7: The American Film Industry and the American Government in Postwar Germany

Broadly speaking, the relationship of the government and the film industry is one of mutual support. The government perpetuates the environment in which all industry operates, and industry has an interest in preserving the existing social order. The film industry, which reaches man’s mind and emotions, can be a powerful ally of government and the economic order, both at home and abroad. The belief that film is a useful instrument of propaganda evolved in government circles during the last world war and grew to maturity in the late 1940’s and early 1950’s. At this time, occupation forces in West Germany sought to reeducate the German people. How was the difficult task of destroying Nazi ideas and inculcating those of democratic capitalism to be accomplished? How was Communism to be combatted? American films, embodying “our” point of view, seemed an instrument which could be aimed at both opponents.

Relations between government and the film industry are tenuous, however, as their aims may not always coincide. The profit motive on the one hand, and the political motive on the other, may pull the two apart. When the objectives of the two groups are similar, however, they may work together actively for mutual gain. Even when their ultimate purposes are different they may tend to use identical means, resulting in an alliance between private and public interests.

There have been repeated pleas for emphasis on film as a propaganda tool. As early as March, 1950, Senator William Benton, in calling for a “Marshall Plan in the field of ideas,” urged more recognition of the role film could play in the government’s propaganda work. In a Senate speech, he discussed film, radio, and printed matter, claiming that “for all practical purposes, it may be said we are not using them at all.” He declared:

Their impact today, in our interests, is that of a midget. I make an exception of the Hollywood motion picture, with its varying types of impact. They do have the potential strength of a giant, and my plea today is that we give them a chance. Nothing equals the motion picture in its capacity for gripping and holding masses of people, and communicating information and attitudes in vivid, remarkable form…. We need to get the pictures. We do not have them now. We need to show them. Their impact can indeed change the fact of history.¹

Senator Benton introduced a resolution asking that “the international propagation of the democratic creed be made an instrument of national policy….”

With governmental needs favorable to employment of film for propaganda purposes, the film industry was quick to support this policy. If the government actively pursued a wider dispersal of American films throughout the world, the industry was likely to gain in a business sense from the additional revenue such dispersal brings. The dual advantages were recognized by the film industry, for it realized that a push from the government could be useful in developing new markets and for making old ones yield attractive revenue. To assist the drive for favorable operating conditions abroad, the industry had to follow up the government’s belief that film could be useful for propaganda. Spyros Skouras of Twentieth Century-Fox once urged the industry to “work harder and harder to create [a] missionary spirit.” “This will not only be of great importance to the motion picture industry economically,” he said, “but it will also enable us to diligently discharge the sacred duty of our great medium to help enlighten humanity.” Skouras added that

it is a solemn responsibility of our industry to increase motion picture outlets throughout the free world because it has been shown that no medium can play a greater part than the motion picture in indoctrinating people into the free way of life and instilling in them a compelling desire for freedom and hope for a brighter future. Therefore, we as an industry can play an infinitely important part in the worldwide ideological struggle for the minds of men and confound the Communist propagandists.²

The Skouras statement is a call to the industry to have its films circulated more widely so that profits can be larger and Communism can be defeated.

While the government was quite explicit about why it wanted to have American films circulated abroad, the industry preferred to verbalize its own aims even though in tacit agreement with those of the government. The film companies have not actively enunciated the overt propaganda qualities of their products because, basically, they prefer to maintain their own control over content and not be confronted with the charge that they are shaping content to conform with government directives. The companies often cooperate with the government by erasing from their films undesirable elements rather than by purposely injecting types of content which propaganda would call for. The belief behind this is that films already convey “our” point of view and that no further positive steps need be taken to emphasize it.

Such thinking reflects the basically business orientation of the companies, for their initial allegiance is to the production of films which will draw audiences and generate revenue. If the same pictures also can carry a message beneficial to the government, so much the better. Basic conceptualizations of the social role of communications in America are involved. There has been a tradition of freedom of communication and separation of government from the operation and content of mass communication. This “hands off” policy—freedom of the press—is reflected in the distance between the film industry and the government when production values and content are involved.

