factor, the shifting of refugees. It is not dis-
puted that this task, which is probably the greatest
single task ,in the reconstruction of the German social
and economic order, devolves upon the Government.
And it will be realized nowadays, especially after
the failure of the various attempts at officially direct-
ed regional resettlement, that the trend of free internal
migration must be taken as the guiding principle, that
is to say that the official measures too must be ad-
justed to the general movement from the over-burden-
ed deficiency areas to the big prosperous ones.
Applied to the special position of the distressed
areas, the meaning of the general lessons which
emerge from the process and the results of free in-
ternal migration and officially directed re-settlement
up to the present is this: officially directed re-settle-
ment cannot aim at transferring refugees from one
distressed area to another. Which means, in concrete
terms, from Schleswig-Holstein to the Eifel. If the
ideas outlined above are acted upon, directed re-
settlement can only. be effected by regions following
free migration, that is to say from deficiency areas
to prosperous ones, and not from Land A to Land B.
The danger of re-settling refugees in other distressed
areas can only be avoided by breaking away from
the Land principle in the technical carrying-out of
the re-settlement and by adopting the regional prin-
ciple. The re-settlement schemes undertaken. up to
the present have erred in this respect. The fact that
they have now been corrected as far as possible by
free internal migration is an advantage for which we
have to thank the free economy.
As these questions are of especial importance where
the distressed area of Schleswig-Holstein is concerned,
it behoves us at this point to describe the peculiar
position in which this Land finds itself. Schleswig-Hol-
stein's former industrial prosperity has been under-
mined by the war. It was founded on actual armament
industries and their supplying works,-, About 130,000
jobs in industry. were lost owing to war damage and
dismantling. On the other hand a mighty stream of
refugees poured into Schleswig-Holstein. Its populat-
ion rose from about 1.6 million in 1939 to about
2.6 million in 1946, and amounted on January 1st 1950
to 2.7 million. Widespread permanent structural un-
employment and social distress on an. unimaginable
scale were the inevitable consequences. Now as Schles-
wig-Holstein, in spite of its incursions into industry,
has remained an agricultural Land, it does not possess
the recuperative powers displayed, for instance, by the
industrial concentration areas, where economic energy
was only temporarily quenched by wartime destruct-
ion and dismantling. As soon as the bottled-up stores
of energy were released these areas cast off their
temporary role of distressed areas and have become
the most important producing areas in the Federal
Republic. It was impossible that Schleswig-Holstein
should have' possessed the same resilience.
Before 1939, it would have been unthinkable to rank
Schleswig-Holstein as anything approaching a dis-
tressed area. It was a thriving agricultural region,
resembling Denmark in this respect, though its agri-
culture was not so intensive as Denmark's. Seen from
the angle of today, agrarian policy could certainly
have served Schleswig-Holstein better. The very fact
that its agriculture lagged behind Danish agriculture,
which was carried on in the same natural conditions,
shows what could have been done, certainly in agri-
culture in Holstein. This international change of
direction should have been allowed to take place, as
the attraction of the nearest large German concent-
ration and agricultural marketing area in Rhineland-
Westphalia as such had been diverted elsewhere and
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was no longer directed to Schleswig-holstein. The
reason why this political change of front could not be
carried out in the economic situation prevailing at the
time, however, was because of the tenacity of the
agrarian interests East of the Elbe, which could not
be reconciled with what were known to be the
interests of Schleswig-Holstein. East of the Elbe the
aim was protective duties and withdrawal from the
world market, not free trade.
Both factors, industrial dismantling and a not entirely
fortunate agrarian policy, have accentuated the de-
pression which set in in Schleswig-Holstein with the
influx of the refugees. It is true that agricultural
conditions there have changed under the pressure of
these events. Schleswig-Holstein has been trying to
support an agricultural population which has swollen
since 1939, and has succeeded in doing so by effecting
changes in its agriculture. The number of workers
employed, in agriculture has risen more in Schleswig-
Holstein than in any of the other Lander since before
the war, partly owing to more intensive vegetable-
growing, which requires a great deal of labour. But
the possibilities it affords are very limited. Relief on
any material scale can only come from industrial
reconstruction and expansion. But it is impossible to
look to industrialization for a short-term solution of
Schleswig-Holstein's refugee problem and with it the
removal of the crucial cause of the distress there.
Only re-settlement remains as the chief way out of the
impasse. And here omissions of the past few years
are making themselves felt.
