(c) crown copyright
Catalogue Reference:cab/66/64/24
Image Reference:0001
Printed
The
for
for the War
Cabinet.
April
1945.
n strictly hmited.
cirm
i t ais i s s u e d
the
Copy No.
TOF
W.P.
(45) 2 2 4 .
7th April,
1945.
WAR
BRITISH
EXPORTS, GERMAN
CABINET.
INDUSTRY
AND
REPARATIONS.
MEMORANDUM BY THE PAYMASTER-GENERAL.
A T first s i g h t t h e r e a p p e a r s to be a conflict of i n t e r e s t over t h e r e b u i l d i n g
of G e r m a n i n d u s t r y .
T h e smaller h e r i n d u s t r y , t h e s m a l l e r will be h e r w a r
p o t e n t i a l ; b u t t h e smaller h e r i n d u s t r y , t h e smaller also w i l l be the r e p a r a t i o n s
w h i c h can be e x t r a c t e d in the form of m a n u f a c t u r e d goods. A s f a r as t h i s c o u n t r y
is concerned, t h i s a p p a r e n t conflict is, i n m y o p i n i o n , u n r e a l . F r o m t h e B r i t i s h
p o i n t of view, t h e slower t h e recovery of G e r m a n i n d u s t r y , t h e b e t t e r .
True,
we shall n o t get m a n u f a c t u r e d goods as r e p a r a t i o n s . B u t we shall g e t w h a t is
infinitely m o r e v a l u a b l e to us, namely, a c o n s i d e r a b l e s h a r e of G e r m a n y ' s p r e - w a r
export markets.
I . — O u r Export
Problem.
F o r t w o y e a r s n o w t h e v a l u e of o u r i m p o r t s (not c o u n t i n g m u n i t i o n s ) h a s been
five t i m e s t h e v a l u e of o u r e x p o r t s . I n o t h e r w o r d s , a l a r g e p a r t of t h e food w e
eat a t every m e a l , a n d of t h e r a w m a t e r i a l s used d a i l y in i n d u s t r y , a r e g i f t s or
loans from a b r o a d .
N e a r l y half o u r i m p o r t s a r e on L e n d - L e a s e or M u t u a l A i d f r o m N o r t h
A m e r i c a ; w h e n t h e w a r is over t h e s e g i f t s will cease. M u c h of t h e o t h e r h a l f
is on c r e d i t from o t h e r c o u n t r i e s ; as w e h a v e b o r r o w e d so m u c h from t h e m
a l r e a d y , w e can h a r d l y e x p e c t t h e m to go on l e n d i n g to us indefinitely w h e n the
war is over.
M e r e l y to p a y for food to keep ourselves alive, a n d for m a t e r i a l s t o k e e p o u r
factories r u n n i n g , we m u s t e x p a n d o u r p r e s e n t - d a y e x p o r t s five t i m e s — a n d t h a t
in a v e r y s h o r t t i m e if w e a r e to avoid b e c o m i n g p e n s i o n e r s of N o r t h A m e r i c a .
E v e r since 1913 t h e r e h a s been a n o m i n o u s d o w n w a r d t r e n d in o u r e x p o r t s
(after a l l o w i n g for p r i c e changes). B y 1938, a l t h o u g h t h e rest of w o r l d t r a d e
h a d i n c r e a s e d , a n d t h e w o r l d d e m a n d for i n d u s t r i a l p r o d u c t s h a d r i s e n by well
over one-half, o u r e x p o r t s h a d fallen to less t h a n t w o - t h i r d s of the 1913 level.
D u r i n g t h i s w a r t h e y h a v e p e r f o r c e been c u t to less t h a n o n e - t h i r d of even t h e 1938
volume. I n face of all t h e w a r t i m e i n d u s t r i a l i s a t i o n t h a t h a s t a k e n p l a c e in
C a n a d a , A u s t r a l i a , I n d i a , B r a z i l a n d o t h e r c o u n t r i e s , a n d of t h e i n f i l t r a t i o n of
A m e r i c a n p r o d u c t s t h r o u g h o u t t h e w o r l d , i t will be difficult e n o u g h to r e g a i n o u r
1938 m a r k e t s . B u t t h i s will n o t suffice. Somehow or o t h e r we m u s t in a d d i t i o n
reverse t h e s i n i s t e r decline t h a t h a d been afflicting o u r e x p o r t s f o r a g e n e r a t i o n
even'before t h i s w a r , a n d r a i s e t h e m in t h e course of a few y e a r s t o one a n d a h a l f
times t h e 1938 level—a t r u l y g i g a n t i c t a s k .