Eric Johnston once declared that “Hollywood is not in the business of grinding out pictures neatly labeled for use as weapons in the propaganda war.” “Hollywood is in the entertainment business,” he added, “and that’s precisely why our films are loved and believed by people abroad.”³ This concisely states the film companies’ belief that a closing of the gap between industry and government is not likely to be useful for either party because credibility will decline and possibly revenue. Hollywood has been intent on stressing that its pictures can do a good job abroad within the production framework in which they are currently being made. There is also the suspicion that if Hollywood agrees to government planning of content with foreign audiences in mind, the next step could be planning of content with domestic audiences in mind.⁴

That Hollywood wants to cooperate, but independently, is implied in a statement Eric Johnston made to a Senate committee in 1953.

Pictures give an idea of America which it is difficult to portray in any other way, and the reason, the main reason, we think, is because our pictures are not obvious propaganda. They are completely free pictures, and they reflect the freedom under which they are made and the freedom under which they are shown.⁵ (Italics mine)

… We have advised foreign managers to be careful and set up some criteria as to what pictures should be sent to areas and they have done that on their own. I know they have a keen awareness … of what pictures should go into what areas, and whether a picture is harmful and whether it will do a great deal of good. They are doing the screening themselves…. There are a good many of our pictures that are not shown overseas….⁶

Senator J. William Fulbright was on the committee which heard Mr. Johnston’s statement. In light of the film executive’s comment, Senator Fulbright pushed the matter further and the following dialogue resulted:

SENATOR FULBRIGHT: What determines whether a picture is sold abroad or not? It is a commercial determination, is it not—what you think will sell?

MR. JOHNSTON: Yes. Drama sells abroad better, but I am not an expert….

SENATOR FULBRIGHT: You don’t have to describe it. What I mean is that your test, the criterion you use, is whether or not it will make money. Isn’t that your objective?

MR. JOHNSTON: Of course, we are a commercial enterprise.⁷

Hollywood cooperates with Washington but only to the extent that it does not forfeit its autonomy. A vice president of Paramount Pictures, in discussing film production, has stated that

… we try to find out whether the subject matter that we are handling would be an offensive matter in the area where our Government is having problems, and, if so, not to do it. We try, where we can, to inject things that will be an expression of friendliness in relation to that country and those people. We do that as Americans. We do not do it under the demand or under the control of anybody in the Government.⁸

There is another element involved in this problem of propaganda and it is the obvious fact that American audiences also have to see these films. This involves a matter of balance and emphasis in film making, for a picture made with foreign audiences in mind can flop at home just as the reverse can be true. That the industry has to consider both ends is apparent in two statements made by Y. Frank Freeman, a vice president of Paramount. In testimony to a Senate committee in 1956, Mr. Freeman said:

Paramount and all of the other companies must produce motion pictures which will have universal appeal…. Thus, the American motion picture is international and will so remain….⁹

A few minutes later he declared:

We have always designed our pictures primarily and essentially for the American market, and the record of all producers will, I think, show that.¹⁰

The extent and success of cooperation between industry and government when profit and propaganda motives are at stake is illustrated by events in postwar Germany. In considering Germany, the Allied Powers believed that simply to disarm the country would not be enough. They felt that eradication of “her false ideologies of superior nationhood and the right to make war for purpose of territorial acquisition [were] just as important as curtailing Germany’s physical ability to make war.”¹¹ This aim called for an intensive program of propaganda designed to reeducate Germany and for controls over all media of communication. Products and representatives of American media were enlisted in this campaign for the messages they carried and the know-how they could offer.