As the result of free migration and directed re-settle-
ment the population of Schleswig-Holstein had declined
by the middle of last year from 2.2 million to some
2.5 million. It is thus below the level recorded at the
1946 census, but still far higher than in 1939. Accord-
ing to calculations of the Institute for Regional
Research, a .further approximately 630,000 people
should still be removed from Schleswig-Holstein to
other places, partly by officially directed re-settlement
and partly by free emigration. The Institute's
investigations have also shown that the chief diffi-
culties connected with official re-settlement are that
most of the active elements amongst the refugees have
left the Land, partly by official re-settlement and
partly by free emigration, and that the groups now to
be re-settled consist of people rendered immobile by
social, economic and psychological factors. But it is
precisely these groups which give ? the distress in
Schleswig-Holstein its special character and will, if
they remain there, make it a permanency. People of
low or restricted earning power, juveniles, broken-up
families - to indicate some of the typical groups we
are concerned with here - have much better chances
of employment and training in an area where many
different and highly-developed industries are con-
centrated than Schleswig-Holstein can offer them in
breadth, even if industry is expanded to the utmost.
It is general knowledge that in North Rhine-West-
phalia opportunities exist for such groups, but that the
whole scheme depends on whether or not housing can
be provided for them. Only when new houses have
been built in the prosperous areas to lodge the immi-
grants, will it be possible for them to take full
advantage of their chances of obtaining employment,
and for this purpose, again, the investment of funds in
housing in the reception areas is necessary. It is in
this sense that what we said above about the recovery
of Schleswig-Holstein depending on housing con-
struction in North Rhine-Westphalia is to be under-
stood.
Migration and housing construction are consequently
inseparable, and this must be borne in mind in all
measures aiming at the recovery of the distressed
areas insofar as they concern the redistribution of
population. The fact that the necessary coordination
has often been lacking both materially and in point
of time, is the chief reason why better results have
not been obtained from re-settlement so far; though
we must not, of course, demand the impossible from
it. Many of the criticisms now being heard are unjust
and without objective foundation. Re-settlement
denotes not only a change of domicile but genuine
incorporation, which in itself shows that it must
inevitably be a long process of amalgamation. Further-
more, the annual quotas the nonfulfilment of which is
receiving publicity are political ones. They were
originally fixed at a time when no one could possibly
have had any experience of what could be expected
every year from officially directed re-settlement, and
they were also fixed later politically. The information
showing what free migration has actually taken place,
by which, if it is to be successful, official re-settlement
must be guided, could not be obtained and made
available in the form of official statistics until later.
And finally the criticisms often overlook the time
factor and do not make allowance, in the unfulfilled
quota for 1951, for the numbers left over from 1950
and actually settled in 1951.
But re-settlement is an important factor in the re-
covery not only of Schleswig-Holstein but also of
other distressed areas such as the Bavarian Forest, the
Rhon and North I-lesse, to mention only a few parti-
cularly outstanding examples. This would of course
involve re-settlement. on a different scale. But the
Bavarian Forest, whidi could only provide an adequate
livelihood for some two-thirds of its population in
1939, and whose population rose by.33 O/o, owing to the
influx of refugees after 1945, can only be relieved by
resettling part of its surplus inhabitants, industrial
expansion notwithstanding. These are measures many
of which can be planned and carried out by the
Lander independently, possibly on the lines of the
much talked-of Hesse Plan aimed at internal recovery
by means of an exchange of population from the
distressed area of North Hesse to the industrial con-
centration area of Frankfurt-Wiesbaden. To what
extent Government funds are required is another
matter. But whether it be Schleswig-Holstein, the
Bavarian Forest or North Hesse, in every case we shall
get what we have called regional substitution of re-
covery possibilities. Furthermore, prosperous areas
are helping by receiving the excess population which
the distressed areas have no possible means of
supporting. It should be noted further that the question
of the industrial stocking-up of prosperous areas,
possibly in the South-West of the Federal Republic,
should also be considered from this angle. A fillip to
industry in Baden would not only benefit that Land
but would also, because of the arrangements that
would have to be made for receiving refugees, help
to restore healthier conditions in the far-away dis-
tressed areas on the coast. He who earnestly desires
a return to prosperity for his own Land or his own
distressed area must not keep his eyes fixed on what
is happening inside its frontiers and believe that all
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the funds that are available ought to be invested only
in the area itself. An outlook as narrow as this may
even do harm to that area.
INCREASING PRODUCTIVE CAPACITY
The various aspects of the tasks connected with re-
settlement have been intentionally given first place
here. It is these tasks which are the primary aim of
all policy which has as its object the recovery of the
distressed areas. And they are the more modern tasks,
which did not figure to the same extent in earlier
projects. All measures which set out to restore pros-
perity to the distressed areas by increasing their
economic capacity are an old story. As the great
majority of the distressed areas are agricultural ones,
it is obvious that reconstruction schemes should begin
by trying to raise their productivity. The very limited
scale on which this is possible in a case like that of
Schleswig-Holstein has already been described. There
are some areas, however, where the chances of success
for the whole area are greater. The distressed areas
have often been called agricultural areas with a small
agricultural marketable output. There are many quite
different reasons for this; where the Rhon is con-
cerned, for instance, they are: the flat stony land, the
repeated parcelling - out of the land as the result of
division of inheritance, bad farming methods and the
unduly high cost of the land owing to the land hunger
of the population. Emigration to America from the
Rhon is very common, and the emigrants, the "Ameri-
cans", eventually come back and buy themselves a
plot of land with their savings. This sends up the price
of land. Before the last world war it was nothing
unusual for a hectare of land in the Rhon to change
hands at from 5,000 to 6,000 Reichmarks, the value per
unit having been somewhere near 500 Reichmarks.