A n d yet w e m u s t succeed if o u r p l a n s for full e m p l o y m e n t a n d social r e f o r m
are to be a n y t h i n g b u t a m i r a g e , a n d if the influence we h o p e t o w i e l d i n t h e w o r l d
is not to be p a r a l y s e d by d e p e n d e n c e on o u r c r e d i t o r s a n d s h o r t a g e of cash.
I I . - The
German
and Japanese
Export
Markets.
O u r b i g g e s t o p p o r t u n i t y lies in t h e c a p t u r e of t h e G e r m a n a n d J a p a n e s e
export m a r k e t s . B e f o r e t h e w a r , in a t o t a l w o r l d m a r k e t for finished m a n u f a c t u r e s
of £ 2 , 0 0 0 million, w e s u p p l i e d goods w o r t h £ 4 0 0 million, t h e G e r m a n s a n o t h e r
[29588]
B
£ 4 0 0 million a n d t h e J a p a n e s e £ 1 7 5 million. H e r e t h e n is a n o p e n i n g of
t r e m e n d o u s i m p o r t a n c e . A s u b s t a n t i a l slice of t h e e n e m i e s ' e x p o r t m a r k e t s w o u l d
go f a r t o solving o u r problems.
T o - d a y we h a v e a u n i q u e o p p o r t u n i t y to achieve t h i s . O u r t w o m a j o r allies
h a v e shown no exceptional solicitude for the f u t u r e of G e r m a n i n d u s t r y , a n d we
shall soon be occupying the most i m p o r t a n t i n d u s t r i a l a r e a in G e r m a n y , d e v a s t a t e d
by bombing a n d t h e r a v a g e s of w a r .
I f we decide to forgo t h i s o p p o r t u n i t y , if we decide t h a t G e r m a n i n d u s t r y
a n d e x p o r t s m u s t be restored, let i t be p l a i n w h a t t h i s m e a n s to B r i t a i n . Q u i t e
a p a r t from questions of m i l i t a r y security, i t m e a n s deliberately t h r o w i n g a w a y
t h e l a r g e s t single chance we h a v e of r e s t o r i n g a n d e x p a n d i n g our e x p o r t s , w i t h o u t
w h i c h we are" condemned to poverty, p e n u r y , debt and decline. Only very
compelling reasons could j u s t i f y H i s M a j e s t y ' s G o v e r n m e n t in t a k i n g
responsibility for such a policy.
I I I . — T w o Immediate
Issues.
A decision on these m a t t e r s c a n n o t be p o s t p o n e d .
immediate answers —
T w o questions d e m a n d
(a) A s soon as we have occupied the R u h r there will be p r e s s u r e from m a n y
q u a r t e r s to restore its i n d u s t r y . I t will be a r g u e d t h a t t h e G e r m a n s
m u s t send m a n u f a c t u r e s to t h e i r n e i g h b o u r s in p a y m e n t of t h e r e p a r a ­
tions w h i c h are t h e i r d u e ; t h a t they m u s t e x p o r t in o r d e r to p a y for
t h e i r necessary i m p o r t s ; t h a t t h e i r factories m u s t be r e s t a r t e d if m a s s
u n e m p l o y m e n t , w i t h all its social a n d p o l i t i c a l i m p l i c a t i o n s , is to be
avoided.
T h e r e a r e a n s w e r s to these a r g u m e n t s , a n d they a r e set o u t below.
-' H e r e I a m only concerned t o e m p h a s i s e t h a t , if we accede t o these
d e m a n d s , we shall n o t only be r e s u s c i t a t i n g our p r i n c i p a l p r e - w a r
c o m p e t i t o r in t h e e x p o r t m a r k e t ; we shall have to restock and
r e - e q u i p G e r m a n factories largely out of our own pocket (at a n y r a t e
u n t i l we can be recouped by the r e c i p i e n t s of r e p a r a t i o n s — a t some
u n c e r t a i n f u t u r e d a t e ) ; we shall n o d o u b t have to c o n t r i b u t e b r a i n s
a n d effort which we can ill s p a r e from t h e t a s k of g e t t i n g our own
i n d u s t r y g o i n g ; a n d we shall be h e l p i n g the G e r m a n s to m a k e for
t h e E u r o p e a n Allies, free of charge, m a n u f a c t u r e s w h i c h t h e y would
o t h e r w i s e have bought from us for c a s h — g o l d a n d f o r e i g n e x c h a n g e
w h i c h we c a n n o t afford to forego.
