Falling Behind or Catching Up? The East German Economy in the 20th Century

Sep 24, 2009 - Sep 26, 2009

Conference at the GHI | Conveners: Hartmut Berghoff and Uta Balbier (GHI)

Was it a bad start or a bad performance? This conference held at the German Historical Institute, Washington, DC, and co-sponsored by the Stiftung zur Aufarbeitung der SED-Diktatur, aimed to locate the economic history of the GDR within the broader frame of twentieth-century German history. Historians and economists from both sides of the Atlantic traced the past, present, and future of the East German economy, considering not just the decline but also the relative success and longevity of its economic system. The conference set out to overcome the historic narrative that regards the GDR economy primarily as a failure and as a preeminent example of the deficiencies of central planning, especially when contrasted with the outstanding economic success of the Federal Republic. It explored the factors behind both the strengths and weaknesses of the East German economy within its broader political, cultural, and social context.
The conference opened with a public panel discussion presented in cooperation with the American Institute of Contemporary German Studies. Hartmut Berghoff and Jackson Janes discussed the GDR's culture of decline with leading German and American experts on the history and economy of the GDR, as well as the new Länder after 1990. They posed the question of the GDR's legacy in Germany up to the present.
While this opening focused on the state of Eastern Germany today, the first conference panel moved into the past, examining the GDR's economic heritage as far back as the nineteenth century. Analyzing the history of the Eastern German economic realm before 1945, this panel highlighted the starting conditions for the GDR economy. Uwe Müller opened the panel with a presentation on the political debates about the "backwardness" of the East, which was treated as a grave political and social problem before the First World War. He outlined the different interventions undertaken by the state to improve economic productivity in the East. Rainer Karlsch then showed how the autarky projects of the Nazi regime had shaped the Eastern German economic landscape by establishing, for example, the "chemical triangle." He demonstrated that these projects were heavily subsidized, just as the GDR's autarky projects created in the 1950s were. Jaap Sleifert presented the starting conditions for the regime, concluding that the GDR economy suffered from bad political decision-making rather than a bad start. East Germany had inherited a modern industrial sector that would have made economic growth possible. However, the exclusion from international free trade and ideological decisions made in the Soviet Union in the late 1940s made the GDR's economic decline foreseeable. Taken together, these papers revealed the ongoing state intervention in the Eastern German economy in the first half of the twentieth century under different regimes and considered this tradition in analyzing the GDR's economic system.
The second panel traced the ideological framework behind the creation of the centrally planned economy in the Soviet Occupation Zone, as well as the political and economic realities of the early years of the GDR. First, Burghard Ciesla addressed Soviet economic policy, displaying how dismantling, occupational pragmatism, and disarmament brought the East German economy close to collapse in the late 1940s. He underlined the influence that Cold War developments had on Soviet economic policies. Jeffrey Kopstein's paper explored the ideological and cultural parameters that influenced the creation of the GDR's socialist society and its economic system. In accordance with the work of the political economist Andrew Janos, he labeled the GDR's economic system a "militarized economy." He also compared it to the economy of the Third Reich in working towards a general model to explain German "militarized economies" in the twentieth century. Whereas Ciesla and Kopstein unveiled the chaotic, exploitative, and destructive nature of Soviet economic policy in East Germany, Margrit Grabas turned the perspective toward the economic policies that the SED - the GDR's ruling party - had planted on that soil. She interpreted the Crisis of June 17, 1953, as an instructive shock to the system, which led to the formation and consolidation of a GDR-specific regulatory capacity of socialist industrialization. The panel made clear how important ideological, political, and social influences were in shaping the East German centrally planned economy.
The third panel focused on the economic developments and reforms of the 1960s. Inquiring into the regime's attempt to implement market mechanisms within the centrally planned economy, Jörg Rösler argued that the reforms produced a rise in consumption standards and could have worked had arguments within the SED and with the Soviet Union not brought the process to an end. Silke Fengler then outlined the business history of the VEB Filmfabrik Wolfen, adding a micro-history perspective to the panel. She demonstrated how the cooperative and competitive relations within the Comecon affected the innovative capability and productivity of the company. In particular, the Soviet Union's demands and goals limited the development of the East German photochemical industry; moreover, Wolfen's technological development was cut off from the West. Finally, Andrew Port presented a social historical dimension of the economic decline of the GDR by exposing the dark side of Eigensinn. He showed how attempts to create artificial competition among workers to stimulate productivity had a contrary outcome: socialist workers began to sabotage the work of their colleagues in the struggle for benefits and honors. This panel exhibited the different dynamics within the GDR's economic system and the socialist bloc, arguing not only that the structures of the centrally planned economy weakened the regime, but, even more importantly, that the dynamics within the system also did so.
The fourth panel pursued the GDR economy's path to stagnation and decline. André Steiner provided an overview of the economic situation for the decades after Erich Honecker succeeded Walter Ulbricht as the General Secretary of the SED Central Committee in 1971. In the 1980s, especially, exports decreased, growth rates diminished, and the supply of consumer goods declined. Neither two major credits from West Germany nor investment adventures into microeconomics could stop these developments. With her analysis of the life and impact of Werner Hartmann, Dolores Augustin then added a biographical dimension to GDR economic history. Focusing on Hartmann's career as "the father of GDR's microelectronics," she outlined the shifts in the GDR's culture of technological innovation that undermined the regime's economic viability as early as the 1960s. The GDR's competitive potential in the technological sector reached its lowest point in the 1980s when the influence of the state and the Stasi grew. The panel again emphasized the GDR's heavy reliance on economic development within the communist bloc. It also revealed the GDR's inability to keep up with international technological research.
The fifth panel explored the global dimensions of the GDR economy, highlighting external influences on and challenges to the closed centrally planned economy. First, Ray Stokes analyzed the impact of the 1970s oil crisis on the GDR. He showed, on the one hand, how the Soviet Union supported the GDR during the crisis, which affected the GDR less than the Federal Republic. On the other hand, he portrayed how the GDR dealt with the challenge by responding in a way that turned into a long-term economic pattern: the regime invested money into short-term solutions like increasing brown coal mining, which hazarded further exploitation of the environment, instead of considering long-term solutions for the provision of energy resources. In the following paper, Ralf Ahrens outlined the dynamics of East German foreign trade in the Honecker years. He described the GDR's "import hunger" to fill gaps in consumer goods and cover the lag of technological innovation. Ahrens emphasized the Soviet support of the GDR, e.g., buying products that were produced in the GDR that could not be sold in the West. In the third paper, Sibylle Gausing investigated the political dimension of the GDR's "de facto membership" within the European Economic Community (EEC) in the 1960s. She sketched out German-German trade relations, revealing how they opened the EEC up to the GDR. The West German government supported these trade relations for political reasons, even though some West German firms opposed them because of their negative impact on economic competitiveness. While other European member states were also suspicious, the Soviet Union tolerated the GDR's special position within the EEC since it strengthened the East German economy. The panel clearly highlighted how important it is to view the GDR's economic history within the context of the global economic system. It made the decisive influence of global players like the EEC or the Soviet Union on the development of the regime readily apparent.
The sixth panel broadened the conference's perspective by looking at the transformation of the Eastern German economy after unification and discussing its future prospects. Michael Burda gave an overview of the economic development of the former GDR regions since unification, pointing out the improved living standard in the East over the last two decades and the convergence of consumption patterns in East and West. He also underscored that the wage differential between the West and the new Länder has involved the relocation of international companies moving East. Burda's positive take on German economic unification was contrasted by Gerhard A. Ritter, who emphasized the negative consequences of transferring the social system of the Federal Republic to the new Länder. He demonstrated how the transfer of the West German system-with its pensions, benefits, and trade unions-to the economically weaker East produced higher wages and exploded the cost of unification. In addition, Western options for early retirement and short-term labor became important parts of the labor market policy towards the East. Therefore, a vicious circle developed in which high social expenses led to increasing unemployment. Holger Wolf then compared the course of German economic unification with the postwar economic policies of the 1940s. In both periods, an initial reform package comprising monetary reform and price liberalization aimed to re-invigorate an economy stifled by wage and price controls, heavy state debt, and extensive state influence on allocation. However, due the different international setting of the new Länder, they never experienced an economic boost comparable to that of the West German state in the 1950s. The panel nevertheless acknowledged the impressive ability of the new Länder to catch up with West Germany in terms of consumer goods and infrastructure.
The conference augmented the perspective on GDR economic history with regard to time and space. It showed that the GDR was by no means isolated from the course of German history at large. The GDR's development was based on its economic heritage from the first half of the twentieth century and was strongly influenced by Soviet exploitation after the war. However, the Soviet Union constantly supported its German socialist stepchild in trade and the supply of raw materials. At the same time, the GDR economic system was shaped by its trade with and credits from the Federal Republic; it was influenced by international economic systems like the Comecon and the EEC, as well as by global challenges like the oil crisis.
The combination of approaches ranging from economic and social history to economics helped to shed new light on the GDR's economic development. It helped us to explore the history behind the constant decline caused by a centrally planned economic system and to see the various dynamics and traps within the system. The conference adds to the German Historical Institute's growing interest in the field of GDR history that correlates with an international upswing in the field.
Uta Andrea Balbier (GHI) 