Needless to say, in such circumstances there is no
question of making a profit on it in normal times. The
result has been that these farms are encumbered with
colossal debts. A sampling survey conducted in 1932
disclosed indebtedness amounting to 1,326 Reichsmarks
per hectare of land under cultivation in the' Rhon
compared with an average for Bavaria of 537 Reich-
marks. Conditions are similar among the mountain
farmers in the other Southern and Western distressed
areas in West Germany, and almost all recovery pro-
jects begin by demanding that the question of the land
shall be put on a sounder basis, because it is the
essential precondition for all further measures such as
impfovements, better opening-up of plots, effective
steps to counter the danger of erosion, freedom from
debt, and a revision of credit conditions. Where the
North-German distressed areas are concerned other tasks
are more urgent: the cultivation of new moorland and
fallow land, construction of water-protection systems
and dykes, land reclamation, plant for protection from
wind, settlement by refugee farmers, the introduction
of new cultures, etc.
But even in the former debates on the older distressed
areas in the farmland in the Mittelgebirge, it was
generally accepted that the measures taken in the
agricultural sector would have to be accompanied by
others in the industrial sphere, either in order to
provide the farm workers with an additional source
of income or. to drain off the surplus agricultural
population into industry and thereby relieve agri-
culture of its redundant personnel. For at that time
industrialization was regarded as the only way of
lessening to any appreciable extent the burden of
excess population, and today it ranks second after the
redistribution of population in reconstruction measures.
Today, however, we shall have to consider the indu-
strialization of the distressed areas as having a very
close connection indeed with the redistribution of
population, particularly with officially directed re-
settlement. Unfortunately, as we have said, it was not
clearly realized right from the start that the two
measures must run parallel and be coordinated, and
no proper care was taken when the re-settlement was
effected to see that the entrepreneurs and specialized
workers needed for the setting-up of new industries
were left behind in the distressed areas in sufficient
numbers. Hence, in many cases the distressed areas
parted with all their specialized workers and were
left with the others, the immobile, the tired, the
people of low or restricted earning capacity. The dis-
tressed areas have lost the pioneers, who are not so
vitally important to the concentration areas, whereas
the less employable people who have been left behind
could still have been, usefully employed in the con-
centration areas. This is more or less a description,
albeit a highly-coloured one, of actual events,
The homes proposed for the new industries are first
the Mittelgebirge and then the coastal areas. An im-
portant consideration here is the absence of a vital
factor in industrial concentration, namely of large
coalfields. We are therefore forced to proceed on the
assumption that the industries to be set up will have
to be ones for which the immediate proximity of coal
is not essential. As, furthermore, the chief object is to
provide employment for additional population, the
new industries should be ones in which the emphasis
is on labour and not so much on capital,. as capital is
in general dear and not easily come by. We can get
some tips from concerns which were moved during
the war. In this connection an interesting example is
provided by what has been done in the Rhon by the
Siemens concern, who already have works at Bad
Neustadt-on-Saale and are now building another at
Bad Brilckenau. But the psychological moment for a
successful industrial re-settlement in the Mittel-
gebirge was when the refugees first arrived. It would
have been the obvious thing to transfer them as it
were from one "Mittelgebirge" to another and let
them get on with the jobs they had already been
doing in similar surroundings in their old homes. But
one "Mittelgebirge" is not the same as another, and
Johannes Muller who was so emphatic about the
special position of the Erzgebirge and the Thuringian
Forest, stresses the fact that industrial activity in the
Mittelgebirge has become most intensive where parti-
cularly outstanding industrial ability has been faced
with problems of not more than average difficulty, as
in the Erzgebirge, the Thuringian Forest and the South
Westphalian mountains, Conditions in the Rhon, the
Eifel and the Bavarian Forest are not like this, how-
ever. Perhaps the Sudeten Germans have had con-
ditions more like those in the Saxon Erzgebirge and
the Thuringian Forest. In any case they have made
the acquaintance of quite different "Mittelgebirge" in
Federal Germany. But leaving aside all. these con-
siderations, it is too late to do much about it now.