I t h e r e f o r e t r u s t t h a t we shall do n o t h i n g to e n c o u r a g e the
r e b u i l d i n g of G e r m a n i n d u s t r y , a t least w i t h o u t very carefully
c o u n t i n g t h e cost.
(b) T h e second i m m e d i a t e q u e s t i o n arises o u t of t h e a p p o i n t m e n t of a
R e p a r a t i o n s C o m m i s s i o n in Moscow.
I t w a s clear a t Y a l t a t h a t
n e i t h e r t h e A m e r i c a n s nor t h e R u s s i a n s h a d given m u c h t h o u g h t to
the q u e s t i o n ; consequently a vigorous l e a d from B r i t a i n on a clear­
cut policy m i g h t achieve considerable r e s u l t s . T h i s m a k e s it all the
more necessary t o consider very carefully w h a t policy our r e p r e s e n t a ­
tives a r e t o p r e s s .
Some of t h e r e s u l t s of a decision to m a k e G e r m a n y p a y r e p a r a t i o n s
in t h e form of m a n u f a c t u r e d goods h a v e a l r e a d y been described.
Above all, it w o u l d r u l e o u t t h e only G e r m a n r e p a r a t i o n s of real
value to u s — h e r e x p o r t m a r k e t s . Moreover, a l t h o u g h I a m dealing
p r i m a r i l y w i t h economic m a t t e r s , it m u s t not be f o r g o t t e n t h a t
G e r m a n y ' s c a p a c i t y t o m a k e w a r follows from her c a p a c i t y to m a n u ­
f a c t u r e goods. T h i s should a p p e a l to all t h e U n i t e d N a t i o n s alike.
I n my view it should be possible t o reach a n a g r e e m e n t w i t h the
R u s s i a n s by w h i c h they w o u l d t a k e e x i s t i n g G e r m a n m a c h i n e r y ,
forced labour a n d r a w m a t e r i a l s , w h i l e we should t a k e G e r m a n
e x p o r t m a r k e t s ( a n d also p e r h a p s c e r t a i n special t y p e s of
e x i s t i n g e q u i p m e n t , a n d r a w m a t e r i a l s like t i m b e r a n d p o t a s h ) ;
nobody would receive a n y m a n u f a c t u r e d goods—a policy the
A m e r i c a n s w o u l d almost c e r t a i n l y endorse. I t is t r u e t h a t t h i s would
involve t h e sacrifice by t h i s c o u n t r y of r e p a r a t i o n s in t h e form of
m a n u f a c t u r e d goods.
B u t d u r i n g t h e first few y e a r s , a s the
Chancellor of the E x c h e q u e r h a s w a r n e d us in W . P . (45) 146, we
g
c a n n o t h o p e to g e t m u c h f r o m G e r m a n y a n y h o w . A n d once o u r o w n
f a c t o r i e s h a v e been reconverted, i t is u n l i k e l y t h a t L a b o u r or C a p i t a l
I n a n y event,
w o u l d welcome a flood of G e r m a n m a n u f a c t u r e s .
B r i t a i n ' s s h a r e of such m a n u f a c t u r e s w o u l d c e r t a i n l y be w o r t h very
l i t t l e c o m p a r e d w i t h t h e v a l u e to u s of G e r m a n e x p o r t m a r k e t s .
S o m e of t h e o t h e r A l l i e s m i g h t of course l i k e t o h a v e G e r m a n m a n u ­
f a c t u r e s , b u t t h e i r p r e f e r e n c e s m u s t n o t be allowed to o v e r r i d e o u r
v i t a l i n t e r e s t s . A s t h e R u s s i a n s h a v e recognised, t h e n e e d s of t h e
c o u n t r i e s t h a t h a v e o r g a n i s e d victory m u s t t a k e first place.
I V . — T h e arguments
for restoring
German
Industry.
W e a r e n o t so m u c h faced w i t h t h e q u e s t i o n w h e t h e r or n o t to d e s t r o y
G e r m a n i n d u s t r y . A l a r g e p a r t is, or w i l l be, in r u i n s . W h a t w e h a v e t o decide
is w h e t h e r w e a r e to allow a n d h e l p t h e G e r m a n s to r e b u i l d it.
