The German Four-Year Plan

SINCE Germany’s transition from an agrarian to an industrial state in the second half of the last century, she has been dependent upon world trade and the exchange of her finished products for the raw materials of countries which are less thickly populated, more favored in climate, or blessed with mineral deposits. Before the war, Germany had available for payment for imports not only the receipts from her extensive export trade, not then restricted by any serious obstacles to commercial exchange, but also the interest on credits extended and loans made abroad. At the turn of the century the voice of statesmen and scientists, raised in warning against the overdependence of German economy upon the rest of the world, went unheeded. The war taught renewed appreciation of the value of increased domestic production of materials hitherto imported. Indeed, the German war industries were developed under the most unfavorable conditions imaginable. Science and technology were unprepared for the task, which was rendered all the more difficult by the shortage of workmen and materials.

After peace was concluded, there was at first no further attempt to develop the home-production industries, since there flowed into Germany abundant foreign credits which made it possible to pay for heavy imports. But with the onset of the depression the situation was radically altered. Because of the sudden recall of foreign credits Germany was no longer able to pay for her full import requirements, so that she was forced to limit these sharply; and at the same time she began to realize that no change in the foreign trade situation was to be expected in the near future. The loss of property values abroad, the necessity of paying interest and principal on credits accepted after the war, in conjunction with the numerous restrictions on trade impeding the sale of German goods, limited considerably the possibility of obtaining foodstuffs and raw materials from foreign countries.

In this connection attention should be drawn to the fundamental difference between the objective of the German Four-Year Plan and the distress and privation forced upon the German people by the four war years. Germany to-day is not cut off from deliveries from abroad. German export trade is still of sufficient volume to pay for more than four billion gold marks’ worth of imports, so that the FourYear Plan is responsible only for providing a maximum requirement which is not excessive in proportion to total consumption. The distress during the war, on the other hand, was due not only to the cessation of deliveries from abroad but also to the great consumption of materials in the field and the lower harvest yields resulting from a shortage of workers and fertilizers. Conditions at that time are strikingly illustrated by the fact that during and after the war there appeared a perceptible shortage of coal in spite of Germany’s rich deposits of this mineral, because it was impossible to supply the necessary replacements at the right time and to carry on further developments in the mining districts. Every German who passed through the period of the war recalls with anything but comfort the so-called Ersatz or ‘substitute’ materials he was compelled to use because it had become impossible to provide even the essentials.

It is the goal of the Four-Year Plan to raise the standard of living of the German people and to bring about domestic production of essentials without noticeably restricting the population. Efforts are being made to reduce to a minimum the sacrifices asked of the consumer. Press, radio, schools, exhibits, lectures, and announcements of every kind explain the situation and remind one, for instance, that the per capita consumption of fats has risen some 25 per cent in comparison with pre-war time and that merely a return to former dietary habits would suffice to eliminate temporary difficulties in the supply of fats. Through publications of the Business Institute the housewife’s attention is called to the most practical way to plan her meals at different seasons. Eliminating the thoughtlessness of the consumer will make possible the saving of many million marks in import values.

The makers of household articles and furniture are obliged to observe definite regulations in order to avoid unnecessary consumption of such metals as nickel, copper, and lead. Durability and pleasing appearance are not sacrificed. Here too it is a question merely of gently educating the consumer.

The textile industry is required to use artificial fibres mixed with natural fibres, but careful inspection prevents lowering of quality. Unfounded prejudices on the part of consumers are thus overcome, so that the purchaser of a fabric does not get the impression that he is obliged to content himself with a substitute product of less value.

It has been pointed out that the sealing of wine bottles with caps made of an alloy of lead and tin not only is impractical but calls for importation of 1,650,000 pounds of these two metals. There are artificial materials similar to Cellophane which make it possible to seal the bottles more hygienically and cheaply. Formerly many millions were expended annually to buy cork from abroad. Some years ago an inventor endeavored to manufacture stoppers of wood. In general, wood is not elastic enough for a bottle seal, but the inventor has discovered how to give it the necessary elasticity by cutting ringshaped grooves in it.

Greater attention is of course being paid to the collection of scrap and waste material. The manufacturers of metal cans, for instance, print a notice on their product reminding the consumer not to throw the empty cans away heedlessly, but to turn them over to one of the collecting stations. This is another case in which a considerable import item can be saved by an appeal to the individual. The examples enumerated show that much can be accomplished even with simple measures.