Considerable sections of the refugee industries have
established themselves in other areas, not a few in
prosperous ones like Wurttemberg and North Rhine-
Westphalia. By no means all of them, moreover, have
gone into the country, and many have made for the
large towns. In North Rhine-Westphalia, for instance,
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the refugees industries are definitely centred in the
large towns, and though in Bavaria they are to be
found mainly in small towns of up to 10,000 in-
habitants, this is not to say that these refugee con-
cerns would have settled in Bavarian distressed areas
for preference. They would most certainly not have
done so. At all events, the great majority of the refugee
industries are no longer floating industries which still
have to find homes for themselves. They already have
homes and will not part with them lightly. Hence,
some incentive will have to be offered them if they
are to be induced to go to the distressed areas as
pioneers in industry. But this makes it all the more
necessary for vigorous steps to be taken to find out
what industries started by refugees in distressed areas
are already in difficulties, possibly in the Bavarian
Forest, but will have to be supported in the interests
of the economic development of the area. In finding
the answer to this question the opportunities on the
world markets of the industries concerned must not
be overlooked.
PLANNING AND IMAGINATION
In these, as in all other cases involving the setting-up
of new concerns in distressed areas or the supporting
of existing ones, careful planning will be necessary,
but it must be done with a grain of imagination and
not stick too much to outworn formulae. The industrial
development of Wilhelmshaven is a highly instruc-
tive example of what can be done in breaking new
ground. Versatility, the exploitation of all the special
local possibilities and adjustment to opportunities on
the world markets are demanded of the new indu-
stries, which should concentrate on producing high-
grade export goods.
The speeding-up of industry and re-settlement are the
two crucial factors in the rehabilitation of the distress-
ed areas. If they are to achieve it they will have to
be supported by other measures, What housing con-
struction is to re-settlement, increased transport
facilities are to industrialization. All the different
plans and proposals show that the chief requirement
here is an expansion of the road system. The question
of the construction of new railway lines does crop up
now and then in the plans, but on the whole, where
the railways are concerned, in this case once more
it is not so much a matter of constructing new lines
as of cutting rates. It is important, on the other hand,
that new roads should be built so as to make it
possible for new industries to be set up or for exist-
ing ones to expand and to bring the workers from
their distant villages. Considerable shuttle traffic will
often be unavoidable in the distressed areas. In this
matter of shuttle traffic, too, public opinion has
frequently been unduly prejudiced. The part played
by this traffic as a criterion of prevailing conditions
is often similar to that played by home industries,
which are also a phenomenon frequently met with in
distressed areas. There have been times when home
industries have been regarded as the last word in
social degradation, and the same thing sometimes
happens in the-case of shuttle traffic, so that its better
aspects are lost sight of because of this unfortunate
background.
It has only been possible to deal in broad outline
here with the tasks and the possibilities presented
by the rehabilitation of the distressed areas. And
only the essential remedies have been indicated,
measures whose aim it is to provide properly paid,
permanent jobs. For relief measures which only set
out to give employment to the unemployed "to keep
them off the street" do not constitute recovery. They
are often ill-spent capital.
Do Branded Goods Require Price Maintenance?
By Prof. Karl Christian Behrens and Wolf Dieter Becker, Berlin
Neutral observers who have followed the discussions
which have been going on for years about the merits
and demerits of branded goods, will have been struck
by the fact that the protagonists and the critics of
such goods almost always use the term "branded" as
it is defined in the statutes of the Trade Mark As-
sociation. We also find the Association's definition
adopted in trade journals. The rule is departed from
by Schafer t) and H. Fischer 2), who analyse the func-
tions of branded goods, but still take as their point
of departure the concept of the "classical" branded
article corresponding to the Trade Mark Association's
definition.
According to that definition, branded goods are
"Products o f t h e s a m e k i n d regulary put on the market
in the same quality and presented in the
same way, an identifying device of the maker
(a mark - either the name of a firm or a picture or a word
mark) indicating its connection with a specific place of
origin being visible on the goods or on the package, and for
which the makers have fixed a s e 1 I i n g p r i c e valid f o r
the whole of Germany which must be main-
tained by the trade").
') Zur Analyse des Markenwesens. Die Deutsche Fertigware, Stutt-
gart 1935.
Produzent and Markenwesen, Berlin 1939.
Quoted from: Bergler, Der Markenartikel im Rahmen der indu-
striellen Absatzwirtsdraft, in "Marktwirtschaft and Wirtschafts-
wissenschaft", Festschrift fur W. Vershofen, Berlin 1939, p. 240.
Although decades ago there may have been justific-
ation for adopting this concept as a scientific work-
ing expedient, the time has come to reconsider the
advisability of continuing to use this formula. Its in-
adequacy is demonstrated by the fact that certain
articles which we automatically call branded goods
are not included in it because they lack one charac-
teristic, e. g. price maintenance. We cannot but agree
with Bergler when he calls the Association's definition
"mechanistic" and says that it "misses the point" 4).
