GDR ECONOMY 1963-85

NES (Features, Problems, Why was it abandoned?)

Features: Directors at lower levels allowed decisions

-Introduced profit making as a key indicator

-Incentives for workers, increase in wages.

-Focused on scientifical technological developments- chemicals, optics, electronics

-Encouraged Universities and industries to link in order to improve production

Problems: - Managers didn't have financial skills, some were oppossed ideologically and therefore broke machinery on purpose

-Wage change was unnecesary because there weren't many consumer goods anyway.

Abandoned? Because of the invasion of Czechoslovkia, Brezhnev afterwards pushed for more centralised political and economic systems to enhance control.

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ESS (Features, Advantages? Problems, Why was it ab

Features: More centrally planned

-Price subsidies on industry

-Extended to policy of agriculture

-Higher production of quotas

More emphasis on developing computer technology and chemical and plastic industries

Advantages: Economy grew nearly 6%

-Industrial proudction almost 45%

-Become the USSR's main trading partner

Problems: -No improvement in international - didn't live up to high expectations - pressure on overtaking the FRG - Overtaking the FRG placed too much emphasis on industry, not enough on consumer goods

Abandoned: Whilst Ulbricht was on holiday, Honecker introuced a Politburo resolution which reversed ESS and intoduced central planning etc.

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The Unity of Social and Economic Policy (Features,

-Tried to raise living standards through consumer socialism and better welfare. The theory was a more contented workforce would work harder and longer for the state, then any increases in production would provide more investment in housing, healthcare and education.

Advantages: - The economy stabalized, industrial production grew steadily at around 5% each year through the 1970s - By 1980 nearly 85% of people had washing machines

Overriding Problems: - The OPEC crisis suddenly raised world oil prices.

-By 1982 the GDR found it difficult to secure credit while a slowdown in retail trade caused a shortage of consumer goods, rising production costs and debt all meant a full blown liquidity crisis. (Led to the DM2 billion secured in loans from the FRG.)

-In 1982 exportd fell by 30% while exports rose by 9% = 'A Thousand Little Things' vanished from shops. (The Trabant can be highlighted to show the inferior quality of consumer goods.

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Membership of COMECON, Advantages? Disadvantages?

+76% of trade with USSR and the Eastern bloc (45% with the USSR)

+The GDR had the most sophisticated economy and the highest standards of living in the Eastern Bloc.

+In the 1970s, due to worker shortage they could bring in workers from Cuba, Angola and Mozabique

-The fact that trade with the USSR was 45% meant they got many natural resources including Oil from there and therefore when the USSR inevitably raised prices, the GDR suffered.

-By the second OPEC crisis Brezhnev reduced the GDR's oil supply even though Honecker sent a letter to Brezhnev, pleading for more supplies.

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