Very promising are the efforts for an intensification of agriculture. Sheep raising is being energetically promoted, since the number of sheep can be materially increased without injury to the foodstuff market, and the domestic production of wool can thus be stepped up. The cultivation of flax and hemp, which was not common in the first years after the war, has been extended again. Dairying has made important progress; the agricultural market administration suggests to farmers how to use their feed stocks to best advantage. With the slogan ‘No more waste! ‘ distributors and consumers of provisions are taught not only how to use them economically, but also, through appropriate methods of storing and handling the goods, to lessen spoiling, which previously cost the German national economy not less than one and one-half billions annually. To extend the use of fruit marmalade as a spread for bread instead of butter and margarine the sugar industry furnishes the marmalade manufacturers with cheap sugar. The consumption of marmalade increased from 62,000 long tons in 1933 to 125,000 in 1936. As appears from the examples enumerated, — and more could easily be adduced, — much has been done in the economizing of foodstuffs, too, to reduce imports necessary to the German economy.

The new industrial structure envisaged by the Four-Year Plan is probably the most interesting part of the whole plan, not only calling for a high degree of intelligence and energy, but also impressing itself on the entire industrial activity of Germany.

Germany’s chemical industry looks back on a glorious past. It has been one of the heaviest exporters, since the specialties produced in Germany — whether medicines, dyes, or aids to the chemical industry — have maintained their share in the world market even under altered conditions of competition. The development of the German synthetic nitrogen industry is an outstanding example of success in producing a previously imported material in quantity sufficient to satisfy domestic demand, and also in keeping the price so low that it could be exported to compete with the natural product in the world market.

The German economy is now reaping the fruits of an industrial research conducted in part under great material sacrifices and maintained through times of economic stress. Even before the war, patents for the liquefaction of coal were taken out both by Dr. Friedrich Bergius and by the chemical industry; after the war, research in this field was continued intensively, at first probably in the expectation that there would be a natural shortage of oil resulting from the exhaustion of the oil wells, and spurred on in part too by the high prices in the world market, which declined abruptly at the beginning of the depression. Practical experience in this field of industry has made such progress that the cost of producing oil from coal now corresponds to the domestic price of gasoline, although the latter is, to be sure, protected by tariff. In any case, no increase in price worth mentioning is demanded of the motorist. It is estimated that in a year or a year and a half Germany will be able to cover her requirement in motor fuels — that is, approximately 2,000,000 long tons — from her own production.

Great progress is evident in the artificial textile fibre industry. Both the artificial silk industry and the manufacture of cellulose wool experienced vigorous growth in the past year. In 1936 there were manufactured in Germany 55,000 long tons of artificial silk and 45,000 of cellulose wool. Cellulose wool is a new kind of textile fibre that appeared in the market only a few years ago. In 1935 Germany had at her disposal a production of 15,000 long tons; in 1937 this will probably climb to 70,000. The prices of cellulose wool have been kept at such a level as to impose no burden on the consumer in this case, either, especially since this industry has had the experience of preliminary work covering long years.

While the development of the coalgasoline and cellulose-wool industries is to be regarded as a normal function of private initiative, for which the government, to be sure, supplied the initial impulse and which was promoted in part by certain casings of credit, problems of a fundamental nature are raised by processes for manufacturing other substitutes for raw materials, processes which are more recent and have not yet attained the same technical maturity as the liquefaction of coal.

Even though experience has demonstrated the truth of the principle that in the course of time every technical process with continued development permits a reduction of manufacturing costs, nevertheless production in a new field should be taken up only after mature consideration if costs are materially higher than on the goods previously imported. In such cases the outsider is hardly able to weigh the pros and cons. When it became known that the German Dye Trust was bringing out a synthetic rubber, which was substantially dearer than natural rubber, doubt was expressed whether this novel material was adapted to the German economy. Soon, however, it was ascertained that the synthetic rubber possessed characteristics giving it considerable advantages over natural rubber. Its durability is materially greater, so that automobile tires made of Buna can be used approximately one and one-half times as long as those of natural rubber. The increased life of the finished product, involving still other considerable manufacturing costs, amply justifies the increased expenditure for the synthetic product. Furthermore, Buna is less sensitive to heat and does not bubble when brought in contact with oils, so that we have here a new material for use whose field of employment is much wider than that of natural rubber. It is precisely these specific qualities of Buna which justify the hope that it will be used for special purposes abroad too, so that a material originally intended only to replace former imports in the home market promises to become a new article of export. In this sense, likewise, it supports the aims of the Four-Year Plan.

