5. Pricing Policy

Ever since the National Socialist Party came to power in Germany, it has become more and more generally recognized that prices are the factor at the heart of currency and thus of the entire economy. Even during the present war, everything possible has been done to maintain price structure. In particular, the War Economy Ordinance has ensured that prices and wages for goods and services of all kinds are to be set in accordance with the guidelines of the national war economy.

Thanks to this strict management on the part of the Reich and the united discipline of the German people, it has been possible in the Reich proper to keep prices under control in spite of all the difficulties that a total war entails; that is, it has been possible to keep the economy working at peak productivity despite great price pressure and at the same time to preserve for each national comrade the living standard and expense level he was accustomed to in pre-war times.

These are things one must bear in mind when one considers pricing policy in the General Government and especially in Warsaw.

Aside from the fact that the Polish pre-war economy was strictly liberal and capitalist in nature and that there was very little state management of the economy, the war and its devastating consequences for the City and the District of Warsaw had also caused great economic upheaval following the Polish Campaign. Added to this is the fact that the old pre-war Poland was a country of agricultural surplus, whereas the General Government, whose borders had to be drawn in accordance with the interests of the Reich, is not yet independently able to produce enough food for its populace to maintain an adequate standard of living.

The resultant shortage of goods and raw materials of all kinds, and most of all the Polish people's widespread blatant egotism and utter lack of discipline, soon began to exemplify the liberalist maxim of "supply and demand" in the form of black-marketeering and hoarding, which was intended to squeeze the greatest possible profits out of this wartime need. The situation was marked by a complete absence of economic planning and of any sense of responsibility for the national economy.

A few months after the conclusion of the Polish Campaign this situation was already causing great pricing problems in the region administered by the General Government. To resolve these problems the Governor General issued an order pertaining to the elimination of such profiteering; the decree was intended to put a stop to this deplorable state of affairs by providing for very severe penalties. Under the terms of this decree, severe cases of profiteering which do harm to the common good, as well as hoarding and black-marketeering, are punishable by imprisonment and in particularly reprehensible instances even by death. This order was followed a few days later by an injunction regarding the setting of prices for basic commodities required by the working people, as well as by an order prescribing the use of price tags, which mainly serve to assist in the monitoring of prices and are also intended to encourage price restraint in both customers and merchants.

The experiences of a mere few months already showed clearly that in light of the fundamental attitudes of the Polish people these measures alone would not suffice, but rather that comprehensive price policies akin to those in force in the Reich would have to be instated in the General Government in order to get a grasp on this aspect of the economy. These orders were therefore replaced in April of 1940 by the Pricing Regulation orders which were in fact the prelude for comprehensive pricing policies in the General Government.

It was, of course, not possible to introduce a rigid price freeze, since even as early as April 1940 matters already stood quite differently in the General Government than in the Reich. The Pricing Regulation therefore proposes that individual commodities should be regulated by maximum, set or recommended prices determined by the Governor General or by the individual Governors. In those cases where such price levels were or are not specifically prescribed, a flexible price freeze has been introduced – that is, retail prices and wages may exceed the stock or market prices of August 31, 1939, or the prices otherwise in effect on that date, only by as much as wholesale purchase prices can be proved to have increased since that time, or by as much as the amount of other inevitable cost increases which cannot be compensated for by a decrease in profits, in which respect it goes without saying that the profit margin of August 31, 1939 may not be exceeded. Should any greater increase in prices and wages or in profit margins come to be necessary for economic reasons, the authorities in charge of price control may permit or order exceptions to the rule. On the one hand, this regulation provided the economy of the General Government with much greater pricing flexibility than is the case in the Reich; on the other hand, however, it also brought with it the greater obligation of constant self-responsible monitoring of independent pricing practices.

And indeed, this systematic planning and guidance of the newly created price monitoring authorities effected an initial stabilization of the prices. Prices dropped noticeably; this, however, was largely only the case because at that time, at least in the industrial sector, the price structure was still relatively normal and also because there were still considerable quantities of goods in stock. More or less acceptable price levels could thus be maintained for almost a year, even though the prices of many basic commodities were even then already much higher than the pre-war levels had been.

State authority did of course attempt to strengthen and consolidate the price structure in almost all areas of the industrial and agricultural economy by means of a close-meshed system of management whose directives were largely based on, or even copied from, similar directives in the Reich. In this way the restoration of the lost equilibrium of supply and demand was attempted from a management perspective, which would at the same time have served to eliminate by state force that wilful setting of prices which characterizes a liberal economy.

The increasing shortage of goods rendered these management directives and price regulations less and less practicable, as prices merely represent the last link in a long chain of economic processes and can only function properly if all other links in the chain are perfect.

The Polish people's boundless lack of discipline, as already mentioned, increased black-marketeering and goods trafficking to a degree that is simply incomprehensible in a German frame of reference. In this respect the Jewish influence on Warsaw was quite naturally also a decisive factor. The agglomeration of some half a million Jews in the city, who in accordance with their nature were ever eager to undermine and to destroy all efforts at reconstruction and development, has been very injurious. The later spatial aggregation of the Jews in their own residential quarter did decrease, but not completely eliminate, this influence. That tangled Jewish hodgepodge which has also permeated Polish economic circles for centuries must first be completely eliminated.