W h a t compelling reasons m i g h t be held to j u s t i f y o u r t a k i n g a s t e p t h a t
would so grievously h a m p e r o u r export, p r o s p e c t s % C e r t a i n l y n o t t h a t w e need
her m a n u f a c t u r e s as r e p a r a t i o n s . W h a t o t h e r a r g u m e n t s a r e t h e r e ? T h r e e
of those w h i c h a r e c u r r e n t m a y be briefly e x a m i n e d .
.(a) It is said that there will be mass unemployment
in Germany
after the
war if her industry
is not fully
restored.
T h i s a r g u m e n t , i n m y view, u s u a l l y receives u n d u e w e i g h t . T h e G e r m a n
metal, e n g i n e e r i n g , electrical a n d chemical i n d u s t r i e s a r e t h e m o s t i m p o r t a n t
from t h e e x p o r t — a s from t h e m i l i t a r y — p o i n t of view. T h e y a c c o u n t e d for
t w o - t h i r d s of G e r m a n y ' s p r e - w a r e x p o r t s . B u t even i n 1939, w i t h r e a r m a m e n t
in full s w i n g , they employed only 5 million people o u t of a t o t a l w o r k i n g p o p u l a ­
t i o n of 34 million.
I t i s idle to p r e t e n d t h a t a l a r g e p a r t of these 5 million could n o t find w o r k
elsewhere. A t least 2 million w o r k e r s will be occupied for five y e a r s r e b u i l d i n g
G e r m a n d w e l l i n g s d a m a g e d or d e s t r o y e d in t h e w a r a n d in b u i l d i n g h o u s e s for
t h e G e r m a n s to be e v a c u a t e d from t h e E a s t e r n t e r r i t o r i e s . N e a r l y 9^ m i l l i o n
w o r k e r s w o r e a c t i v e l y e n g a g e d i n a g r i c u l t u r e i n 1925.
B e t w e e n 1925 a n d 1939
n e a r l y f million left t h e l a n d ; they m i g h t go back. A n d if t h e l a r g e e s t a t e s w e r e
m i l l i o n w o r k e r s could be settled on t h e l a n d . Some 3 m i l l i o n
broken u p , another
G e r m a n s , f o r w h o m w o r k w o u l d o t h e r w i s e h a v e h a d to be found, h a v e been killed
in t h e w a r . B y t h e t i m e t h e G e r m a n s h a v e m e t R u s s i a n d e m a n d s for w o r k e r s t o
m a k e good t h e r a v a g e s inflicted on t h e i r c o u n t r y — a figure of 4 million h a s been
m e n t i o n e d — t h e r e m a y well be a s h o r t a g e , r a t h e r t h a n a s u r p l u s , of m a n - p o w e r in
Germany.
Nobody m a i n t a i n s , of course, t h a t t h e t r a n s i t i o n from w a r to p e a c e w i l l
be easy i n G e r m a n y . T o demobilise t h e G e r m a n A r m e d Forces (9 m i l l i o n m e n
i n c l u d i n g p r i s o n e r s i n A l l i e d h a n d s ) , a n d to s h i f t p e r h a p s 5 million m u n i t i o n s
w o r k e r s to p e a c e f u l p u r s u i t s , w i l l t a x G e r m a n o r g a n i s i n g p o w e r to t h e utmostF a i l u r e t o r e s t o r e G e r m a n h e a v y i n d u s t r y m a y a g g r a v a t e t h e i n e v i t a b l e p r o b l e m of
t r a n s i t i o n a l u n e m p l o y m e n t , b u t it w i l l h a r d l y affect i t s o r d e r of m a g n i t u d e .
I t m a y be t h a t f a c t o r y w o r k e r s w o u l d p r e f e r t o s t a n d a t a bench r a t h e r t h a n
w o r k on t h e l a n d or b u i l d h o u s e s — b u t t h e sacrifice of t h e i r p r e f e r e n c e s is n o t a
heavy p r i c e to p a y for s t a r t i n g t h e bloodiest w a r in h i s t o r y .
r
(b) It has also been said that the Germans'
standard
of life will be reduced
is restored.
to intolerable
levels unless their industry
T h i s is a n o t h e r of those q u a l i t a t i v e s t a t e m e n t s w h i c h does n o t b e a r q u a n t i t a ­
tive a n a l y s i s .
