GDR Economy

Allied powers reached an agreement of 20 billion - final decision was that each of the occupying zones could take reparations from their own zone with the USSR getting and extra 10% from the western zones for delivering food

USSR dimantled factories, transport infrastucture and payments  from production - trophy brigades that seized gold, silver, art, furniture and clothes

1,500 entire industrial plants and half of all the east german railway tracks were taken from the soviet zone - damages to equipment while transporting, difficulties reassembling complex industrial plantsm taking german experts to the USSR - Stalin wasn't planning for Germany to be permanently divided

Reparations placed a heavy burden - any goodwill from germans was outweighed by hostility because of failing living standards and maltreatment of germans during the seizure of reparations

Idelogical conviction - nazsm as an inevitable product of the later stages of a capitalist society

GDR transform into a marcist lenist state - abolish the land owning class, private business and dmall farmers

central planning, nationalisation of industry and collectivisation of agriculture - based on a stanilist model

Declaration of the planned constuction of socialism

Germany's post war division meant that the GDR no longer had access to important supplies of coal stell from the Ruhr area as it was now part of the FRG

Until 1950 the USSR continued to take reparations as 25%  of all industrial goods produced in the GDR

GDR lost valuable labour to the FRG through migration

introduced centralised state planning, high production qutas for heavy industry

accelerated the move to the nationalisation of industry - industries and factories were taken over and formed into People's Enterprises - covered 75% of the industrial sector - severly reduced to cover only small-scale -

shortages of technology and equipment

try to meet production targets by increasing labour productivity - Miner Hennecke was used as a role model-  increased daily output of coal ofnearly 400%

Signiciant increases in the production of brown coal, electrivity, iron and cement - coal and steel production fell short of targets

viewed as an overall success with some targets being exceeded - workers put under immense pressure for long hours - lack of consumer goods - widespread dissatisfaction - insufficient investment in modern technology - quantity over quality

Modernisation, Mechanisation and Automation

Focused more on consumer goods and improving livign standards

Development of nuclear energy - first nuclear reactor was activated in 57

Centralisation control was tightened by the SED -transferred a large number of industrial ministries to the state of planning commission

offered entrepeneurs 50% partnership incentives to turn their buissnesses into People's enterprises- prive enterprises only controlled 9% by 1960. Production Co-operatives were formed - 1/3rd of craft workers were under state control by 1960

Ulbrigh's proclmation in 1958 that the GDR needed to overtake the FRG lef to the plan being abandonded -

Resentment tward the Junker class (People who were seen as having palyed a significant part in the rise of the Nazis) - most of the most popular reforms was making the junket land owners with more than 100 hectares forfeit their land and this land was re distrubuted - 1/3rd of the GDR's entire farmland was reallocated to more than 500,000 beneficaries - small and medium sized farms were allowed to keep possession of their land - lthough popular immediately post war - overall agricultural production suffered - lack of machinery and livestock - resentment at forced requisition of food - lack of  farming experience by many who had been given land - significant number of farmers abandonded their farms -late 40s - falling agricultural production had become a seious conern - 1952 began voluntary collectivisation in an attempt to increase food supplies - within 6 years only 1/3rd of gdr farmland had been collectivised - ailenated larger scale farmers who stood to lose large amounts of land 0 dissatisfaction of rural works caused 15,000 farmers to emigrate to the FRG in the early 50s

Economic demands and a more secure political position led Ulbricht to try to do a 2nd attempt at collectivisation - 1960 - socialist spring - enforced by denying reluctant farmers acess to collective machinery and high targets - people who opposed local SED functionaries were arrested and land taken by the state - crop yields between 60-61 fell 30%

widespread dissatisfaction with living standards in the 50s - food was heavily rationed - consumer goods in short suppy - housing shortage - taxation was rising - partly caused by increasing costs of guarding the GDR's border with the FRG - almost hald a million citizens mirgaring to the FRG between January 51 and 53 - church leaders voiced conerns about social unrest to government - USSR was alarmed

Did not mean that there was support for western style capitalist democracy - peopel who had resisted nazism held out hope for the socialist dream - the view that west germany was a haven for Nazis used by propaganda = 15 state ministers in the FRG were Nazis