The other major blow to price structure in the General Government, and again particularly in the City and the District of Warsaw, came in spring of 1941 when the great deployment of the German Wehrmacht against Soviet Russia became necessary. The troop movements involved, which chiefly affected the City and the District of Warsaw, necessitated the buying-up of many goods by the Wehrmacht. Further, the deployment itself, and the danger of war it clearly posed, caused millions to panic-buy and hoard extensively. The troop movements interfered severely with agricultural collection and distribution measures, and large sectors of the population thus suffered severe food shortages. Great price hikes for most consumer goods were the result.

After most of the German Wehrmacht had moved on, an initial drop in prices was evident. However, the extended duration of the Soviet Campaign has turned the General Government, and once again the District of Warsaw in particular, into a primary supply base for the German Wehrmacht, which results in further shortages of all goods and services so that rising prices are once again inevitable.

The ultimate goal of all efforts in this field is, of course, the creation of an effective pricing structure and hence also of an economic structure for this neighbor of the German Reich – a structure which will meet the needs of the leading German and thus the overall European economic interests, and which therefore stands in healthy price relation to its neighboring economic spheres.

Due to the circumstances already mentioned, this goal cannot possibly be attained during the war. The only contributions which can already be made towards this end are preparatory measures which will facilitate rapid adjustment once the situation is back to normal.

Now, in wartime, limits are imposed on official price structuring and monitoring which demand careful and judicious direction of pricing policy. The foremost aim of such policy must be to accommodate the needs of the Wehrmacht, both in terms of supply and of price. Every other concern must be subordinate. Second on the list of priorities must be to meet all other German needs. The General Government is obliged to lend as much support as possible to the German Reich, and this applies equally to the price situation. It goes without saying that the territory of the General Government and its Polish denizens must also be given fully as much protection as the necessities of war permit, and it is the particular responsibility of pricing policy to safeguard the standard of living of the Polish people who are actively working for the German interests.

The problems which the conditions described pose for the attainment of these goals are self-evident. Exhaustive, detailed attempts were nevertheless made in many areas to determine reasonable prices and to maintain these as far as possible: countless price checks and business audits were carried out in all branches of production and at all levels of trade, prices for many different products were set under consideration of present economic conditions, profit margins were determined for wholesale and retail activities, and particular attention was paid to the development of an ordered system of accounting and bookkeeping in industry and trade.

Beyond that, the systematic and well-planned combating of black-marketeering in all branches of the economy was one of the foremost tasks of the price monitoring authorities. It was clearly recognized that, considering the incomplete degree to which the official supply system could meet the people's food requirements, the battle against black-marketeering had to be waged carefully and judiciously. In recognition of this fact, a kind of black-marketeering aimed at self-sufficiency was tolerated not only silently but even officially; certain exemption margins were set which were intended to enable the people to supplement their own needs above and beyond the official allocation. For example, 10 kg. of potatoes were generally set as exemption limit, as well as 3 kg. of other groceries, of which a certain part may be butter and meat.

The battle against black-marketeering in the economic sector, on the other hand, was waged all the more strictly, as attempts had been made in this area to turn the need of the entire region to immense personal profit. It is gratifying to note that thanks to the superb co-operation of all authorities involved, more and more such wholesale traffickers are being apprehended and that as a result some sources of illicit trading activity have already been plugged up.

It is self-evident that these efforts in all sectors of the economy had to be backed up with severe and even draconian punitive measures in cases of noncompliance. Not only were fines (at times quite considerable) imposed by the administrative penal system, but also, businesses which refused to submit to official measures were and are being shut down and their proprietors forbidden to transact further business. In particularly severe cases, care was also taken to ensure that the persons in question were provided with a more generally beneficial occupation.

Beyond that, economic saboteurs are increasingly being prosecuted in court. The imposition of numerous high prison sentences and even the death penalty attest to the severity of the courts in these cases.

Further, the Department for Price Control has recently joined in close cooperation with the other authorities in an extensive weeding-out and elimination of all operations not required for the conduct of the war in order to further adapt the state of the economy to war conditions.

Following lengthy preparations, a large-scale campaign for the skimming-off of excessive business profits has been begun, the aim of which is to put an end to the intolerable imbalance between the amount of money in circulation and the availability of goods that could be purchased with it. War conditions have resulted in this disparity between the circulation of money and the supply of goods becoming so severe that the state is forced to intervene and to take the superfluous and unstable funds out of circulation and into its own safekeeping.

This campaign, which is as yet in its infancy and which will channel many millions from the economy to the state, will contribute considerably to the control of the price situation and thus of the entire economy, as required until the war has been brought to its victorious conclusion.

Warsaw Under German Rule
German Reconstruction and Development in the District of Warsaw