The science of political economy has not yet succeeded in working out a valid formula for determining the economically tolerable price of a substitute product. So far as goods which are absolutely essential are concerned, the decision to produce a substitute material is settled, not at all by production costs, but by the urgency of the need. In this case, price plays no part. Even when it is a question of goods of less immediate urgency, the world market price should not be chosen as a yardstick, above all not at a time when the exchange of goods from country to country is hampered. Neither the world market price nor the production cost of a raw-material substitute is a fixed quantity; at the outset they may be far apart and yet in the course of time approach each other very closely. As long as labor is available, there is no reason for giving up hope of producing a substitute for a raw material. Aided by the general recovery, considerable reserves have accumulated which are either being used by these new enterprises for capital investments to promote the Four-Year Plan or serving to meet the Reich’s need of loans.

In certain cases — that is, where the technical and economic risk appears too great — the state for the time being assumes the responsibility for the economic soundness of the new enterprise. Private initiative is not eliminated in these cases, the entrepreneur in particular remaining interested in lowering production costs. An illustration of this is the manufacture of high-protein feed-yeast from wood. There are two processes, of which that under the direction of Dr. Bergius permits production of carbohydrates for the nourishment of man and beast at the usual domestic prices. On the other hand, there is a great difference in price between protein feeds derived from wood and those from soybeans which have been imported. For this reason it is provided that the entire production of protein for feed be taken over at a price which covers the cost of production, including interest on invested capital. To encourage the coöperation of inventors, special rewards are offered for technical improvements.

The production of foods from wood shows that Germany’s reserves of raw materials are by no means yet exhausted. There is no lack of wood. It has been determined statistically that in spite of Germany’s wealth of coal over twenty million long tons of firewood still find their way into stoves. Even a fraction of this is enough to produce considerable quantities of edible protein. More attention to proper management of the forests may be a pleasing incidental effect of this new use for wood.

Occasionally the criticism is made that the entire machine constructed with such an enormous outlay may become worthless if normal trade relations should be resumed; or that the effort to protect newly created industry from foreign competition will perhaps block Germany’s path to a free world economy. Neither objection is sound. Even if new raw materials should be created to the value of one billion reichsmarks, the German market would still remain receptive to imports, the extent of which would be limited solely by the possibility of selling German goods abroad. Moreover, the aforementioned examples showing unexpected developments in the chemical industry tend to indicate that the newly created materials will prove to be exportable. Whether it be a matter of special kinds of artificial resins or of synthetic rubber especially resistant to oils and heat, or whether inevitable byproducts will find a market abroad, there is always the hope that Germany will be able to increase her exports in the fields in which she has always enjoyed a position of preëminence. Perhaps some day it will no longer be necessary to feed milch cows high-protein yeast made from wood. Then it will be easy to switch production to ethyl alcohol, which can be used to supplement the German gasoline supply.

If economic interplay ever reaches the point where the freest possible movement of goods contributes to the wealth of all nations, with accompanying lessening of the obstacles to trade, then Germany’s industrial productivity will suffice, as before the war, to use up in manufactures the raw materials furnished by other countries, and she can utilize the profits to increase her own consumption. The educational work of the Four-Year Plan will be an excellent preparation for this task, for nothing more seriously threatened German economy than insufficient opportunity for the remunerative employment of technical experts and engineers.

Beyond a doubt the experiences that Germany accumulates while carrying out her Four-Year Plan will be of advantage when the problem of careful utilization of raw material assumes importance in other lands as well. The moral buoyancy behind the Four-Year Plan is easy to understand if one considers that the German people are continuing in their great scientific and technical tradition, finding opportunity to demonstrate their love of peace by acting in the spirit of Frederick the Great, who once said that he who wrests increased fruits from the earth does more for his native land than he who conquers a new province.