Ulbricht announced the need for industrial productivity to increase by ten percent while wages reamined unchanged - 17th June - 300 builders on a high profile construction project in East Berlin's Stalinallee went on strike - demanding the reduction of the 10% increase - marched to the government's house of ministeries - joined by thousands of other workesr - by the following day strikes and demonstations were spread throughout the whole GDR

Protestors chants had an increasingly political tone - demands to end the SED, geninue choice of political parties at electiosn - return of the SPD and relase of politcal prisoners - attacks on prisons, police stations, offices and court houses - also included anto-soviet messages - climed onto Berlin's symbolic Brandenburg Gate and set fire to the Soviet Flag

Loyalty of East German police question - Ulbricht appealed to the USSR - more than 20,000 soviet soldiers and 600 tanks station in the GDR to supress the revolts - 21 demonstrators were killed mant injured

Government acknowledged the role that worker's frievances played in causing the revolt - blamed western radio broadcasts - Betrolt Brecht said that the SED should elect another set of workerfs

allowed Ulbricht to consolidate and strengthen his position - 20 protestors were executed, around 500 receieved priosn sentences - several hundred were sent to siberia- used to justify a purge of the SED 20,000 SED dunctionaries were replaced - did response to the strikers demands - no change to politics - Ulbricht annouced that their would be more priority to consumer goods and food in thed following year - decreased the idea of german reunification - no intervention from FRG and GDR joins the Warsaw pact - USSR sanctioned GDR's right to rearm - did not lead to significant reforms just more hard line policies - extensive repression mass arrests, purge of the civil service and Sed party members

Economy in the GDR's first decade - focus primarily on heavy industry at the expense of consumer goods - comapred unfavourably to FRG which had higher earings, shorter working hours and generous holiday - East germany guaranteed employment - however some did not have the employment that matched their skills and abilities - higher proportion of women employed - children of industrial and agricultural workers given educationial opportunities

construction of the Berlin Wall meant that there was less migration out of the GDR - secure workforce enabled more effective government planning - clear improvements in living standards from the mid 60s to mid 70s - border meant thath there was a housing shortage and there were less employment opportunities as they had a more secure population

addressed by the NES and ESS - attempted to make the ecnomy more effcient by reducing central control and allowing measures to profit to drive industry forward - some success in generating growth but both policies lacked soviet support - 1971 Ulbricht was removed from power

Honecker broughout in the Unity of Social and Economic policy - creation of consumer socialism - 1970s saw international economic crises such as the OPEC oil price rises - East Germany too reliant on the USSR - soviets iterfered with prices and trade for their own benefit - fatlery ecnomy in the 80s

Several hundred peopel who ried to escape would be killed between 61-89 - 136 killed in the wall's shadow and over 500 at other GDR border crossings outisde of Berlin - few mass demonstratioons within East Berlin or within the GDR

After absence of large scale protest when the border was sealed - Operation Rose and the physical division was a shock - caused fear - many in the GDR had memories of the 53 uprising and wanted to avoid provoking authorites - rearmament of the GDR and FRg created fear of an international conflict

some supported the construction of the wall as it was seen as essential to ensuring the GDR's survival - resentment towrds border crossers, people who lived in east berlin but worked in West berlin and had acess to western goods - no clear opposition from the west - SED referred to it at the protective wall - people had to accept the situation - increased repression against those more likely to give in to western temptation - farmers relucant to collectivise, those who picked up western media through the aeials -

more decision making by directors at lower levels within organisations - introduced profit making - focus of cosumer goods and to create funds for reivestment - incentives for workers were introduced such as financial bonuses and increasing wages for those with high skill levels - scientific and technological developments in chemicals, optics and electrionic industries - deviated further from central planning - khrushev did not formally approve of the NES - economic experiment - no political concessions - need to compete with FRG as parmount - Apel former Nazi Rocket scientistic as Chairman of the State Planning Commission - less ideologically bound than other SED politicis