The American film industry had in its libraries thousands of pictures which could be placed at the disposal of the Military Government for use in the reeducation campaign. In recalling this period and its problems, Eric Johnston once observed:

In response to urgent requests of top United States occupation officials, American feature pictures were sent into Germany … as soon as the fighting stopped…. American leaders recognized that these non-propaganda pictures would assist during the critical postwar period in conveying to the people of the occupied areas an understanding of American life and democratic institutions. The films were the first real contact between America and the former enemy…. The film industry provided the pictures at no profit to itself but rather at an actual loss for out-of-pocket expenses.¹²

I don’t know of any industry giving away cloth or clothes or steel or anything, but we gave away films, not only gave them away but paid for the means of showing them in dollars out of our own pockets, at an expense of about $500,000 a year.¹³

On the surface, Mr. Johnston’s statement claims that the film industry was an active participant with the government and that the industry’s role was philanthropic, not profit seeking as one would expect. These assertions, however, must be matched with the record.

The exhibition of films was prohibited in Germany until the end of July, 1945, when twenty theatres were allowed to open in the American zone. By the middle of September, about fifty theatres were operating and showing American films with German subtitles. The program for the reopening of houses, however, did not proceed as rapidly as was desired. One writer, active in Military Government affairs at the time, has stated that “the real difficulty in getting more motion picture houses opened lay in the short supply of films.”¹⁴ The Military Government did not have enough different pictures from which to select, and of those it did have, there was a shortage of prints. Even though theatres could be reopened, there were not enough films available to show in them.

The problem might have been solved except for “the inability of the American motion picture industry to co-operate along policy lines laid down by the United States Government for the occupation of Germany.”¹⁵ The film industry and particularly the majors, by controlling the reservoir of thousands of pictures, hoped to receive concessions from the Military Government which would give it a dominant position in the German market. In partial response to this strategy, military officials decided they would have to authorize the exhibition of certain German films which had been declared politically harmless. Thus, in December, 1945, a small number of German features began to be shown to alleviate the film shortage.

In exchange for providing more films, the American industry was making demands on the Military Government which “were so inconsistent with occupation policy” that the industry and the military “failed to reach a mutually satisfactory agreement.”¹⁶ The basis of industry demands centered on how it would be paid for its films, and how it could dispose of these earnings. Under the Military Government’s program, revenues from the exhibition of American films in West Germany were held in blocked accounts with the Military Government. It had to approve plans the companies had for withdrawing and spending these reichsmarks which had value only in Germany. What the companies did not like was that they could not convert their marks into dollars and that the Military Government would not approve their plans for spending them in the German market.

Because of the difficulties of retrieving exhibition earnings, the American industry was not willing to increase its flow of films to Germany to aid the reeducation program. A source within the American industry has revealed that between July, 1945, and December, 1946, only forty-three features were offered to the Military Government. By May, 1947, almost two years after the end of hostilities, only fifty American films had been released in Germany out of the thousands in Hollywood libraries. The “urgent requests” of Military Government officials were answered by the industry with a trickle of films.

Late in 1945, General Robert A. McClure had a number of conferences with film industry leaders in the United States in an effort to resolve the difficulties which were then impeding the reeducation program. When General McClure returned to Germany, he could report little except that the industry had shown a desire to “utilize the military occupation to establish an exclusive position for American films and American distribution machinery.”¹⁷ He felt the government had only a moral obligation to aid the companies, and then only if they cooperated with its policies and objectives. By the summer of 1946, it became increasingly apparent that the film industry was not likely to yield, and might ultimately refuse to make any films available to the Military Government.

There were several demands made by the American companies on occupation authorities. The MPEA insisted that only it should have the right to export to Germany and that only its members should be permitted to release films. “This ran straight into strong opposition from Military Government,” according to one writer, “which wanted to include independent producers in order to obtain the best product.”¹⁸ The MPEA, legally empowered to monopolize the export business for the American industry, was attempting to force this privilege on the Military Government, but during a period when it hardly seemed justified.