F o r t h e l a s t five or even t e n years, n e a r l y all G e r m a n heavy i n d u s t r y , a n d
m u c h of h e r l i g h t i n d u s t r y , h a s been t u r n i n g o u t p r e d o m i n a n t l y m u n i t i o n s a n d
w a r l i k e stores. A small f r a c t i o n of t h i s c a p a c i t y , devoted e n t i r e l y to peace­
t i m e p r o d u c t i o n , w o u l d give t h e G e r m a n s f a r m o r e consumer goods a n d a h i g h e r
s t a n d a r d of life t h a n the)' h a v e h a d for a long t i m e .
T h e n i t is s a i d t h a t G e r m a n y will be u n a b l e to e x p o r t enough to p a y for
h e r necessary i m p o r t s .
T h e o p e r a t i v e w o r d h e r e is " n e c e s s a r y . "
Unlike
t h i s c o u n t r y , G e r m a n y is very n e a r l y self-sufficient i n food-stuffs; even a t t h e
h e i g h t of h e r w a r effort i n 1 9 4 2 - 4 3 she p r o d u c e d e n o u g h on h e r o w n l a n d to
p r o v i d e a d a i l y a v e r a g e of 2,300 calories p e r h e a d — n e a r l y n i n e - t e n t h s of h e r
[ 2 9 5 8 8 ]
2
*
B
t o t a l c o n s u m p t i o n . A relatively small increase in a g r i c u l t u r a l o u t p u t w o u l d
give t h e G e r m a n s , w i t h o u t a n y i m p o r t s a t all, as m a n y calories as most o t h e r
European countries.
Some f a t s would h a v e to be i m p o r t e d , a n d probably a few m i l l i o n tons of
g r a i n to offset t e r r i t o r i a l losses in the E a s t ; b u t these, together, would not
exceed o n e - t e n t h of t h e t o t a l value of G e r m a n y ' s p r e - w a r i m p o r t s .
A s to r a w m a t e r i a l i m p o r t s , G e r m a n civilians h a v e m a n a g e d for five y e a r s
p r a c t i c a l l y w i t h o u t overseas s u p p l i e s ; they have developed m a n y k i n d s of e r s a t z
m a t e r i a l s , especially textiles. T h e need for i m p o r t s of ores a n d m e t a l s will be
g r e a t l y reduced if G e r m a n heavy i n d u s t r y c o n t r a c t s . T h u s , t h e r e is no d o u b t t h a t
she could survive w i t h a m u c h smaller i n d u s t r y , a n d m u c h smaller e x p o r t s ,
t h a n before the w a r . T h e r e would be fewer m o t o r c a r s a n d o r a n g e s , less coffee
a n d t e a , b u t the basic e s s e n t i a l s of life w o u l d be available.
(c) It is argued that failure to restore German industry
would
impoverish
Europe and the world.
I t is of course t r u e , as a n a b s t r a c t p r o p o s i t i o n , t h a t if p r o d u c t i v e c a p a c i t y is
e l i m i n a t e d , fewer goods will be p r o d u c e d t h a n could be m a d e if it r e m a i n e d
i n t a c t . B u t the q u e s t i o n now is not w h e t h e r G e r m a n factories should be destroyed
or not. T h e j have been destroyed. T h e question is w h e t h e r they should be
r e b u i l t in G e r m a n y a n d employ G e r m a n l a b o u r or w h e t h e r t h e goods they could
p r o d u c e for e x p o r t should be m a d e here. Nobody seriously expects to get very m u c h
from t h e o u t p u t of G e r m a n f a c t o r i e s in t h e first y e a r or two. A f t e r t h a t t h e r e
will n o t be a n y d a n g e r of t h e U n i t e d N a t i o n s r u n n i n g s h o r t of t h e m a n u f a c t u r e s
they w a n t . T h e r e has been a n enormous e x p a n s i o n in m a n u f a c t u r i n g o u t p u t
and capacity d u r i n g the war. For example, the w a r t i m e increase in the o u t p u t
of t h e B r i t i s h metal, e n g i n e e r i n g a n d allied i n d u s t r i e s h a s been at least t w o or
t h r e e t i m e s a s g r e a t as t h e t o t a l p r e - w a r e x p o r t by s i m i l a r G e r m a n y i n d u s t r i e s .