The definition of the Trade Mark Association requires
that branded goods shall possess three characteristics:
1. The same brand and the same presentation;
2. Be of the same kind and quality;
3. The same price, a maintained one.
Let us see whether these attributes are really typical
of the branded goods of today. b
BRANDING AND PRESENTATION
"Branded goods" originally came into being sponsor-
ed by the trademark, the most impressive identifying
device. It shows the origin of the article and also
constitutes a guarantee on the part of the makers or
the dealers. The "guarantee" is addressed - generally
via several stages of production and distribution -
') Op. cit., p. 247.
20
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direct to. the consumer with the assurance that the
goods for which the trademark stands are a high-
class type of a certain kind.
It is this direct approach to the consumer which is the
fundamental difference between branded goods and
goods bearing no name and which constitutes the
chief function of the trademark. Without the label
there is usually nothing to tell the consumer whether
the goods are really high-grade ones, as he has no
means of subjecting them to a technical examination.
The trademark therefore passes on the guarantee of
quality direct to the consumer. It helps, moreover, to
make the goods more widely known, hence it also
performs a propaganda function. The necessity for
the outward form of the trademark to remain un-
changed as far as possible is so obvious as to require
no further comment.
On the other hand the requirement thatthe packaging
shall remain the same as a precaution against the
goods being changed after they leave the factory is
more open to criticism. In the years after 1945 many
of the manufacturers improved the packaging of their
branded goods without any question being raised of
the quality having been changed, let alone lowered.
The Sunlight Company, on the other hand, recently
decided not to put up their prices to meet the big
increase in the cost of paper, and are now offering
their article on the market unwrapped. They say:
"Even without the externals the housewife will ...
remain loyal to us. At the same time we feel that by
taking this step we have proved that urgent problems
of the hour can be solved by unconventional
action . . . " s). The fact that so important a firm has
had the courage to take this step, which is regarded
by all the text-books as a very doubtful proceeding a)
makes it look as though more importance has been
attached hitherto to the use of the same packaging
than was really necessary.
Where a branded article has given steady, genuine
service for many years and has thereby become an
indispensable part of the consumer's daily life, its
presentation will not be as important as it is
generally thought to be. Much depends, too, on
whether the article is used daily or periodically.
Changes in the presentation of articles of daily use
will probably be accepted more quickly than when
they are used periodically.
Hence, the trademark is the "guarantee transmitter'
in the system, whereas uniform presentation is only
an additional identifying device.
UNIFORMITY OF KIND AND QUALITY
The requirement that branded goods put on the
market shall be of the same kind and quality means
that the trademark is a token of quality. Besides
guaranteeing the quality of the product (practical use-
value, durability, etc.), in many cases it also indicates
its dimensions, its type, etc., in the same way as the
DIN. standards do. Indications of quality make for
better understanding between the parties to the trans-
action and are an important aid to rationalization. It
therefore behoves manufacturers of mass-consumption
goods to lay still more stress on the sign-of-quality
aspect of branded goods than they have done hitherto.
But what do we find in, reality?
Where the goods are harvested products, no such
guarantee can be given with certainty. But no one
6) "Der Kontakt", the journal of the Sunlight A. G., 1951, No. 3,
p, 4. 252.
Cf, inter she Bergler, op. cit., p.
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will deny the many high-grade articles on the food
and.luxury markets their right to the name of brand-
ed goods on that account. The fluctuations in quality
would have to be very noticeable to make the con-
sumer give up buying the brand of his - often ir-
rational - fancy and change to another one. Con-
sumers are not as a rule concerned with slight
changes. What matters to them is that the quality
shall be habitually high.
But the "standard" function of the trademark system
is discounted in another way, namely by the number
of similar "high-grade goods" appearing on the
market in the guise of branded goods. The consumer
cannot detect the usually slight technical differences
between them and authentic branded goods, for with
the help of costly advertising small points can often
be made to look like being vitally important.
This behaviour has still more harmful consequences
when articles which have long since become mass-
consumption goods are kept on the market as
"artificial specialties". Here the tendency to ration-
alization of selling and consumption inherent in the
system defeats its own object. The numerous
"artificial" specialties masquerading as branded goods
lead to unjustifiably high prices for many mass-con-
sumption goods, the result being a depression of the
consumer's standard of living.
It is reported 7) that an American store once display-
ed for sale two piles of exactly similar towels, one
of which was labelled "branded goods". When sales
were checked up after a certain time, it was found
'1) Weidmann-Lauter, "Der Markenartikel", two lectures, Zurich.
1932.
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that of all the towels sold, 80 0/0 were from the
"branded" pile. This goes to illustrate the inex-
perience of consumers.
"Our economic system cannot give proof of its in-
herent strength", says an American expert 8), "if the
manner in which extensive consumer markets are
catered for, amounts to exploitation of ignorance and
confusion." As a remedy for this state of affairs he
suggests standardization of mass-consumption goods,
which will help "to keep our free competitive econ-
omy sound, strong and efficient".