The companies also were demanding that they be allowed to use their frozen marks for what amounted to economic penetration of the West German film industry. The companies asked to buy theatres in Germany, to produce newsreels for use in Germany and elsewhere, and to buy German raw stock to make prints of their own pictures. In addition, the American companies expressed an interest in obtaining the Bavarian Filmkunst studios for their own production purposes. The Military Government, meanwhile, had prohibited American companies from purchasing or investing in real estate and from buying items in short supply such as automobiles and typewriters.

These and other proposals made by the American industry ran contrary to the objectives the Military Government had in mind. The latter called for the rebuilding of a film industry that would be German in operation and in financial support as well as politically and economically independent. The Military Government felt the industry had to be rebuilt as a German enterprise, not as an American subsidiary, and that there should be no favoritism involved in occupation policies. As a step toward this, German film makers with non-Nazi records were encouraged to ask the Military Government for permission to start production companies.

Hollywood continued to use its control of films as a bargaining weapon. Military officials found themselves in a somewhat helpless position because they needed pictures and these could be made available only by the companies. When finally the policy was reformulated it allowed American companies to engage in production and distribution of films in the American zone of Germany. However, it continued to forbid American investment in theatres, and prohibited the acquisition of German raw stock for the making of prints for export trade. The effect of the new policy adopted by the Military Government was to give American companies entry into two of the three levels of the German film industry—production and distribution—and to establish a virtual monopoly of film distribution in the American zone. Plans for film production in Germany by American companies were never undertaken on a large scale, for reasons to be discussed in a later chapter.

In February, 1948, the MPEA officially began distributing American films in West Germany, taking over the function of the Information Services Division of the Military Government. The MPEA expanded its own organization and established seven main branches to service theatres in the American, British, and French zones. The earnings of American films, however, continued to be frozen, but instead of going into an account under the Military Government, they fell into an MPEA account. Regardless, the question of withdrawing money from the market was unsettled and the American industry was still wondering how it would convert reichsmarks into dollars.

This problem touched other American media doing business in Germany, notably the print media. Some American authors, for exam pie, were reluctant to sell German publication rights to their work because they could not draw on their blocked earnings. This was a definite obstacle for the reeducation program, and officials in Washington took steps to remedy it. In 1948, the Informational Media Guaranty Program (IMG) was started as part of the Economic Cooperation Administration. The program permitted the converting of certain foreign currencies into dollars at attractive rates, providing the information materials earning the money reflected the best elements of American life. This was a decided advantage to the film companies for it allowed them to distribute and exhibit their pictures in difficult currency areas with complete assurance that some of the resulting revenue would be available to them in dollars. Implicitly, it expanded the number of markets which could be exploited by the American industry, and put an “official” label on Hollywood’s work. American films could then go forward with the rank of ambassador.

At the time the IMG program was being launched, German currency underwent a reform and the official unit became the deutsche mark. This ended the Military Government’s official control over the former reichsmark and the occupation mark. However, conversion of the new marks into dollars on the open market was not authorized and the MPEA companies would have continued to face the frozen earnings problem had it not been for the IMG program.

It should be stressed that IMG did not guarantee dollars for all American films shown in Germany. An American film was eligible to receive benefits only if it met criteria established by the Economic Cooperation Administration:

The films eligible for IMG coverage include only those which present a fair and essentially accurate picture of American life, or which, regardless of subject matter, have sufficient distinction of production, design, or acting, to reflect credit on the culture of the United States.¹⁹

In short, IMG permitted conversion when films were deemed valuable for the message they contained. If a particular film was not approved, an American company could still distribute it in West Germany, but its earnings would remain blocked in marks. Even considering this feature, the scheme still benefitted American companies and they rapidly increased their flow of films to the German market.

During the 1948-49 rental year, only sixty-four American films were released in Germany. In the following rental year the number jumped to 145, in 1950-51 to 202, and in 1951-52 to 226. The impact of the IMG program is apparent when we recall that between V-E Day and May, 1947, only fifty American films were released in Germany. In the same way, 278 American films were released from January 1, 1950, to April 1, 1951, a sharp contrast to the 170 released between V-E Day and the end of 1949. And these pictures were not necessarily new ones, for of the 448 American films released up to April, 1951, about 20 percent had been made prior to 1940.²⁰ The stimulus to release came from the availability of dollars, and the availability of dollars stemmed from a need for propaganda.