T h e i n c r e a s e since 1939 in the o u t p u t of A m e r i c a n factories h a s been s o m e t h i n g
like 25 t i m e s as g r e a t as G e r m a n y ' s t o t a l p r e - w a r e x p o r t s of m a n u f a c t u r e s ; the
e x p a n s i o n of 33 million tons a y e a r in A m e r i c a n steel p r o d u c t i o n is H t i m e s
G e r m a n y ' s t o t a l p r e - w a r o u t p u t of 22 million tons.
T h e d e p e n d e n c e of E u r o p e a n c o u n t r i e s on t h e G e r m a n m a r k e t is also a p t to
be e x a g g e r a t e d . T h e i n d u s t r i a l c o u n t r i e s of t h e C o n t i n e n t w i l l have no g r o u n d s
for c o m p l a i n t . Before t h e w a r they sent only 13 p e r cent, of t h e i r e x p o r t s to
G e r m a n y , a n d they will surely g a i n on balance by a r e d u c t i o n of G e r m a n y ' s
c o m p e t i t i v e p o w e r ; but even if they did not, we m u s t consider our own needs first.
A s for the E u r o p e a n p r o d u c e r s of r a w m a t e r i a l s a n d food-stuffs, the only
c o u n t r i e s d e p e n d i n g on t h e G e r m a n m a r k e t for more t h a n one-fifth of t h e i r p r e ­
w a r e x p o r t s , a p a r t from t h e B a l t i c S t a t e s w h i c h are now p a r t of R u s s i a , were :—
r
B u l g a r i a , H u n g a r y , S p a i n a n d T u r k e y , whose p a r t in t h e w a r scarcely
qualifies them for special c o n s i d e r a t i o n ;
Greece a n d Y u g o s l a v i a , t w o small allies whose needs we c a n easily s u p p l y
a n d whose e x p o r t s of ores a n d metals, timber, c u r r a n t s a n d tobacco we can
r e a d i l y absorb.
A s for t h e overseas c o u n t r i e s , p r a c t i c a l l y every one of them, u n l i k e t h e U n i t e d
K i n g d o m , is in a much s t r o n g e r financial p o s i t i o n t h a n before t h e w a r and well
able to t i d e over a n y losses t h a t m i g h t be involved.
A s a r e s u l t of her fight to save liberty. B r i t a i n h a s become the g r e a t e s t debtor
n a t i o n of t h e world. W e h a v e t h e r i g h t to d e m a n d t h a t our i n t e r e s t s be considered
in t h e p o s t - w a r s e t t l e m e n t . L e t us not forget t h a t a w e a k B r i t a i n , s t r u g g l i n g
w i t h u n e m p l o y m e n t and a low s t a n d a r d of life, her foreign t r a d e reduced a n d
h e r e x c h a n g e s c o n s t a n t l y t h r e a t e n e d , m i g h t well impoverish t h e w o r l d f a r more
t h a n a c o n t r a c t i o n in G e r m a n i n d u s t r y .
V.—Other
Arguments.
I n t h i s note I h a v e c o n s i d e r e d only t h e economic r e p e r c u s s i o n s of o u r
t r e a t m e n t of G e r m a n i n d u s t r y a f t e r the w a r . B u t clearly t h e more we c u r t a i l
h e r heavy i n d u s t r y , the g r e a t e r will be o u r m i l i t a r y security. I t is c o m p a r a t i v e l y
easy to stop new factories b e i n g built.- B u t , once they have been built, i t is
n o t o r i o u s l y difficult to m a k e s u r e t h a t they a r e not diverted to w r o n g uses.
I t h a s also been a r g u e d t h a t a lower s t a n d a r d of life in G e r m a n y m i g h t t e m p t
f o r e i g n c a p i t a l i s t s , d e s p i t e t h e i r e x p e r i e n c e a f t e r t h e last w a r , to erect factories
i n o r d e r to e x p l o i t the c h e a p G e r m a n labour. N a t u r a l l y , if it is decided not to
r e s t o r e G e r m a n i n d u s t r y u n t i l she is fit to r e s u m e h e r p l a c e a m o n g civilised
n a t i o n s , t h i s m u s t n o t be allowed. No f a c t o r i e s could be erected w i t h o u t special
permission.
