Economic Stagnation in the 1980s

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  • Economic Stagnation in the 1980s
    • Economic Stagnation in the 1980s
      • Honecker preferred central planning and got rid of many elements of the ESS.
      • Central planning left no room for initiative but it was not threatening to the SED as it did not resemble capitalism.
      • Partly privatised companies came under state control once more and in the 1980s the economy went into crisis.
    • Solutions to the economic problems
      • Some USSR economists thought the situation could be solved by working with the FRG (confederation), Gorbachev believed in the talent of middle managers who could return to the ESS and leaders of the GDR just buried their heads in the sand.
      • Honecker wanted to join with other communist countries.
      • It was believed that only intervention by the International Monetary Fund would keep the country afloat.
      • They would have to cut consumption by 25% which would destabilise the country. Little happened and Honecker resigned.
      • Confederation was put on the table again – but was the point of having two separate states working along capitalist lines.
    • The impact of the USSR
      • USSR realised it could no longer subsidise Comecon. Brezhnev said in 1981 that supply of raw materials would be cut and the USSR would raise price to market level.
      • This was a disaster for the GDR who imported 70% of its raw materials from the USSR.
      • It reduced oil deliveries to the GDR as well as the USSR claimed it was selling oil to the West at lowered process.
      • The GDR had to burn lignite which was cheaper but had high levels of pollution.
      • It was no longer possible for propaganda to suggest that people werewell off – BUT the GDR was all they knew!!!
    • Economic relations with the FRG
      • By 1982 the economy was in great crisis.
      • Help came from the FRG – DM 1billion in 1983 and DM 950 million in 1984.
      • It may have been that the FRG did not want to see the GDR destabilised at a time when there seemed unrest in central Europe.
      • The GDR used this loans as security by depositing them in the bank it made them more credit worthy.
    • The 1981-85 Five-Year Plan
      • Set ambitious targets; to hold down the level of imports while increasing exports, speed up technological and scientific advances while decreasing domestic energy consumption.
      • They needed to increase economic growth to pay for the increasing welfare. External factors such as higher prices for raw materials and oil impacted the GDR.
      • Oil Exports
        • Ironically in a country that was increasingly reliant in domestic consumption of coal they modernised its fuel techniques with oil refineries.
        • Many consumer goods and foodstuffs disappeared off the shelves – it had stabilised its debt but was to over dependent on the export of oil at high prices and when the world price for crude oil fell the GDR found itself in trouble.
        • Economic managers in the State Planning Commission insisted there needed to be less spending on welfare and more investment in modernisation. Honecker refused his social contract was sacrosanct.
        • The GDR would not cut spending on welfare;
          • Members were still convinced central planning could address economic problems
          • Improvements in social welfare would see improvements in productivity.
          • Members still believed their propaganda in the relative strength of the GDR
    • The Poor Quality of Consumer Goods
      • In the 1980s the GDR citizens were more aware of the quality of goods on sale in the West.
      • There was a long wait for cars, fridges and telephones were poor quality, parts were rare if they broke down.
      • People were also becoming aware that people in positions of power has better access to good such as telephones.
    • National Debt
      • The debt owed to capitalist countries spiralled out of control by 1989 they owed over DM 46 billion.
      • Comecon took much of its industrial outputin return the GDR recived 70% of its raw materials.
      • The GDR could never export enough to finance it because of its inefficient production techniques. Queues for goods grew as shelves were left empty.

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