The first media contract executed by IMG was signed with the MPEA in December, 1948, and covered films released from August 1 to December 31, 1948. The value of this contract was $230,000. It later was extended six months to August 1, 1949, and increased to $457,000. The MPEA proposed to distribute during this period thirty prints each of forty-four black and white features, eight color features, and a number of shorts. In the six months to the end of 1949, IMG guaranteed $636,000 for MPEA films. In 1950, contracts were signed for more than $3,000,000 and when discussions took place for the 1951 program, the American industry suggested a further increase to $4,000,000.²¹

The payment policy of IMG underwent some modification as the program functioned over the years, reflecting the amounts Congress appropriated for it and the way funds were divided among various media. The arrangement under the first motion picture contracts was for conversion of marks up to the actual direct dollar costs wholly attributable to the projects covered. Beginning in 1950, the guarantees were issued on a more liberal basis. In addition to the actual out-of-pocket costs incurred by the distributor, each approved film was eligible to have an amount equal to $25,000 in earnings from exhibition converted from marks into dollars. According to industry estimates, these out-of-pocket expenses (for raw stock and the cost of the German language version) normally ran to about $12,000 for each film. Thus, for every feature the IMG selected, it guaranteed to pay about $37,000. That the American industry benefitted financially from the IMG subsidy cannot be disputed. From the first contract, retroactive to August 1, 1948, until the expiration on February 28, 1953, of the last contract under which dollar conversion was provided, total dollar payments by IMG to American film companies amounted to more than $5,100,000.*

With the IMG program working, and with approaching favorable conversion of blocked marks into dollars, the American industry’s interest in the German market drastically changed. Its policy became one of bringing into Germany as many films as it thought the market could absorb. Not only that, but the American industry thwarted the establishment of an import quota in Germany. Discussions in Washington between MPEA representatives and the State Department resulted in an order to the U.S. High Commissioner in Germany that the Department wanted no quota on the importation of American films. An official German quota never materialized.

The reluctance of American companies to send films to West Germany prior to the IMG program was a result of concern with revenue. Even the Military Government’s objective, to reeducate Germany, was not sufficient incentive for the companies. The event which turned the trickle of American films into a torrent was, clearly, the initiation of guarantees by the American government. That the IMG program was lucrative to Hollywood was apparent when the House of Representatives considered an appropriation to the U.S. Information Agency in 1959. Congressman H. R. Gross attacked film industry lobbying in Washington and the IMG, declaring that through its payments the “Motion Picture Export Association has been given a pretty good ride on the informational media gravy train….”²²

While the exportation of films to Germany demonstrates one facet of industry-government relations, another area can be illuminated by an examination of the antimonopoly issue as it existed in the postwar German film industry. At the end of the war, there existed no private film business in Germany. The entire industry had been organized by the Hitler regime under the government-owned UFI, a gigantic holding company which maintained control over its subsidiary, Universum Film A. G. (UFA).

The UFI combine represented a great economic power as it included not only production, distribution, and exhibition facilities, but laboratories, music publishing, script publishing, export companies, and other interests which carried the UFI influence into broader fields. Western occupation authorities recognized the dangerous power that a reconstituted UFI could exert upon postwar German business. They believed a monopoly in the motion picture business would not be consistent with the best interests of a new, democratic Germany. In contrast to East Germany where only one large company was authorized, the Americans, British, and French agreed to place the new West German film industry on a thoroughly competitive basis. This called for the restructuring of the entire industry and the destruction of the UFI trust. The Western Powers believed that the new German industry should be composed of small independent units. The three levels of the film business—production, distribution, and exhibition—were to be separated, and within each level there was to be competition among companies.