I t is sometimes s a i d t h a t a h a r s h s e t t l e m e n t w o u l d be r e s e n t e d by t h e
G e r m a n s a n d w o u l d s t i m u l a t e a w a r of revenge. B u t s u r e l y no one w h o h a s
lived t h r o u g h t h e p a s t t e n y e a r s still believes t h a t G e r m a n y c a n be a p p e a s e d
by soft t r e a t m e n t . Moreover, a f t e r t h e b e a t i n g t h e y h a v e a l r e a d y h a d , t h e i r
p r o p a g a n d i s t s a r e b o u n d to r e p r e s e n t a n y s e t t l e m e n t — s h o r t of u n c o n d i t i o n a l
s u r r e n d e r by t h e A l l i e s — a s i n i q u i t o u s . I t is t h e o p p o r t u n i t y to do ill deeds t h a t
m u s t be denied, a t a n y r a t e u n t i l a n e w g e n e r a t i o n h a s g r o w n u p .
W e a r e often told t h a t it is no use m a k i n g a r r a n g e m e n t s now, however
j u s t a n d however desirable, t h a t will be c o n s i d e r e d h a r s h a n d o p p r e s s i v e
by t h e B r i t i s h people i n five y e a r s ' t i m e a n d t h r o w n overboard.
The short
a n s w e r is t h a t i t is t h e first five years t h a t count. W h e n we h a v e r e - e s t a b l i s h e d
o u r e x p o r t s a n d a r e p a y i n g o u r w a y , w e m a y be able to afford to be more g e n e r o u s .
I t is, of course, difficult to forecast t h e moods of t h e p u b l i c five y e a r s
a h e a d , b u t of one t h i n g we can be c e r t a i n : if t h e y a r e t h e n suffering from p o v e r t y
a n d u n e m p l o y m e n t , t h e y w i l l find it very difficult to u n d e r s t a n d w h y t h i s Govern­
ment, a t the end of a w a r in w h i c h so m u c h h a d been sacrificed, d e l i b e r a t e l y h e l p e d
to b u i l d u p G e r m a n c o m p e t i t i o n in the e x p o r t m a r k e t s .
F i n a l l y , t h e m o r a l issue is perfectly clear. T h e v a s t f o r e i g n debts we h a v e
i n c u r r e d , the loss of o u r overseas assets, of m u c h of o u r s h i p p i n g a n d of m a n y of
o u r p r e - w a r m a r k e t s , in f a c t all t h e sombre a s p e c t s of o u r p a i n f u l economic
s i t u a t i o n , are t h e d i r e c t r e s u l t of G e r m a n a g g r e s s i o n . B r i t a i n m u s t e x p a n d h e r
e x p o r t s or starve. G e r m a n y , c a n live w i t h o u t . E v e r y o n e a g r e e s t h a t she should
face sacrifices in o r d e r to r e p a i r t h e d a m a g e she h a s done to o t h e r c o u n t r i e s .
W h o t h e n can condemn B r i t a i n if she seeks r e s t i t u t i o n in t h e G e r m a n e x p o r t
markets ?
VI.-Conclusions.
M y conclusions a r e as follows :—­
1.
2.
3.
4.
I t is f a r m o r e i m p o r t a n t to t h i s c o u n t r y t o re-establish B r i t i s h e x p o r t s
t h a n to o b t a i n G e r m a n m a n u f a c t u r e d goods a s r e p a r a t i o n s .
F o r t h i s reason alone, we should d i s c o u r a g e t h e r e s t o r a t i o n of G e r m a n
i n d u s t r y . B u t q u i t e a p a r t from t h i s , such a policy w o u l d give f a r
g r e a t e r m i l i t a r y s e c u r i t y t h a n a n y o t h e r scheme likely to be devised.
T h e i n s t r u c t i o n s t o o u r r e p r e s e n t a t i v e s on t h e R e p a r a t i o n s C o m m i s s i o n
should t h e r e f o r e be to t r y to confine r e p a r a t i o n s to e x i s t i n g e q u i p m e n t ,
r a w m a t e r i a l s a n d , if the R u s s i a n s insist, i n d e n t u r e d labour.
M e a n w h i l e B r i t i s h r e p r e s e n t a t i v e s on t h e C o m b i n e d Civil Affairs
C o m m i t t e e should be i n s t r u c t e d to stop a n y efforts to r e b u i l d G e r m a n
i n d u s t r y , especially heavy i n d u s t r y , w h a t e v e r t h e reason, u n t i l t h e
whole q u e s t i o n h a s been settled w i t h o u r p r i n i c p a l allies.
C.
Great George Street,
7th April, 1945.
(
S.W.1,