Soviet Occupation Zone
East Germany


The Economic History of Socialism in the German Democratic Republic


The first issue of Studies on the DDR follows the foun­da­tion of the GDR after World War II and traces its deve­lo­p­ment from an anti-fascist demo­cra­tic state to a socia­list one. Central to this process is the econo­mic star­ting point, which was a parti­cu­larly diffi­cult one after the war due to the repa­ra­ti­ons payments, and which deter­mi­ned econo­mic life.
The text focu­ses on the econo­mic effi­ci­ency of the GDR, its achie­ve­ments and its contra­dic­tions. In addi­tion, it provi­des infor­ma­tion on central charac­te­ris­tics of socia­list society and labor: inter­na­tio­nal soli­da­rity, collec­tive orga­niz­a­tion in state-owned enter­pri­ses, plan­ned economy. In the following issues, the Studies on the DDR will be devo­ted to these and other topics in grea­ter depth.


By April 1945, troops of the anti-Hitler coali­tion had libe­ra­ted most of the terri­to­ries occu­p­ied by the fascist Wehr­macht. The Red Army opened its offen­sive on the capi­tal of the German Reich and the fierce ‘Battle of Berlin’ ended with the complete mili­tary defeat of Nazi Germany. This photo­graph shows two Red Army soldi­ers in the Reich Chan­cel­lery, Hitler’s last command post. At their feet lies the topp­led symbol of fascist power, the impe­rial eagle above the swastika.
After the uncon­di­tio­nal surren­der of the German Wehr­macht on 8 May 1945, the victo­rious powers of the anti-Hitler coali­tion assu­med sover­eig­nty over the German Reich. As agreed at the Crimea Confe­rence of the Allied heads of state (Stalin, Chur­chill, and Roose­velt) in Febru­ary 1945 and as stipu­la­ted in the Pots­dam Agree­ment in August later that year, Germany was subse­quently divi­ded into four occup­a­tion zones, as shown in this map.
In 1962, the Demo­cra­tic German Report, an English-language jour­nal based in the DDR, publis­hed a map listing the coun­tries in which former members of the Nazi party were working as ambassa­dors for the Federal Repu­blic of Germany. Despite the end of the Third Reich’s reign of terror, the ‘old elites’ quickly re-emer­ged in the young Federal Repu­blic. Func­tio­n­a­ries of the Hitler regime were appoin­ted to influ­en­tial posi­ti­ons in the judi­ciary, univer­si­ties, the army, and corporations.
After the end of the war, Berlin was divi­ded into four sectors and placed under the control of the British, Ameri­can, French, and Soviet occu­p­y­ing powers. Free move­ment within the city was permit­ted until August 1961, when the construc­tion of the Wall brought west­ward migra­tion to an end.

Excerpt from ‘Construc­tion Song’ (1948) by commu­nist writer Bertolt Brecht (1898–1956):


Ever­yone likes a roof over their head                                          
so advice to construc­tion isn’t bad.                         
For our own good cause we must create,
at very first a brand-new state. 

Gone with the rubble, some­thing new be built!   
For oursel­ves only we must care
and come right at us, those who dare.

In accordance with the reso­lu­ti­ons of the Pots­dam Confe­rence, provin­cial and state admi­nis­tra­ti­ons in the Soviet Occup­a­tion Zone issued decrees to disem­power and expro­priate major corpo­ra­ti­ons and large landow­ners. This poster from June 1946 encou­ra­ges parti­ci­pa­tion in a refe­ren­dum concer­ning the Law on the Trans­fer of Enter­pri­ses Owned by War and Nazi Crimi­nals to the Property of the People.

The German People’s Coun­cil was a poli­ti­cal commit­tee and SED initia­tive that was compo­sed of repre­sen­ta­ti­ves of the various parties and mass orga­ni­sa­ti­ons in the Soviet Occup­a­tion Zone in 1947. It was orga­nised simi­larly to a parlia­ment and a special commit­tee in the People’s Coun­cil drew up the draft of a consti­tu­tion. The People’s Coun­cil conve­ned at the Congress of the People on 7 Octo­ber 1949 and estab­lis­hed itself as the provi­sio­nal Volks­kam­mer (DDR People’s Parlia­ment); in Octo­ber 1950, the first vote was held. The Volks­kam­mer would remain the parlia­ment of the DDR and the country’s highest consti­tu­tio­nal body until 1990.