Managers did not prossess the appropiate financial skills - difficulties in obtaining the necessary resources - oppotion of an idelogical basis - some indviduals deliberatley sabotaged industrial prdouction such as breaking machinery or taking extended sick leave - worry that it would lead to the creation of wealthy individuals - argument that wage differentials were unnecessary when a lack of consumer goods meant that there was little to purchase

Brezhnev outsing Khrushev led to change - failure to meet targets - accusations on rely on West Germany - attacks on the character of Apel

Centralisation reintroduced - cental planning in agriculture trade and industry - promote key industries such as heavy industry - developing computer technology and chemical and plastics - higher production qoutas - more in line with the international mood in the USSR - Warsaw pact invasion of Czechsolvakia in 69 to rperess a popular revolt led to Brezhnev imposing centralisation of the economy throughout the entire Eastern bloc - return to more hard-line communist policies

Desire progression was diffcult to maintain - did not have required facilities, experts and financial investment to match the west - FRG estimation the economy grew by 5.7 where as the west estiamtes that it actually grew 3.5% - industrial production rose considerabyl in all sectors - industrial production rose 43% - quality of trained labour improved - progress made in rebuilding urban areas such as Dresen and Leipzig  - Did not live up to high expectations - productivity failed to meet ulbricht's aim of overtaking the FRG - no real improvement in terms of international improvement - GDR demand exceeded the supply especially as the urban renewal used many of the the available resources - too much emphasis on a few industries not enough on consumer products - cold winters at the end of the decade

GDR replaced Poland as the USSR's main trading partner - top ten industrial nations in the world - despite reparations and lack of marshall aid

recognised need to improve consumer goods - during 60s there was a significant increase inth e availability of hoshold items more so than in other states within the eatern bloc - inferior qulaity comapred to FRG - many eat germans blamed the USSR because of reparations

try to raise living standards through consumer socialism and better welfare - contented workforce would work longer and harder - more central control - all private and semi private buisnesses were nationalised in 72 - this sector had created 11% of GDR production and employed nearly 50,000 peopel - resticted the impact of consumer socialism -  consistent underinvestment in industry due to focus on welfare - caused decline in the 80s - stabalisation of economy - industrial production gre stradily at atround 5 percent each year through the 70s - 80s nearly every houshold had a television and refridgerator while 85% had washing machines

Resent at the unabiability of consumer goods directed at Delikat and Exquist shops - government runstores that sold high quality and luxury goods - designed for the elite party members - accepted east german currency - unaffordable for the majority

OPEC crisis of 1973 suddenly raised worldwile oil prices - natural resource in the GDR 0 reduce the GDR's purchasing power for exports

GDR found it increasing difficult to secure credit caused a shortage in consumer goods - caused liquidity crises were rising production cost, state expenditure, mountaing interest rates on debts and failing trade meant that the GDR couldn't borrow money

Negotations between SED and FRG to secure nearly 2 billion DM in loans in 83 and 84 - much needed cash placed into the banks and not reinvested to make the GDR seem more credible to the west - attempts to reduce GDR's reliance onf USSR oil - saved fuel and sold it too the west - same was done with consumer goods - East Germans noted that a thosand littel thigns vanished from stores - imports fell by 30% while exports role by 9.1%

Inferiror quality of consumer goods such as the Trabant - expensive cars that were deliberately underproduced - as private ownership of a car was seen to be ideologically wrong

Became a member in 1950 - 76% of its trade was with the USSR and eastern place - economic planning became intrinsicallyl inked with COMECOM - GDR was unable to keep up with Western developments in modern technology - GDR became most sophisticated industrial economic with highest living standards in eastern bloc - supplied USSR and other COMECON members with vital technology

A labour shortage in the 70s meant that the GDR brouht in workers from Vietnam, Mozambique, Angola and Cuba - students from eastern bloc countries studied at east german universities

USSR was the GDR's largest trading partner accounting for 45% of the GDR's exports of plant and machinery - not profitable for the GDR - never bought at proper market price - supplied 90% of GDR's iron ore, oil and wood and 80% of its rolled steel and sheet metal

