To what extent did the GDR's economy stabilise after 1961?

Question 1

What is consumer socialism?

Answer 1

The idea of rewarding workers: if they work for the state, the state would provide them with consumer goods. It was used to describe Honecker’s approach to economic policy.

Question 2

What is the OPEC?

Answer 2

The Organization of Petroleum Exporting Countries, dominated by Arab states who used the organization set to crude oil prices to their advantage.

Question 3

What are the two main reasons for the implementation of the New Economic System in 1963?

Answer 3

• The GDR’s new found security following the building of the Wall allowed the government to adopt and, to some extent, experiment with new policies.
• It coincided with the USSR and some Eastern Bloc countries, like Hungary, recognizing the need for economic reform that would hopefully encourage greater efficiency, productivity and innovation.

Question 4

Who was in charge of the NES?

Answer 4

It was placed under the direction of Gunter Mittag, the Head of the Office for Industry and Construction.

Question 5

What is the date range of the NES?

Answer 5

1963-68.

Question 6

What were the aims of the NES? (5)

Answer 6

• More decision-making would be allowed by directors at much lower levels within organizations (but the SED retained overall planning control)
• Profit-making was now a key indicator of performance in an attempt to improve quality goods to create funds for reinvestment
• Incentives for workers were introduced, including financial bonuses and higher wages for skilled workers.
• More of a focus on scientific and technological industries, particularly the chemical, optic, and the electronic.
• Also encouraged universities and industry to develop links as a means to improve production

Question 7

Success in terms of the links between industry and university lead to what problem?

Answer 7

Skilled workers often found themselves overqualified for jobs which lead to dissatisfaction in the workplace and high labour turnover.

Question 8

Why did the SED emphasise the need for scientific expertise?

Answer 8

Because it created opportunities for highly-skilled and rewarding careers within the GDR now it was impossible to emigrate.

Question 9

How did the NES differ to the economic reforms suggested by Khrushchev?

Answer 9

The NES deviated further from central planning than the reforms Khrushchev had envisaged for the USSR. Khrushchev did not formally approve but, he tolerated the NES as long as it maintained ideological commitment.

Question 10

What need did Ulbricht see as paramount when implementing the NES?

Answer 10

Competing with the FRG.

Question 11

What were the three main problems with the NES?

Answer 11

• Managers often did not possess the necessary financial skills and there were often difficulties in obtaining the right resources.
• There was opposition to the NES by those ideologically committed to creating a Communist state. Those who opposed sabotaged or broke machinery, or took extended sick leave off work. They felt that lessening SED control undermined the idea of a socialist and state and felt offering financial incentives to workers would lead to the creation of wealthy individuals.
• There was also an argument that wage differentials were unnecessary when the lack of consumer goods meant there was actually very little to purchase.

Question 12

How did the USSR help to bring about an end to the NES?

Answer 12

• The USSR’s leadership wanted to recentralise planning.
• Another problem was the replacement of Khrushchev with Brezhnev in 1964, whose views were far more orthodox and there was clear unease in Moscow that Ulbricht’s deviation could create a class of rich-elite within a socialist state.
• Brezhnev’s curt visit to the GDR in December 1965 made his feelings quite clear.

Question 13

Who was Erich Apel and what was his significance in implementing the NES?

Answer 13

Erich Apel was a former Nazi and Soviet rocket scientist, who Ulbricht appointed Chairman of the State Planning Commission; he was one of Ulbricht’s key supporters.
However, right from the beginning his political allegiance was undermined by his background and after Brezhnev made his feelings clear about the economic policies of the GDR, Apel faced personal attacks on his character and accusations of relying on West Germany. The NES also failed to meet targets.
This, combined with Ulbricht’s loss of faith in him and a loss of political reputation, lead Abel to commit suicide in December 1965, from which point it was clear the NES had no future.

Question 14

How did the SED justify a move from the NES to the ESS?

Answer 14

On the grounds that the NES had been an experiment and an economic policy based more on the ideas of Communism was now needed.

Question 15

When was the ESS announced and how did it differ from the NES?

Answer 15

It was announced in April 1967 and was based more on central planning. It also extended to include agriculture and trade as well as industry.
it restored some price subsidies introduced by the state to promote key industries, and it placed more emphasis on developing computer technology, chemical and plastic industries, with higher production quotas.