The trademark should stand for what is agreed by
the consensus of economic opinion to represent a
real advance in quality (and in value). If we aspire
to this genuine efficiency competition, the. individual
branded article can only occupy a position of prefer-
ence for a time; until, that is to say, the bulk of the
products competing with it have caught up with it
in quality.
The individual consumer cannot tell whether the
goods offered him as branded goods are "artificial
specialties', "pseudo-brands" or authentic branded
goods. Mass suggestion by large-scale advertising has
blunted the perceptions of the consumer to such an
extent that many branded goods enjoy an opinion
monopoly. It would therefore be to the interest of
the makers of authentic branded goods to return to
real efficiency competition so that everyone can re-
cognize the difference between real and quasi-brand-
ed goods.
QUALITY MARK PLUS TRADEMARK
One way in which this could be achieved would be
by the introduction of quality marks for mass-con-
sumption goods. There was a strong bias in favour
of this "collective confirmation of the quality of the
goods" amongst manufacturers, dealers and con-
sumers before the second world war 8), and if certain
consumer goods were compulsorily subjected to
uniform tests there would be no danger of a quality
mark (control number) affecting the position of in-
dividual brands 10). The introduction of obligatory
quality marks would not only make the public be-
come attached to brands which may otherwise be
brought into disrepute by "pseudo-brands". The
quality mark would guarantee a minimum habitual
standard of quality and would give the members of
the Trade Mark Association valuable protection
against the makers of pseudo-branded goods.
In this matter we should do well to copy the success-
ful experiments carried out in the USA. in the quality
grading of consumer goods 11). The quality grading is
done there by official, semi-official and private
organizations who have their own special labor-
atories. Every article to be tested is given the record
number of the control station. In view of the dislike
felt - understandably - in Germany for Govern-
ment controls, voluntary organizations should be set
up which would carry out the quality tests and put a ,
quality label on the groups of goods tested. In agri-
culture we still have a comparable institution in the
butter market dating from pre-war clays. Another
interesting point is that the American consumer
organizations examine branded goods privately in
N) C. W. Moffet, quoted from Coles in "Standards and Labels for
Consumers' Goods", the Ronald Press Co., New York 1949, p. 158,
') H. Fischer, op. cit., p. 13.
10) Cf. H. Fischer, op. cit., p. 13.
11) In this connection see Behrens, "Standardisierung in Amerika",
Rationalisierung, 1st annual issue, No. II, 1950, and "Standardi-
sierung and Sortenbeschrankung", Zeitschrift fur Betriebswirt-
schaft", 20th year of issue, 1950, p. 582 et seq.
their laboratories and divide them into three cate-
gories (recommended, fair to middling, not recom-
mended). The goods also have quality marks (iden-
tifying labels) affixed to them after testing. Their use
is voluntary; they guarantee the customer a relatively
constant quality and give customers who buy "over
the counter" the advantages enjoyed by wholesale
buyers with experienced buying agents and labor-
atories of their own. Nor would buyers of finished
or consumer goods be the only ones to benefit by
quality grading. We also meet with the marks of the
makers on raw materials ('basic standards"). An ex-
ample of this in Germany is Nino-Flex branded
poplin, which is supplied to more than 300 manufac-
turers. In the USA., the US. Steel Corporation's mark
is to be found as a guarantee of the quality of the
steel on many manufactures, from children's toys to
railway bridges 12).
The practice of quality grading of consumer goods
and raw materials benefits consumer and manufac-
turer alike.
FIXED SELLING PRICES (PRICE MAINTENANCE)
We must begin by explaining the term "price main-
tenance". Price maintenance may mean two things:
uniformity of prices and stability of prices. We can
interpret uniformity of prices in the first place as
meaning that the prices of certain goods in a certain
district are the same everywhere at a given moment.
If we are referring to prices in one place, then
uniformity of prices means that the price of each
unit is the same to each buyer of the commodity. In
this case we call this a "fixed" price, that is to say
there can be no "beating down". Stability of prices
includes the time factor. It means that the price of
the article remains unchanged for an unstipulated
length of time. Stability of prices may be absolute,
i. e. independent of the fluctuations in the value of
money and the level of prices. It may also mean,
however, that the "maintained" prices rise or fall in
harmony with the ups and downs of the general
price index. In this case there is a "sliding scale"
for each branded article the price of which is main-
tained.
When we examine price maintenance for branded
articles we find that it is a question of regional
uniformity, "fixed" prices, and stability of prices,
linked with the general price level. The distinction
between the three aspects of resale price maintain-
ance - which some people would like to see intro-
duced again - is important inasmuch as its advocates
and critics frequently select one of them and on its
basis pass judgement on the whole complicated
question of price Iaintenance. It must be remember-
ed that the pecuii.arities which have characterized the
practice of price maintenance up to the present, have
been due precisely to the joint operation of the three
factors.