This policy was also in broad agreement with what the American industry desired in Germany. The industry preferred to see Germany become a free market and it felt this could not be achieved if UFI were to regain the strength it had during the Hitler era. A reconstituted UFI would have offered competition, especially in view of the American industry’s desire to establish its own control in the German market. The MPEA was active in pressing for the destruction of UFI and for the sale of former UFI properties. Eric Johnston transmitted his association’s concern to occupation authorities on numerous occasions. As Variety once reported:

With the monopoly powers of UFA under the Nazis still clearly in mind, MPEA doesn’t propose to let this threat to one of its most valuable foreign markets go unchallenged…. In terms of dollar remittances, Germany in 1954 will deliver in excess of $13,000,000.²³

The desires of the American companies in the UFI problem were concisely stated to this author by an American industry representative: “We would not want to see a monopoly here.” In addition, American interests had expressed a wish to buy some of the UFI properties.

The policy of the western occupation authorities was put into effect as soon as the war ended, and continued during the immediate postwar years. Independent German producers were licensed in the three western zones and by 1948 more than twenty companies had been established. The UFI combine was confiscated by the Military Government which administered the properties and it appointed a German custodial committee to develop a plan for the decartelization of the industry.

Action to dissolve the UFI trust was not taken until September, 1949, when the American and British Military Governments issued Law 24, the “UFI Law,” which was supplemented by Ordinance 236 from the French Military Government. The objective of Law 24, as stated in its preamble, was to

… dispose of such [motion picture] property in a manner best calculated to foster a sound, democratic and privately owned motion picture industry in Germany, organized so as to preclude excessive concentration of economic power….²⁴

It authorized the establishment of a Liquidation Committee to have title to UFI properties and the right to sell them, subject to certain conditions. These required that sales be at public auctions and that buyers could not be government agencies, officials of political parties, former leading Nazis, or former high employees of UFI. In addition, non-Germans were forbidden to acquire more than a quarter control of any one of the three production studios up for sale. The Liquidation Committee was established in February, 1950, but according to one source it never functioned.²⁵

By this time, however, Military Governments had ceased their operation, and authority was vested in the Allied High Commission and in a reconstituted West German federal government. As the status of the former Military Government’s UFI Law was now ambiguous, the West German government requested clarification. In June, 1950, it asked the High Commission to replace Law 24 with a governmental decree designed to carry out the same idea. The Commission responded by repealing Law 24 and French Ordinance 236 but replacing them with High Commission Law 32. This new law dissolved the Liquidation Committee established under Military Government and set up in its place a Deconcentration Committee with power to dispose of UFI properties. Simultaneously, the High Commission declared it would repeal its own Law 32 as soon as the West German government passed legislation on film industry deconcentration.

To this point, then, three committees had had the power to split the UFI trust. There was the Custodial Committee which had been replaced by the Liquidation Committee which, in turn, had been replaced by the Deconcentration Committee. Yet by the middle of 1950 no action had been taken to destroy the UFI combine or, at minimum, to sell some of its appendages.

While the West German government was drafting its own film industry law, the High Commission went ahead with its plans to auction UFI properties. The first step began in November, 1950, and subsequent attempts did not prove fruitful. The official report from the American High Commissioner for Germany declared:

Extensive but unsuccessful negotiations have been held with various groups who expressed interest in buying these properties. The major obstacle to selling them has been the lack of liquid capital in Germany. Banks have been unwilling to lend money to finance the purchase since very high rates of interest can be obtained in making industrial loans with less inherent risk than in the motion picture industry.²⁶

High Commission efforts to sell parts of the UFI combine drew criticism from the German press and the German government. One segment of the press believed the current “financial difficulties of the motion picture business” offered a greater danger to further development of the film industry “than another motion picture monopoly in the hands of a few big companies.”²⁷ The government contended that the High Commission ought to wait until it had formulated its own law for the disposition of UFI properties. Officials within the government were critical of the Commission’s policy. Dr. Rudolf Vogel, chairman of the parliament’s committee for press, film, and broadcasting, asserted that forced deconcentration of UFI was “an act of mistrust.” He declared that even though there were giant production companies with diversified interests in the United States and Great Britain, the High Commission was trying to dissolve a similar one in Germany. Dr. Vogel insisted that the problem

has nothing to do with security. Today the question is whether—five years after the capitulation—it is still possible to squander German property without the participation of the Germans.²⁸