Question 16

How did the ESS reflect the international mood?

Answer 16

The Warsaw Pact’s invasion of Czechoslovakia in 1968, to suppress popular revolt, lead to Brezhnev imposing a centralised economy throughout the Eastern bloc and the return to more hard-line communist policies. The changing political climate limited the effectiveness of an already limited ESS.

Question 17

Why was the desire to develop research difficult to maintain under the ESS?

Answer 17

Because the GDR simply did not have the required facilities, expertise, and financial investment to match those of the West, particularly the FRG.

Question 18

Between 1968-71, the GDR economy grew by how much in comparison to the West?

Answer 18

Between 1968-71, the GDR economy grew by an average of 5.7%, while Western estimates of its gross national product (GNP) rose from 3.5% in the period 1960-65 to 5.1% between 1965-70.

Question 19

What happened to industrial production between 1958-65? What about the quality of trained labour?

Answer 19

It rose by 43%.
The quality of trained labour improved as the Wall stemmed emigration to the West.
Progress was also made in rebuilding areas such as Berlin, Leipzig and Dresden.

Question 20

What were the two key failures of both the ESS and the NES?

Answer 20

• Neither lived up to the high expectations set upon them, especially not Ulbricht’s aim to overtake the FRG.
• Despite domestic growth, there was no real change in the GDR’s international competitiveness, and even within the GDR the demand often exceeded the supply, especially as the urban renewal used many of the available resources.

Question 21

How can one view the ESS and the NES?

Answer 21

Not as radical reforms, but as attempts to make the economy function more efficiently. Economic authority was firmly in the hands of the Party and this weakened the ability of the reforms to promote initiative and efficiency at local level.

Question 22

Why was the desire to overtake the FRG detrimental?

Answer 22

Because it placed emphasis on a few industries and not enough on consumer products, leading to shortages that made the cold winters at the end of the decade more unpleasant for GDR citizens.

Question 23

How did Honecker seize the opportunity to scrap the ESS?

Answer 23

While Ulbricht was on holiday in 1970, Honecker introduced a Politburo resolution that reversed the narrow emphasis in the economy and dramatically increased central planning, thereby scrapping the ESS.

Question 24

What meant that individuals were often dissatisfied in the 60s?

Answer 24

The lack of quality of basic consumer goods (such as clothing, chocolate, shoes, coffee, and fruit), particularly in comparison to the FRG.

Question 25

Aside from the SED, who else did the East German population blame for the lack of consumer goods?

Answer 25

Many East Germans blamed the USSR for the scale of reparations that had been taken following WWII, and others thought it was the result of German division, which was thought to have been the fault of the West.

Question 26

After 1971, the SED focused on what?

Answer 26

Trying to improve living standards through consumer socialism and better welfare. The theory was that a more contented workforce would work harder and longer for the state. The policy was called "Unity of Social and Economic Policy".

Question 27

Economic centralisation meant what for the GDR?

Answer 27

That all private and semi-private businesses were nationalised in 1972. This sector had created over 11% of GDR production- usually small, technical goods- and employed 500,000 people. The loss of these businesses severely impacted Honecker's vision of consumer socialism and the policy was repealed in 1976.

Question 28

The focus on the social aspects of the "Unity of Social and Economic Policy" meant what?

Answer 28

Whilst welfare and housing standards were greatly improved throughout the 70s, industry faced a consistent underinvestment that would finally manifest itself in economic decline in the 80s. Though the economy did not excel, it stabilized, allowing the state to maintain its control.

Question 29

What was the growth of industrial production in the 70s?

Answer 29

Industrial production grew steadily at around five percent each year throughout the 70s.

Question 30

How many households had a television, a fridge or a washing machine by 1980?

Answer 30

Nearly every household had a television and a refrigerator and 85% had washing machines.

Question 31

What were Delikat and Exquisit shops?

Answer 31

Government-run stores that sold high-quality and luxurious goods, such as Dresden China. They were designed for Party-members and unlike Intershops, they accepted East German currency. The products were unaffordable for the majority of East Germans and they were resented because of this and the general lack of affordable consumer goods.

Question 32

What were Intershops?

Answer 32

Shops which sold Western goods at lower prices than in West Berlin or the FRG. but only accepted Western currency.

