Between state capitalism and globalisation: The collapse of the East German economy

Abstract

The origins of this book go back to the 1980s, in particular to a series of visits to, followed by periods of residence in, both the German Democratic Republic and West Berlin. Living in and between two such different societies focuses one’s thoughts on the contrasts, whether in terms of the lifestyle and ‘national character’ of the people, or the structures of economy and polity. In the East, one felt that this was a society that, in material terms, lagged Western Europe by five or fifteen years. Roads were more likely to be empty, and cobbled. Cars were fewer, and more basic in their design. Some farmers were still using horse-drawn carts. Televisions were usually black and white, and personal computers the preserve of enthusiasts only. In terms of political structures, the suppression of public debate was, of course, most striking. So too were some of the features of a ‘mobilised society’; hardly had I taken up my teaching post at a university, for example, than my students were called away by the ‘Free German Youth’ organisation to assist farmers bring in the harvest. In terms of ideology, differences to prevailing views in the West were observable in the media and in the streets, whether in the shape of propaganda banners or in their very names, evocative of the Communist pantheon or simply of industry (‘Street of the Workers,’ ‘Aluminium Street,’ ‘Technicians Street’). Yet in many respects the similarities between the two systems were, if not more eye-catching, then certainly more important. As I crossed the Wall to visit family or friends in West Berlin I was aware that the economic and cultural gap was no greater than that experienced by, for example, an inhabitant of San Diego visiting her family in Tijuana, or a Palestinian refugee in Gaza visiting Israel to do the same. Thus, in the East, my colleagues and I would go to work each day, to a work regime that, although a touch more ‘Prussian’ than that which I personally had known in the West, was in central respects identical. We would follow the curriculum, carry out instructions from our superordinates, collect our wages each week and proceed to spend them in shops and on leisure activities, depositing any remainder in our savings accounts. The question that arose, for me, was whether these similarities indicated the presence If anything the differences in everyday life between Were these differences In 1989 civil liberties were won by a mass movement, the Berlin Wall came down, and market reforms were introduced, followed by currency union and then unification with the Federal Republic of Germany (FRG). Public political debate was now tolerated and the ‘mass organisations’ dwindled and died. The streets, now with different names, grew busier and the price of colour televisions fell. At work, we could join an independent trade union but also faced the likelihood of unemployment, and in these respects the work regime changed. Our wages, moreover, were in Deutschmarks, they could be spent in the West, and the savings bank was now owned by the Deutsche Bank. However, in fundamental respects we continued as before: attending work each day, operating within a similar hierarchy of command, collecting and spending our wages, and so forth. The original questions that were to lead, ultimately, to this book arose from out of these experiences: How can one account for the similarities and differences to its Western twin? In particular, what sort of economy was that of the German Democratic Republic (GDR) and, by extension, those of the Eastern bloc? What made them tick? What explains their emergence, growth and demise? And above all: what exactly changed in 1989–90? In addressing them, three main lines of enquiry were pursued. One was to study the ‘political economy of Communism.’ An exploration of this takes up the first two chapters of this book. The second was to study the economic and political history of the GDR, a thread that is pursued in chapters three to eight. Thirdly, questions related to the demise of the East German economy in the 1980s and in particular to its collapse in 1989 led me to back to Berlin in order to research in the archives of the old regime and to conduct interviews with former functionaries. The findings from this research are concentrated in chapters seven and eight. In addition, a final chapter analyses the eastern German economy after unification, enabling the question of ‘what exactly changed in 1989–90’ to be viewed in a new light.