Karl Brunner of the Social Democratic party contended that UFI already had been broken because more than half of its property was in the Soviet occupation zone and inaccessible to the UFI organization in the western zones. He charged that the aim of the Commission’s plan was to eliminate competition from German films.²⁹ Similar sentiment was expressed by Dr. Hermann Puender of the Christian Democratic party and president of the German Economic Administration. He felt the destruction of the German film monopoly was purely “for the one-sided benefit of foreign interests.”³⁰

At the same time, there were hints that British and American officials had disagreed about the method of disposing of UFI properties. These difficulties eventually were resolved when, late in 1951, the High Commission announced it would make no further attempts to dismantle UFI and that action would depend upon the German parliament developing a program for this purpose. In the months which followed, pieces of the UFI combine gradually were handed over to the West German government by the High Commission. The last transaction occurred in December, 1953, and at that time the fate of UFI passed into the hands of the Bonn government and German industrialists and financiers.

Meanwhile, facilities of the UFI combine had been leased and rented to independent film companies which had been established either under the Military Government licensing procedure or under subsequent arrangements. Thus, when the German government inherited control of UFI, it was an operating entity and in a structure similar to that of the Hitler days.

One writer has observed that by 1953 the “deconcentration of the UFA-UFI properties into economically viable and competitive units [had] not yet been accomplished.” He noted that experience with coal, iron, and steel industries had demonstrated that “deconcentration is a very long drawn out matter.” In discussing the film industry’s structure in relation to other media of mass communication, the author stated:

The German democratic press has a good chance of survival. The German radio shows a heartening consciousness of its public service functions coupled with a determination to maintain its gains. But in the film industry, it is perhaps too much to expect that future developments will be along the lines desired by [the Allied High Commission for Germany].³¹

The eventual control of much of the UFI properties passed in 1956 into the hands of a holding company in which a number of major German economic and banking interests had an investment.

As a result, the UFI combine was not broken into economically independent and viable units as the Military Government and the High Commission had planned. The UFI organization in the western zone remained virtually intact, although its ownership was no longer in government hands. One person in the film industry in West Germany. He writes that despite Allied efforts to deconcentrate and the UFI properties would have aggravated the film industry crisis. The government, according to this source, wanted “a strong pillar” around which the entire industry would revolve, and decided this should be the old UFI properties.

This is supported by John Dornberg in his book Schizophrenic Germany. He writes that despite Allied efforts to deconcentrate and decartelize German industry, “most of the big industrialists have made a grand-scale recovery” and “are virtually all back at the trottle today.”³² Dornberg adds:

It would be unfair to say that the Germans or the Allies have tried to forget the plans to decentralize large industries which played a major role in supporting the National Socialist regime.

But there is also no question, understandably, that the Germans affected by the orders and laws have dragged their feet. Most of the firms involved are vital to Germany’s economic recovery and, considering the change in attitudes and the turn of events for Germany, many officials and many Germans in private life cannot understand why there is still the demand to decentralize and deconcentrate the industries which will strengthen the country economically.³³

In the case of motion picture deconcentration, both the American government and the American film industry believed the destruction of the former Reich film monopoly would serve useful purposes. The government felt that monopoly had to be replaced by competitive and independent companies on the assumption that only this could contribute to a democratic and economically strong Germany under laissez-faire principles.³⁴ The American film industry wanted to see the end of the UFI monopoly because this would have removed an obstacle in the path of the American industry’s own desire to control the West German market.