Links to COMECON were valuable furing the OPEC crisis - GDR shelterred from steep oil prices by using soviet supplies - by 1980s a second OPEC price rise the soviets began to reduce GDR oil supplies - did nothing to protect the GDR from dinancial failings in the late 70s and 80s

Propaganda emphasised full employment (caused overstaffed) , non existant homelessness (did not have the jobs they wanted), cheap rents (lack of new housing meant overcrowded accommodation), subsidised essential food items (long queues and luxuries were rare) and cheap public transport - Economic growth between 1982-85 had slowed to 1.5% from 2% in 1976-80 - honecker responded with short term measures that only accelerated the situation long term - selling of 1500 political prisoners each year to the FRG and massive loads from the FRG the extent at which was kept hidden from the majority of the polibuto - Goods taken out of the domestic market to boots exports

Five year plan of 189-90 attempted to adress these issues - construction or modernisation of over a million homes - focus on new technologies such as the production of mircochips but could not compete with the west - did little to imrpove living standards

econonomy was hampered byt he high levels of spending on defence - 8% of all gov ernment spending - spending on maintaining, odifying and guarding the berlin wall was sufficient to pay for all of the GDR's gas and electcity bills and woul've allowed for the implemention of a 35 hour working weak - the 91,000 full time employees of the stasi was a financial strain

Debts to the west frew to over DM40 billion in the 80s - they gad a GDP of around 250 billion - lack of exports meant it was difficult to to generate currency and difficult to pay off these debts - the schurer-papier projected that it needed to increase export surplus by over 5000% to stabilise debt levels

much of this debt was created by previous efforts to increase exports which required initial imports of various technologies and resources to kickstart industrial development - imports used to maintain living standards - in an efford to gain currency east germant resold soviet oil to the west - by 1983 it made up 30% of its western exports - they had to use brown coal for domestic and industrial use - the cost of this outweighed any short term benefits - domestic instability due to bad crisis management and growing debt - new products failed to compete with high technological standarsd in the west

The financial situation was kept hidden by Honecker - restiction of economic information included the economic minister Gunter Mittag

Personal incomes and overall living standards was compared unfavouragly to those in the FRG - there was a greater level of security - spending on living standards went from DM72.9 billion in 1980 to DM112.4 billion in 1985

Healthy workforce encouraged productivity - seen to be successful at prventing opposition from reaching levels of mass protest

aging population of the 80s across europe - heavy industry had contaminated cities resulting in enviromental damage that affected its citzens - air pollution was the worst in europe which caused respiratory problesm such as chronic bronchitis - some areas such as bitterfeld would've been declared unfir for human havitation by the UN 

Process of industrialisation had been implemented without regard for the workers

Focus on heavy industry established a trend for the neglect of consumer goods - impact on availability and quality of consumer goods - honecker ordered factories that were production for the industrial sector to ensure 5% of their output was made up of consumer goods - strange combination of products - steel mills producing mircrowaves - led to poor qualty goods

shortfall in goods made up by the private sector which gre slighlty in 85 - however they only made up 2.8% of net national product - they were important for the manfucature of spare car parts, fridges, washing machines and relevisions

difficulty obtaining most essential godos sucha s meat butter and bread and basic items of clothing - queuing for long periods - limited number of sizes in shops - but someting they didn;t need because they wouldn't be able to get it later

bartering became a more common way to complete a small transaction - growth of this second ecnomy - tips and bribes to get desired items - Buckware or duck foods as they were found below the counter - goods were scarce and people had large savings - Essential items could be found but not high quality ones - west german tv showed western capitalist lifestyle - could hear rock festivals in east berlin

by 1989 non socialist countires made up a majority of both exports and imports - economic traffic between GDR and FRG was mostly one way - 20% of all GDR trade was with west germany by 1989 0uge changes were made for transit across GDR territory to weste berlin and Hermany 0 bought 34,000 dissidents 0 cash payment for enemies of socialism - through this scheme west germany paid up to DM3 Billion

inter-german co-operation prolonged the existence of the GDR as the FRG offered life support by manging the levels of deby but it raised the political ssumption that perhaps the FRG was not as dangerous as the propaganda suggested - Honecker vistited West Germany in 1987

could not postpone the call for reform forever