This photo­graph shows a mass rally with the Free German Youth that marked the foun­ding of the German Demo­cra­tic Repu­blic in the Soviet occup­a­tion zone. Six months before, in May 1949, the Federal Repu­blic of Germany had been foun­ded on the terri­tory of the three western occup­a­tion zones. The DDR broke with Germany’s impe­ria­list past, defi­ned itself as a workers’ and farmers’ state, built socia­lism, and inte­gra­ted itself econo­mi­c­ally and mili­ta­rily into the Eastern Bloc alliances.
This twenty-fifth anni­ver­s­ary stamp of the Coun­cil for Mutual Econo­mic Assi­s­tance (COMECON) depicts the flags of its member coun­tries, inclu­ding the Mongo­lian People’s Repu­blic (in 1962) and Cuba (in 1972). To streng­t­hen the Eastern Bloc’s econo­mic coope­ra­tion and power, socia­list states crea­ted COMECON in 1949. Its aim was to achieve effec­tive specia­li­sa­tion and divi­sion of labour, as well as the gradual align­ment of the very diffe­rent econo­mic condi­ti­ons of its member states. The foun­ding coun­tries inclu­ded the Soviet Union, Poland, Roma­nia, Bulga­ria, Czecho­slo­va­kia, and Hungary. The DDR joined in 1950. 
The peace-seeking youth of the world conve­ned in the war-torn city of Berlin for the Third World Festi­val of Youth and Students in 1951. This photo­graph shows visi­tors gathe­ring to attend the festi­vi­ties at Alex­an­der­platz, a public plaza in the city centre that had been destroyed by the war. In 1979, almost thirty years later, the chair­man of the World Peace Coun­cil, Romeh Chan­dra, besto­wed the hono­rary title ‘City of Peace’ upon Berlin. 
This image features the stan­dar­di­sed system of elec­tro­nic compu­ters being deve­lo­ped and manu­fac­tu­red at the VEB Kombi­nat Robo­tron in Dres­den. Chan­ges in tech­no­logy in the 1960s posed new chal­len­ges for the DDR’s economy. Head of state Walter Ulbricht conse­quently decla­red the mastery of the scien­ti­fic-tech­ni­cal revo­lu­tion as a funda­men­tal task for the DDR. Six socia­list states subse­quently worked toge­ther in the rese­arch and produc­tion of power­ful compu­ting systems within the COMECON frame­work of the Unified System of Elec­tro­nic Compu­ters (also known as ES EVM). The West’s embargo policy forced the COMECON states to produce their own microelec­tro­nic base at incredi­bly high costs. 
This photo­graph shows the arri­val of workers from the city carry­ing a banner that reads ‘Colleagues from the Karl Lieb­knecht Berlin trans­for­mer factory are helping the first produc­tion coope­ra­tive with the harvest!’ The 1945/46, demo­cra­tic land reform in the Soviet Occup­a­tion Zone secu­red food supplies in the dire post-war period while also funda­ment­ally chan­ging the system of land owners­hip in East Germany. Roughly 560,000 small farms emer­ged from the redis­tri­bu­tion scheme, but they were often poorly equip­ped and supplied. Urban indus­trial and craft enter­pri­ses step­ped in to help with the harvest in the emer­ging agri­cul­tu­ral cooperatives.
This DDR stamp from 1981 shows soli­da­rity with the anti-impe­ria­list libe­ra­tion move­ments. Stamps in the DDR often featured motifs dedi­ca­ted to revo­lu­tio­nary events, anti-fascism, and inter­na­tio­nal soli­da­rity. The West German postal service refu­sed to deli­ver letters carry­ing certain stamps, such as those from the ‘Invin­ci­ble Viet­nam’ series. Conver­sely, the DDR postal service, as well as those of other socia­list states, refu­sed to forward mail carry­ing stamps with revan­chist themes. 