Question 33

What was the overriding problem of the "Unity of Social and Economic Policy"?

Answer 33

It did not build an economy that was able to deal with the succession of problems that occurred in the 1970s, and it undermined the regime's ability to maintain its production of consumer goods.

Question 34

What was the impact of the OPEC oil crisis in 1973?

Answer 34

The OPEC crisis of 1973 suddenly raised worldwide oil prices. This hurt the GDR, as it was a country of limited natural resources. The impact was to reduce the GDR's purchasing power for exports.

Question 35

What was the GDR finding difficult by 1982?

Answer 35

It was increasingly difficult to secure credit, while a slowdown in retail trade caused a shortage of consumer goods. This escalated into a full-blow liquidity crisis, where rising production costs, increasing state expenditure, mounting interest rates on debts and failing trade all combined to lead to lead to the GDR's inability to borrow money.

Question 36

What was the result of the GDR's inability to borrow money?

Answer 36

Frantic and secret negotiations between the SED and the FRG leadership to secure nearly 2 billion Deutschmarks (DM) in loans in 1983 and 84.

Question 37

Explain the contrast between the percentage of imports and exports in 1982

Answer 37

In 1982, imports fell by 30% whereas exports rose by 9.1%.

Question 38

What are the two examples that demonstrate the basic inefficiencies of the GDR economy?

Answer 38

- The absurdities of the bureaucratic obsession with planning can be seen from the order that all factories should use a certain quota of robots- the quota was fulfilled by reclassifying all lifts and vacuum cleaners as robots. - The inferior nature of consumer goods is highlighted by the Trabant or the "Trabi". These cars were expensive and purposely under-produced as the state felt having a private automobile was ideologically wrong and encouraged unsupervised travel.

Question 39

How many households had a Trabant by the 1980s?

Answer 39

Around half. | The Trabants could take 12 years to obtain and so second hand ones were more expensive than new ones.

Question 40

When did the GDR become a member of COMECON and what did this mean for the state?

Answer 40

In 1950, the GDR became a member of COMECON and subsequently, 76% of its trade was with the USSR and the Eastern bloc. For the next two decades, the GDR's economic planning became intrinsically linked with COMECON, such as the establishment and focus on the FYPs.

Question 41

One result of being unable to compete with the FRG lead the GDR to do what?

Answer 41

As the GDR was unable to keep up with Western production, it turned its focus onto the demands of the USSR and the rest of the Eastern bloc. The GDR became the most sophisticated economy with the highest living standards in the Eastern bloc. It supplied the USSR and other Eastern bloc countries with vital technology in areas such as chemicals, microelectronics, and electrical engineering, at well below world market prices.

Question 42

In the 1970s a labour shortage forced the GDR to do what? How were these people received?

Answer 42

A labour shortage meant the GDR had to bring in workers from other socialist countries such as Vietnam, Mozambique, Angola, and Cuba. Students from these and other socialist states studied at GDR universities, often graduating in science and technology. However, due to economic decline in the 80s, they often faced hostility and social inequalities.

Question 43

Who was the GDR's largest trading partner?

Answer 43

The USSR, with 45% of GDR exports of plant and machinery.

Question 44

Was the GDR's trading relationship with the USSR profitable?

Answer 44

Not very, as the products sent to the USSR were never brought at real market price. Also, the USSR paid for these with natural resources. It supplied 90% of the GDR's oil, ore and wood, and 80% of its steel and sheet metal. Therefore, when the USSR changed the pricing of these items, the GDR suffered.

Question 45

Did COMECON aid the GDR during the OPEC oil crisis of 1973?

Answer 45

Links to COMECON were useful but they did not lead to evasion of the crisis as the GDR still relied on the USSR. The GDR was partly sheltered from the steepest oil price rises by using Soviet supplies. HOWEVER: By 1980, after a second OPEC price rise, the Soviets began reducing their oil supply to the GDR, despite a personal letter from Honecker to Brezhnev pleading for more oil. The GDR then began to run up its national debt to the USSR.

Question 46

Did COMECON memberships aid GDR financial woes?

Answer 46

No, it did very little. In fact, by the 80s, growing relationships with the FRG were far more important in terms of trade, agricultural production, and financial aid.