This joint industry-government policy came to nought, however. Only the government could actively initiate dismemberment of UFI, even though the American industry could support such a move. In the years following 1945, there were no serious attempts by the Military Government to dissolve UFI, and when the High Commission finally began the job in the early 1950’s, it met with strong opposition from the West German government. In the five years after the end of hostilities, German government officials and industrialists had begun to wield some measure of political and economic power, and this obstructed the High Commission’s attempts to break UFI. In addition, it is quite probable that German film industrialists, bankers, and other investors, had access to German government circles and strongly demanded that the film industry not be restructured in small, independent, competitive units. Considered in these terms, the deconcentration issue became a battle between American and West German industrial interests through their respective governments. The American government, of course, was not particularly attracted to the wishes of the American industry to have its own control of the German market. In contrast, the German government was interested in building a stronger Germany and recognized that this might be possible for the film industry if it were not dismantled.

Ludwig Erhard, when the Minister of Economic Affairs, discussed the “German economic miracle” and attributed economic growth to what he termed a “social market economy.” He has written:

My use of the term “social” is not intended to refurbish tacitly continued capitalistic methods, but to indicate a definite departure from the old liberalism which, as is generally known, cast the state in the role of night-watchman in the nation’s economy.

What “Social Market Economy” implies is that the state is given not merely the function, but in fact a real responsibility for imposing on the economy certain politically desirable maxims and employing the broad range of instruments of economic policy in such a manner that the free decisions of men of all categories in the course of their economic activities will nevertheless lead to the desired result. The “Social Market Economy” is based on the principles of freedom and order which, if harmony is to reign, must in my view constitute an indivisible whole; for where there is freedom without a firmly established order there is the danger of it degenerating to chaos, and where there is order without freedom, it all too easily results in brutal coercion.³⁵ (Italics mine)

It would seem that the policy of the Bonn government called for giving the German film industry its freedom through private ownership and for instituting “firmly established order” through the maintenance of the UFI combine.

The ultimate outcome of the deconcentration program was not a complete victory for the American film industry, because UFI was never dissolved. However, to parallel UFI’s business, independent German companies were established and these have functioned with various degrees of success. On the other hand, through governmental and industrial cooperation in Germany, the film industry was permitted to remain more or less intact with anticipated benefits falling to German business and to the German economy in general. In spite of this policy, the West German film industry never has managed to get on its feet. The strong pillar, Universum Film, around which the new industry was to be rebuilt, went through years of re-organization, diversification, and economic shakiness, culminating in its bankruptcy in 1962 and its purchase by a West German publishing house two years later.

Following the deconcentration program through to the end, and for all industries, could have weakened the West German economic structure, and this result would have been inconsistent with Allied efforts to increase economic stability and well-being as a bulwark to Communism. Thus, original intentions had to be annulled due to political considerations and events of the time.

Over the years, relations, cooperation, and negotiation between the American industry and the American government have depended upon the availability of channels for interaction. For the industry, contact with government on the highest levels has assumed an important place in its overall business policies. The death in August, 1963, of Eric Johnston, president of the Motion Picture Association of America, left a vacuum in the industry’s administration. In the search for a successor, one film industry executive frankly acknowledged that “our selection must be a man of stature who has entry to the White House [and] respect in international diplomatic channels….”³⁶ Perhaps these requirements have been fulfilled by the new MPAA president, Jack Valenti, a personal friend and former influential aide to President Lyndon Johnson.

* Examining all media involved in the West German program, from its inception until 1955 when it became inactive, we see that the American government entered into seventy contracts and made payments of slightly more than $7,000,000. On this basis, the American film industry accounted for the greatest share of dollar conversions, about seven out of ten dollars. On a worldwide basis, from inception of IMG programs until June 30, 1966, American film companies received close to $16,000,000 under the currency conversion provisions. Thus the film program in West Germany alone represented almost a third of all government payments to American motion picture interests. See: U. S. Senate, 90th Congress, 1st Session, Committee on Foreign Relations, Hearings, U. S. Informational Media Guaranty Program (Washington: Government Printing Office, 1967).