Call for Papers

In 1970, Walter Ulbricht famously declared that the German Democratic Republic would overtake the Western economies without bothering to catch up with them. This declaration became the rallying cry for the GDR's attempt not to copy Western products and economic strategies but to find its own path to industrial accomplishment. Even if this eagerness could not prevent the economic decline of the GDR, we still have to consider the relative success and longevity of the East German economy. By many measures it was the strongest economy in the Eastern bloc and one of the strongest worldwide. Nonetheless, the economic history of the GDR is discussed primarily as a failure and as a preeminent example of the deficiencies of central planning, especially vis-à-vis the Federal Republic.

This conference sets out to analyze both the successes and failures of the East German economy. It will not limit its perspective to the period of the GDR's existence but will also consider the decades before 1945 as well as the post-1990 era. It will explore the factors behind both the strengths and weaknesses of the eastern German economy and consider the economic history of the region within its broader political, cultural, and social contexts.

The conference aims to discuss the history of the GDR's economy in its global context. Therefore, the project will focus not just on the internal workings of East Germany's planning system and enterprises but will also examine the external factors that affected the East German economy (e.g., Soviet policies, German-German trade, COMECON, international economic crises).

We especially welcome contributions that deal with the following topics:

  • The eastern German economy during the Imperial, Weimar, and Nazi eras, the emergence of new industries, autarky projects and the wartime relocation of industrial plants
  • Reparations, agrarian reform, the movement of employees and enterprises between the occupation zones and the two German states
  • The New Economic System, price policy, consumption policies, corporate culture, case studies on East German enterprises
  • External influences: the oil crises, German trade relations, Western loans, the GDR in the Council for Mutual Economic Assistance, the influence of the Soviet Union
  • The eastern economy since 1990, the Treuhand agency, transformation of corporations and enterprises, subventions, economic policies, the influence of Western Germany and the globalization process

Abstracts (2 page max.) should be submitted via e-mail along with a short C.V. by August 15, 2008 to Dr. Uta Andrea Balbier.

Dr. Uta Andrea Balbier
German Historical Institute
1607 New Hampshire Ave., NW
Washington, DC 20009-2562