This image from 1972 shows coope­ra­tive farmers handing over a flag of soli­da­rity to the ambassa­dor of the Demo­cra­tic Repu­blic of Viet­nam. ‘Soli­da­rity hastens victory’ was the motto under which the citi­zens of the DDR expres­sed their soli­da­rity with the Viet­na­mese people and against the United States’ crimi­nal war. Enthu­si­asm to donate for the cause of the Viet­na­mese was extra­or­di­nary: by 1975, more than 442 million East German Mark had been collec­ted. The victory of the North Viet­na­mese troops on 1 May 1975 was cele­bra­ted in the streets of Berlin, singing ‘Ever­y­body on the street, May is red, ever­y­body on the street, Saigon is free’. 
In 1973, the Free German Youth (FDJ), a member of the World Fede­ra­tion of Demo­cra­tic Youth, hosted the Tenth World Festi­val of Youth and Students in Berlin. 25,600 guests from 140 coun­tries met with eight million young DDR citi­zens to cele­brate, discuss, and advo­cate for world peace and inter­na­tio­nal coope­ra­tion. Among the guests was Black Power acti­vist Angela Davis (here in the grand­stand next to People’s Educa­tion Minis­ter Margot Honecker and Soviet cosmo­naut Valen­tina Tereshkova).
After the free­dom figh­ter and first prime minis­ter of an inde­pen­dent Congo Patrice Lumumba was assas­si­na­ted in 1961, Leipzig’s Free German Youth divi­sion built a monu­ment in his name in front of the Herder Insti­tute, where foreign students were prepa­ring for their studies. The street was rena­med ‘Lumumba Street’ in a cere­mony with Congo­lese students.
The British protec­to­rate of Zanzi­bar won its inde­pen­dence in 1963. The following year, the United Repu­blic of Tanga­nyika and Zanzi­bar became the first state outside the Eastern Bloc to offi­cially reco­gnise the sover­eig­nty of the DDR. Civil engi­neers and buil­ding mate­ri­als were subse­quently sent from the DDR to Stone Town, a neigh­bour­hood in the capi­tal Zanzi­bar, and two large apart­ment blocks were built. Although some­what aged now, the apart­ments are still much sought after, and the area is refer­red to as ‘Berlin’.
  1. The following resour­ces are consi­de­red natio­nal public property of which private owners­hip is prohi­bi­ted: mine­ral depo­sits, mines, power stati­ons, dams, large bodies of water, natu­ral resour­ces found in conti­nen­tal shel­ves, indus­trial compa­nies, banks, insurance insti­tu­ti­ons, state-owned goods, traf­fic routes, means of trans­port by rail, sea, and avia­tion, the post office, and telecom­mu­ni­ca­tion installations.
  2. The socia­list plan­ned economy guaran­tees that public property is used with the aim of achie­ving the best results for society. The socia­list plan­ned economy and socia­list commer­cial law serve this purpose. The use and manage­ment of natio­nal public property take place funda­ment­ally through state-owned enter­pri­ses and state insti­tu­ti­ons. The state can trans­fer its use and manage­ment by contract to coope­ra­tive or social orga­ni­sa­ti­ons and asso­cia­ti­ons. Such trans­fers must serve the inte­rests of the gene­ral public and incre­ase social wealth.

