HN 2: The British and their Works

4.2
The DM boom
Overnight the shop windows were filled with goods that
ordinary consumers had not set eyes on for a long time. Secret
hoards yielded up saucepans, toothbrushes, books and other
long-yearned-for consumer articles which could now be sold
without ration cards. A Volkswagen could, at least in theory, be
delivered within eight days at a price of 5,300 DM. Even the cows
seemingly reacted positively to the currency reform on 20th June
1948, because in the first week of the DM, butter supplies
showed a remarkable increase. 206 The "shop-window effect"
lent the currency reform a veritably mystical quality. For most
contemporaries it was not the proclamation of the "Grundgesetz"
on 23rd May 1949 that marked the beginning of a new
age, but the issue of DM banknotes. If an image symbolising
Germany’s New Beginning has etched itself on the collective
memory, then it is that of the long queues which formed at the
bank counters, where a per capita sum of 40 DM was exchanged
at a rate of 1:1.
And at the Volkswagenwerk? "Everything changed in Germany,
like desert flowers after a heavy rainfall. There was a new spirit
of optimism, and steel and so forth was now available.
Production at VW increased." Thus Major Ivan Hirst recollected
the psychological and economic effect of the currency reform. 207
Its short-term effect on production was indeed astonishing.
From 1,135 cars in May 1948, vehicle production climbed to 1,520
in June and 1,806 in July. This production increase was based at
least partly on the release of raw materials which had been
hoarded prior to the currency reform. Consequently the volume
of supplies grew from 3.7 million DM in June to 9.3 million DM
in the following month. 208 Since mid-1947 withholding materials
and only "swapping" them in barter deals had been common
practice among VW suppliers. This is actually true of the entire
national economy: in 1947 a large portion of production had
already been stockpiled but was not recorded in any statistics.
On this basis, the currency reform is revealed as part of an
ongoing upward economic trend that began in the autumn of
1947. It was this trend alone that made the currency reform’s
resounding success possible. 209 At the Volkswagen plant too, the
stage for production growth had long been set by the German
and British management. However, it was the instantaneous
improvement in the materials situation that formed the essential
basis on which the fruits of previous efforts could now be
harvested.
The clean currency cut did however produce a short-term
liquidity problem, because the Reichsmark assets of the
company were converted at a rate of 1:10, whereas wages and
salaries were converted into the new currency at 1:1. On the one
hand there were the cash assets of 495,000 DM, and on the
other the monthly wages bill of some 1.5 million DM. The
company closed this financial gap with loans, which thanks to
the rapid growth of income from the sale of vehicles were paid
off again by the autumn. 210 Conflicts with the suppliers arose
from the business entered into during the currency reform.