Regional uniformity of prices affects chiefly the cal-
culation of transport costs. Assuming trade margins
on branded goods to be ?standardized", two courses
are possible: either the transport costs are calcul-
ated by the manufacturers, or the trade margin must
be fixed at a level which allows of their being cal-
culated by the wholesale and retail dealers. In the
first case the manufacturer establishes a total trans-
port costs account. He uses the surpluses resulting
from moderate transport charges on the one hand
11) Cf. Hundhausen, "Die betriebswirtschaftliche Bedeutung des
Markenartikels", Industriekurier No. 81, 13. 5. 51.
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to offset, deficiencies`
transport costs, which
vidual costs, now becom
Z other buyers, The
,finally genuine indi-
iral costs, with all the
problems which this raises,The result is that the
dealers nearest the production end are prejudiced for
benefit of the others. It is also possible for the manu-
facturer to fix uniform trade margins by zones (freight
basis); however, this does not alter the principle.
While the individual dealer has little say in the
matter of transport costs,, he has it in his power to
decide the amount of the other trading costs. Uni-
formity of selling prices means the freezing of trading
costs. In theory, of course, when selling prices are
maintained the prospect of a higher share in the
profits acts as an incentive to lower costs. But the
technical effort and the organization required to
bring costs down calls for initiative, and so long as
there is no compulsion to reduce costs. dealers will
be reluctant to tackle problems of this kind. Compul-.
sion to reduce costs only exists, where prices are
free and competitive. Fixed prices stifle the com-
mercial ability of the trader,' 'particularly that of
the retailer.
The fact that the trade itself wants resale. price
maintenance, thereby shirking its commercial func-
tions, has nothing surprising about it while the deal-
ers' rebate on branded goods remains relatively high
(25-40?/o). The opponents of free competition see
nothing inconsistent in their refusal to countenance
the free.operation of supply and demand in the case
of branded goods. "The majority ' of independent
traders want to remain free, but they do not want
the price mechanism of the free economy. In their
opinion, a free economy means leaving them free to
make money." 13) Can it be that the. underlying rea-
son for the resistance to free competitive prices for
branded goods is the trade's unwillingness to take
risks?
As for stability of prices, this is contrary to the
principles of the modern dynamic economy. Artific-
ially maintained stability of prices is uneconomic. It
would be better if the prices of branded goods, too,
were determined by supply and demand on the
market.
All price controls are uneconomic, no matter whether
the control is exercised by the State or by private
groups. Prices are deprived of their most important
function; liaison between production and demand is
lost. It seems strange that while price maintenance
by the State is opposed, an attempt should be made
to create a special reservation for private price-
fixing in the field of branded. goods unter the wing
of the prospective Cartel Law, although the economic
consequences to the consumer are the same in both
cases.
Federal Minister Erhard has expressed the view
that price maintenance Is admissible on the ground
that the efficiency principle is already embodied in
the trademark 14). His own experience, he said, had
shown that there was keen. competition amongst the
makers of branded goods in the matter of quality,
hence the demand for free competition was already
being given its full due; and Prof. Notting thinks fit
to call in the "man in the street" to testify to the
necessity of fixed prices for branded goods, because
they save him the trouble of deciding which goods
amongst the confusingly large selection on offer in
16) "Der freien Wirtschaft zum Gedaditnis", Koln and
") Opladen.
150, p.' 55. year Der Markenartikel, 12th of issue, 1950, p' 84;
the market represent the best quality and
the best value for his money 15),
If the makers of branded goods really compete keenly
With one another as to quality 16), then there is no
reason why competition should not be extended to
prices. And to Prof. Henzler's question 17) why the
makers of branded goods should not offer their goods
with prices, since they already advertise their packag-
ing, their quantity and their quality, the answer is:
for the sake of freedom of markets, to promote
rationalization in commerce and to reduce trade
margins for the benefit of the consumer. Price main-
tenance acts as a curb on efficiency, as it forbids a
fair weeding-out.
PRICE-CUTTING IN BRANDED GOODS
The price-cutting argument looms particularly large
in debates on branded goods. The constant-quality
factor is said to determine the position of the branded
price in the price fabric 18). Any change in prices,
particularly any cutting of prices, shatters the con-
fidence of the public and leads to the loss of custom.
Kuhr, in an article on "resale price maintenance for
branded goods in Germany and the USA." 19), points
out that in Germany there is no empirical, basis on
which to assess the effects of price-cutting. The
German courts have always protected price main-
tenance, and according to "Der Markenartikel", even
latterly, despite the prohibition of price maintenance
by the Allied Cartel Laws 20), there has been no
"cut-throat" price-cutting. In the USA., where the
struggle for the recognition of resale price maintain-
ance still goes on, the results of two inquiries into
"cut-throat" price-cutting have been published. The
most important of the findings are: 1. The Federal
Trade Commission could find no single case of brand-
ed goods having been driven off the market as the
result of price-cutting. 2. Exhaustive inquiries showed
that when "leader" price-cutting is applied, the loss
on the "leaders" is not offset by an increase in sales
of regular lines, and that total profits are indeed
reduced. It is improbable, therefore, that the practice
of "leader price-cutting" will become widespread.