– Arti­cle 12 of the 1968 Consti­tu­tion of the German Demo­cra­tic Republic

From the end of the 1960s, indi­vi­dual state-owned enter­pri­ses in indus­try as well as the construc­tion and trans­port sectors were gradu­ally merged into larger econo­mic units called Kombi­nate, or ‘combi­nes’. In 1989, around eighty percent of all employees worked in combi­nes. In the combi­nes – a sort of ‘socia­list corpo­ra­tion’ – the produc­tion, sales, and distri­bu­tion of a single indus­try, or even comple­men­tary bran­ches of produc­tion in diffe­rent indus­tries, were brought toge­ther. The combi­nes had insti­tu­tes and capa­ci­ties for rese­arch and deve­lo­p­ment and coope­ra­ted with acade­mies and univer­si­ties. The aim of forming a combine was to create more favoura­ble produc­tion struc­tures, intro­duce new types of tech­no­lo­gi­cal solu­ti­ons, and improve centra­li­sed control. The enter­pri­ses belon­ging to a combine, like the combine as a whole, recei­ved their plan­ning tasks from the State Plan­ning Commission.

This photo­graph shows members in a work brigade at the VEB Mikro­mat Dres­den draf­ting a protest reso­lu­tion to condemn the neo-Nazi attack on a Soviet soldier at the West Berlin Red Army Memo­rial in Novem­ber 1970. ‘My work­place, a battle station for peace’ was a slogan in the DDR’s facto­ries. The concept of work as secu­ring not only indi­vi­dual live­li­hood, but also the well-being of the commu­nity and even the exis­tence of the workers’ and farmers’ state was central to the socia­list work ethic and life­style. So too was the notion that the indi­vi­dual can only fully deve­lop in a commu­nity toge­ther with others, and that work consti­tu­ted the nucleus in this deve­lo­p­ment of perso­na­lity. As such, joint cultu­ral acti­vi­ties and poli­ti­cal discus­sions in the work collec­ti­ves became part of ever­y­day life.
This image shows an inner-city deve­lo­p­ment from the 1960s in the centre of Berlin. The right to housing was ensh­ri­ned in the consti­tu­tion of the DDR. In 1973, a compre­hen­sive housing construc­tion program became the centre­piece of a series of social policy measu­res. New housing esta­tes were built in almost every city and inclu­ded social infra­st­ruc­ture such as schools, kinder­gar­tens, sports faci­li­ties, poly­cli­nics, stores, restau­rants, and cine­mas. Housing remai­ned afford­a­ble, with rents frozen at the 1936 level. The average DDR house­hold spent about 5 percent of its income on housing. 
The energy indus­try was at the centre of econo­mic plan­ning in the 1950s. The Gaskom­bi­nat Schwarze Pumpe (Black Pump Gas Combine), pictu­red here in 1974, became the largest lignite refi­ning plant in the world. A new town, Hoyers­werda, was built for the 16,000 employees of the Kombi­nat. Lignite was prac­ti­cally the only domestic natu­ral resource in East Germany and its extrac­tion freed the DDR from depen­dency on Western imports. It remai­ned the country’s most important energy source until 1990.

The Trust Agency was foun­ded in 1990 during the unifi­ca­tion process to priva­tise the DDR’s state-owned enter­pri­ses accord­ing to the princi­ples of the market economy and to liqui­date those that were ‘not compe­ti­tive’. It took over 8,500 compa­nies with 45,000 loca­ti­ons that employed some four million people and priva­tised 6,500 compa­nies, selling them far below their value – often for the symbo­lic price of a single West German DM. Around eighty percent of these compa­nies were sold to West Germans, fifteen percent to foreign inves­tors and five percent to East Germans. Two thirds of all jobs in East Germany were lost, even though West German buyers were subsi­di­sed by the state. Viola­ti­ons of the condi­ti­ons of the liqui­da­tion process – such as job reten­tion – went unpu­nis­hed and many of the labour rights that the West German trade unions fought for were abolis­hed in that process. This was an approach that still, to this day, leaves eastern Germany econo­mi­c­ally weaker than the West and causes persis­tent social inequa­lity. As a result, there are now only 850,000 indus­trial jobs in the terri­tory of the former DDR, four to five times fewer than there were in the DDR. In the agri­cul­tu­ral sector, the land taken over by the Trust Agency gained the atten­tion of specu­la­tive buyers around the world and local farmers were unable to afford the rising land prices. Agri­cul­tu­ral compa­nies from West Germany and other EU coun­tries now own this land.

Risen from the Ruins

With the victory of the anti-Hitler coali­tion and the defeat of German fascism on 8 May 1945, a new inter­na­tio­nal balance of power was reached. One of the four victo­rious powers coming out of the Second World War was the Soviet Union, which had been a socia­list society since the 1917 Octo­ber Revo­lu­tion. The coun­try consist­ently imple­men­ted the joint decisi­ons of the allied powers for the crea­tion of a demo­cra­tic Germany in its own occup­a­tion zone.


In the wake of the disso­lu­tion of the anti-Hitler coali­tion and the begin­ning of the Cold War between the Eastern and Western Blocs, two German states emer­ged. In 1949 the Federal Repu­blic of Germany was foun­ded, a bour­geois parlia­men­tary demo­cracy in whose state appa­ra­tus and economy perpe­tra­tors of the Nazi dicta­tor­s­hip assu­med influ­en­tial posi­ti­ons. In the same year, the foun­ding of the German Demo­cra­tic Repu­blic as an anti­fa­scist-demo­cra­tic state heral­ded a complete break with the impe­ria­list past in East Germany. Its alter­na­tive concept of social order was inspi­red by the Soviet Union, but the construc­tion and design of the new state was in the hands of German commu­nists who had lear­ned many lessons from the two world wars.

German Imperialism in the Twentieth Century

During the First World War, the highly indus­tria­li­sed and econo­mi­c­ally prospe­rous German Reich had already star­ted to divide up the world and secure markets and raw mate­ri­als for itself. It had also joined in on the colo­nial prac­ti­ces of other Euro­pean powers, explo­i­t­ing and oppres­sing people on the conti­nent of Africa as well as in Asia and Ocea­nia, figh­t­ing and even commit­ting geno­cide against the Herero and Nama people in what is today Namibia.


