Which country failed economically

 

 

Harald Henke

Dominic Wolfram

Robin Heintz

Galera Drego

Jessica Haff

 

 

  1. The economic system of the GDR

 

 

The GDR economy was a typical example of a central administration economy. The basic principle was the central planning and control of production and distribution of goods. The means of production and banking were in state hands.

The economic plans were decisive for the management of the economy. They were created by the state planning authority as a control instrument. There were both production plans for the companies and demand plans for the population. The latter made workers available to the companies and had to submit to the state consumption plans. For their part, the companies were given production requirements (e.g. with regard to types of goods, prices or quantities). The primary goal was to meet the standards set out in the plans. The success of the plan was checked at regular intervals.

 

  1. Problem analysis
  1. System problems

 

  • Discrepancy between ideology and reality
  • Gigantic, unproductive bureaucracy to coordinate the economy

Example: Until the annual plan for a company is completed, it went through (sometimes several times) Parliament, Council of Ministers, Planning Committee, Functional Ministry, Ministry of Industry, VVBs and VEBs.

In 1977 state expenditures for the state apparatus and economic administration amounted to 3.6 billion GDR marks, more than 3% of the state budget.

  • Inflexibility of the economy

The GDR economy was unable to react to changes in the world market because the rigid planning system was paralyzing.

  • Expensive security apparatus

The GDR had a large number of different order and combat units, including the Ministry for State Security (MfS), People's Police (VoPo), riot police, border troops, National People's Army (NVA), combat groups. Billions of marks were spent on equipping and maintaining these units every year. In 1977 expenditures made up approx. 10% of the total state budget (11 billion GDR marks).

  • Chaotic economy

For decades, the GDR economy lived from its substance. Government spending was higher than the income from the few productive areas. In the 1980s in particular, the state's survival was only ensured through Western loans.

 

 

  1. Problems in the daily economic process

 

The planning in the material, economic and financial areas did not go hand in hand, as is essential for a functioning planned economy. It was not uncommon for one factory to have to stop production because of a lack of supplies or financial resources to be provided by other factories.

  • Conflicts of interest companies - planning authorities

Companies were mostly interested in low plan requirements, which equates to a lower amount of work to be done, even if a higher level of production would have been possible and economically sensible.

  • Insufficient investment planning

State-controlled investments often flowed into less meaningful areas, but were lacking elsewhere where they were needed. Example: uranium mining in the Ore Mountains.

  • Underdeveloped infrastructure
  • Lack of tradition of production

The long tradition of the peasant class, handicrafts and industry was mainly eliminated by the expropriations of the early years. There was a lack of performance principle and interest within the companies.

  • Ineffectiveness of systems to incentivize performance
  • Dilapidated condition of plants and machines
  • Unproductive economy

The level of employment in the GDR economy was artificially high. Many positions were practically doubled, so that one could assume high latent unemployment.

 

  1. Problems of the population in and with the system

 

The standard of living and health of the population suffered as a result of the mode of production, which was carried out at the expense of the environment. Example: the chemical plants in Bitterfeld.

The supply of the population stagnated and there was a shortage of many consumer goods.

The concentration of economic and state power led to certain positions and offices becoming key positions in the economic process. The prerequisites for corruption and mismanagement were thus given; both were common.

The increasing problems together with the stories about the "Golden West" led to a dramatic increase in the number of refugees before the wall was built. Even after that there were still attempts to escape. Most of the refugees were young people whom the state sent for training and the like. had invested. These were lost to the economic system.

  • Lack of identification with the system
  • No initiative

Independent thinking and acting was not required in the company. The state also took on many tasks in everyday life, so that initiative was completely lost. This is accompanied by the lack of motivation that was observed in many workers. One had settled in a state of lethargy.

  • Missing hopes for the future
  • Health hazards in the workplace

Bad working conditions and inadequate safety regulations when handling hazardous substances resulted in health and accident hazards in some work areas. Examples: nuclear, chemical, uranium mining.

 

  1. Summary

There were many reasons for the failure of the GDR, and of course these were not purely economic in nature. Political and social causes also played a role. The state-controlled economy was, however, an important cornerstone of the entire system, so that its failure must also have a lasting effect on the continued existence of the state-political conception.

Completely and effectively planning an economy of this size seems almost impossible. Setting up a production plan in which the production of hundreds of companies with their innumerable interdependencies is fixed cannot work. As soon as the chain is broken at one point, the whole system is paralyzed. It is also not possible to tailor production to the preferences of the population. This was covered up with the demand for the complete subordination of the individual to the system, an ideological training of the population should adapt the people to the requirements of the system. This was unsuccessful, it only aroused anger and resistance to the system, which only through drastic measures (security apparatus, building the wall) did not lead to a premature collapse of the GDR.

Over time, however, when the problems could no longer be controlled and the "big brother" in Moscow also showed weaknesses, the open resistance of the people began, which then quickly and bloodlessly led to the end of the GDR.

 

Bibliography:

 

  • History of the GDR, information on political education 231, Q2 1991
  • Leciejewski, Klaus: The socialist order of the economy - experiences and consequences, in: State and society after the failure of the socialist experiment, publications of the Walter Raymond Foundation, Volume 31, Cologne 1991
  • Dobias, Peter: Theory and Practice of the Planned Economy, Paderborn 1977
  • Gabler, Kleines Lexikon Wirtschaft, Wiesbaden 1989
  • Thalheim, Karl C .: The Economic Development of the Two States in Germany, Berlin 1981
  • WiƟmann, Ulrich: Ideology and technical change, Frankfurt / Main 1983
  • Schlenk, Hans: The internal trade of the GDR, Berlin 1976