The US. Supreme Court has given a ruling on the
legal position by pronouncing against resale price
maintenance. Its 'decision was arrived at on the
ground that horizontal ?restraint of trade" may be
readily effected by a vertical "agreement" under
the terms of the Sherman Act. The "Miller Tydings
Resale Price Maintenance Act" of August 17th, 1937,
r which is always being quoted in Germany is in
blatant contrast to the judgment of the Supreme
Court and, is to be. rated - according to Kuhr - as
a "surprise success won by persons representing the
interests of the. dealers". The Miller Tydings Act
removes price agreements in inter-State trade from
the scope of the prohibition imposed by the Sherman
Act when the goods concerned are in "free and
open" competition with other goods of the same
.kind, when the agreements are not horizontal, and
when the Federal State concerned permits the agree-
ment 21).
16) I-Iandelsblatt No. 56, 17. 5. 50.
19) The German Committee of Inquiry took quite a different view.
Cf. Kuhr, "Preisbindung der zweiten Hand bei Markenwaren in
Deutschland and den USA.", Wirtschaftsdienst, 31st year of issue,
No. 6, June 1951, p. 28.
11) "Der Markenartikel als wirtschaftswissensdlaftlidses Problem",
Der Markenartikel, 13th year of issue, 1951, p. 331.
18) Bergler, op. cit., pp. 278 & 268.
19) Kuhr, op. cit., p. 27 et seq.
$') Cf. Der Markenartikel, .12th year of issue, 1950, p. 207.
"') This does hot apply in Columbia, Missouri and Texas, where
,price maintenance is explicitly prohibited.
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Colour is lent to the suspicion that the Miller Tydings
Act was a temporary error of policy, by a recent
decision of the Supreme Court. Price maintenance in
respect of non-contracting dealers was declared to
be null and void; the result was an enormous fall
in the prices of branded goods in stores not bound
by contracts. This episode incidentally showed that
the makers of branded goods still had plenty of
means of defence against "cut-throat competition"
even when the protection of price maintenance was
withdrawn. For the articles affected by the fall were
quickly sold out, and subsequent deliveries by the
manufacturers were delayed so long that a certain
stabilization of prices set in again.
DOMINATION OF THE MARKET
THROUGH PRICE MAINTENANCE
According to Erhard Y2), the possibility of being able
to dispose of the goods concerned at any time at the
fixed price points to the existence of a monopoly. The
characteristic feature of a monopoly is power. The
power nay be greater or smallar according to tl:e in-
fluence wielded by the monopolist and to the elasticity
of the demand. Mass suggestion by advertising creates
a "psychological monopoly" (Lisowski), or, to use NSl-
ting's euphemistic phrase, a "voluntary goodwill mono-
poly". This means reduced elasticity of demand, how-
ever, hence a reinforcement of the monopolistic
tendency. But it must not be inferred from this that
every maker of branded goods is to be written down
as'a monopolist. Modern economics has shown us the
different shades of pv`yeer .frliihr unrestricted com-
23) "EinfluB der Preisbindiuigund Preisbildung auf die Qualit5t
and die Quantitat des Angebots and der Nachfrage", in "Markt-
wirtschaft and Wirtschaftswissenschaft", Festschrift Mr W. Vers-
hofen, Berlin 1939, p. 63 et seq.
set out in row like cf earls, and we bail
probably nol be far xsg if w do not : -pect to
find many markets for t:anded goods where there is
unrestricted competition. .
Price maintenance is not an essential characteristic
of branded goods. It is impossible to argue away the
fact that blocked prices are uneconomic and have
the effect of monopolies. The prohibition of price
maintenance will not provide a universal remedy
which will lead to real efficiency competition in all
markets, but it will bring us nearer to a solution of
the problems outlined here.
DEDUCTIONS
The standard and token-of-quality functions of brand-
ed goods must be counted as positive factors from the
standpoint of the rationalization of distribution and con-
sumption. Their operation is neutralized at present by
"pseudo-brands" and 'artificial specialties". An
attempt is bein.r made by mass suggestion of con-
sumers irir the shape of large-scale advertising to
create an opinion monopoly for quasi-branded goods
which constitutes a serious threat to free competition.
Weeding out by efficiency in the trade, and rational-
ization of the firms in the trade with the object of
lowering costs and prices, is hampered by the fixed
ultimate selling price. There is no justification for
private price maintenance and its uneconomic con-
cequences. Indeed we must assume that the power
motive plays some part in it. The function of the
branded goods system, i. e. to educate the consumer
and the trade to rational trading and to increase
productivity by an improvement in quality, cannot
be achieved by this means.
(Now cAlofailaRe
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