Recent History
Cold War
GDR 1969-1989 : the Economy

GDR 1949-1969 : the Economy

Demand continued ot be much greater than supply, and coupons had to be issued for staple items such as bread, fat, meat into the early 1950es.
Illustration courtesy of Peter Dörling

The Establishment of a Socialist Economy and Integration into the Soviet Bloc : East Germany meanwhile fared less good than the FRG. The Russians had continued their policy of Demontage (of disassembling entire factories, ship them to the USSR and reassemble them) for quite some time. The policy of nationalization of industries, Collectivization of farmland, of central planning of the economy by the state, since 1956 by the COMECON, had had its impact. The GDR economy was a state controlled economy, it's currency, the (East-) Mark, non-convertible, exchange rates (with the DM) fixed by the state at 1:1 (the black market exchange rate was 3-4 to 1, but illegal and dangerous). Many engineers, frustrated by the system which harmed their creativity and their wages, migrated into the west.
1952 to 1963 : Initially, a functioning civil economy had to be restored, demand outdid supplies, and the GDR economy grew. Food Rationing was terminated in 1958. However, the State Planning Commission was composed of administrators with communist party schooling; in the late 1950es economic growth declined, in the early 1960es it stagnated. Factors such as the political status of the GDR as a provisional arrangement, and the exodus of engineers, medical doctors and skilled workers through Berlin into the west harmed the economic development of the GDR. Events in 1952, 1955 and 1961 turned unification into a less and less likely option, thus the GDR appeared as a less and less provisional political entity; the construction of the Berlin Wall ended the mass exodus of skilled specialists.
Not due to the economic development in GDR times, but rather due to the recontruction of pre-GDR industries, the GDR became the model economy among the socialist countries of Eastern Central Europe. A large shipbuilding industry emerged in Rostock and Wismar, producing mainly for the USSR. There were two car actories, producing the Wartburg and the Trabant, the latter a car with a 2 cylinder engine and a plastic body; it became the symbol of GDR industrial production. The car highlights the problems of GDR industry : the plastic body was only a makeshift solution. The originally foreseen body sheets had to be imported from West Germany - and that sheet's delivery had not been permitted by the West German government.

Trabant 1.1, image courtesy
Alles ueber den Trabant

The New Economic System, 1963-1968 : In 1963 the GDR adopted the New Economic System, based on the theory of Soviet economist Evsei Liberman. Scientists were included in the State Planning Commission; scientific methods applied when Five Year Plans were established; the individual enterprises given more freedom to make decisions, allowed to make profit. It was applied until 1967-1968, when it was quietly discontinued.

A National Path, 1968- : In 1968 the GDR proclaimed her intention to, in economic policy, pursue her own path, i.e. independent of the Soviet model. In Moscow and elsewhere, the liberal economic policy of the 1960es was partially blamed for the Spring of Prague. The GDR path in economic policy meant strengthening of central control over the economy, thus not suspicious to Moscow.

Overall Economic Developments : The GDR was a workers' and farmers' paradise - housing was cheap (10 Marks per month, a mere administrative fee), the car similarily affordable. The problem : for both there was a waiting list. You had to wait up to 12 years to get either one of them. The 1961 model of the Trabant was not changed until 1989, the year of unification. Rented apartments were not repaired unless by those who lived in there, at their own expense (actually, some were repaired by the state, but they could not keep up with the decay, so that in 1989 many buildings were in poor condition.
Within the GDR economy, families could enjoy economic security - jobs were guaranteed, for both genders, Kindergarten places were provided and could live in moderate wealth, many families went on vacation within the country or abroad to other socialist countries (but not to the west). Some could afford a Datscha, a small plot of land with a hut to spend the weekend. Yet, efforts were discouraged, while the state accepted requests for all kinds of benefits, thus cultivating a mentality of inactivity and reliance upon the state, a Dependent Society (Anspruchsgesellschaft). Many of those who did not live according to this mentality migrated into the west, a migration which was halted by the construction of the Berlin Wall in 1961.
The GDR also developed into a consumer society, that is, socialist style. GDR citizens, like those in the FRG, wanted to have refrigerators, electric ovens, tv, a car. GDR women enjoyed skimming through mail order catalogues as much as their western counterparts.
The GDR becoming extremely successful in sports gave the people something of a distinct identity. In economic terms, it had become moderately successful (that is if compared to it's eastern neighbours) and by 1970 claimed to have reached the level of the British economy. One economic branch in which the GDR was successful was Industrial Espionage, favourite target West Germany's thriving industry.

Everyday life with the Trabant, from Paul Negyesi
DDR-Alltagskultur, in German
Article : Evsei Liberman, Economy of the GDR, East Germany, History of Comecon, from Wikipedia
Quantitative Wirtschaftsgeschichte der DDR (Economic History of the GDR in Figures), from Jahrbuch für Wirtschaftsgeschichte, German language bibliography
REFERENCE Hermann Weber, Geschichte der DDR (History of the GDR), München : dtv 1999, in German [G]
> Stefan Sommer, Das grosse Lexikon des DDR-Alltags (The Large Lexikon on GDR Everyday Life), Berlin : Schwarzkopf & Schwarzkopf 2002, in German [G]
Mary Fulbrook, The Divided Nation. A History of Germany 1918-1990, Oxford : UP 1991 [G]
Brian Mitchell, International Historical Statistics : Europe 1750-1988, NY : 3rd ed., Stockton Press 1992 [G]

This page is part of World History at KMLA
First posted in 2000, last revised on June 23rd 2006

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