The First World War ended in 1918 with the Novem­ber Revo­lu­tion, when workers and soldi­ers wiped out the monar­chy in Germany. This led to the estab­lish­ment of a parlia­men­tary repu­blic and brought an end to Germany as a colo­nial power. Though the German emperor was ousted, the gene­rals remai­ned; it was only later, when the Natio­na­list Socia­list German Workers’ Party (NSDAP) was formed, that the reac­tion­ary elite of the poli­ti­cally and econo­mi­c­ally unsta­ble repu­blic even­tually saw that their time had come. The Party’s goals were fully in line with the expan­sio­nist inte­rests of German mono­poly capi­ta­lism, the large-scale landow­ners, and the military.


In 1933, the Natio­nal Socia­list Party took over the government with Adolf Hitler as its leader. Within a few months, the fascists set up a dicta­tor­s­hip that anni­hi­l­ated inter­nal poli­ti­cal oppon­ents by banning poli­ti­cal parties and trade unions and impr­i­so­ning commu­nists and trade unio­nists. They took away the rights of the Jewish, Sinti, and Roma people as well as homo­se­xu­als, Jehovah’s Witnes­ses, and people with disa­bi­li­ties and began to syste­ma­ti­cally murder them. With an enor­mous mili­tary arma­ment programme, Hitler initia­ted prepa­ra­ti­ons for a war that would allow German impe­ria­lism to achieve world domi­na­tion, conquer terri­tory in the east for ‘members of the German nation’, and obli­te­rate the ‘Bols­he­vik subhumans’.


The Second World War began in Europe with the German Wehrmacht’s attack on neigh­bou­ring Poland on 1 Septem­ber 1939, driven by the German Reich and its axis powers Italy and Japan. This war was waged by syste­ma­ti­cally destroy­ing and liqui­da­ting civi­lian popu­la­ti­ons – such as twenty million Chinese people in Manchu­ria and six million Jews in Europe – in the most brutal of ways. Soldi­ers from the colo­nies of the allied forces were also among the over­all seventy million killed during the Second World War. Great Britain in parti­cu­lar recrui­ted soldi­ers from its colo­nies, whose parti­ci­pa­tion in the fight against fascism is largely rende­red invi­si­ble to this day.


Two years after the begin­ning of the war, the anti-Hitler coali­tion was formed by the major powers of the Soviet Union, Great Britain, and the United States to fight as an alli­ance against fascist aggres­sion. The Soviet Union, howe­ver, bore the brunt of the war: two thirds of the fascist divi­si­ons were concen­tra­ted on the Soviet-German front, and it was here that the most decisive batt­les were fought. The Wehr­macht and the Schutz­staf­fel (SS) were relent­less in carry­ing out the order to destroy the conque­red terri­to­ries all throughout Eastern Europe. This scor­ched earth tactic left behind dest­ruc­tion on an unima­gin­able scale: in the USSR alone, over 70,000 villa­ges and towns and 32,000 indus­trial faci­li­ties were razed to the ground. More than 26 million Soviet citi­zens were murde­red during this brutal campaign of destruction.


After the Red Army troops fought the Battle of Berlin, the Wehr­macht was forced to surren­der uncon­di­tio­nally on 8 May 1945. This marked the defeat of Nazi Germany and the Second World War came to an end on the Western Front. Howe­ver, this did not necessa­rily mean that the war was over in other regi­ons. In Asia, for instance, the Second World War had begun as early as 1937 with Japan’s war against China in occu­p­ied Manchu­ria, but it did not end in 1945 with the drop­ping of the atomic bombs on Hiro­shima and Naga­saki by the US.


Instead, the end of the war in Europe gave the British, the French, and other colo­nial powers the ability to focus on crus­hing inde­pen­dence move­ments in their colo­nies. France did this, for example, with bloody massa­c­res in Alge­ria and with its war against Viet­nam, which had been proc­lai­med inde­pen­dent by Ho Chi Minh in 1945 after the surren­der of the Japa­nese occu­p­y­ing forces. The United States not only conti­nued this war, but also resu­med oppo­si­tion against the partis­ans figh­t­ing in the Phil­ip­pi­nes who had conti­nued to resist the Japa­nese occu­p­iers for three years after U.S. forces with­drew in 1942. They were now facing their old colo­nial rulers once again. Howe­ver, there were also instan­ces in which colo­nial powers that had been weake­ned by war with­drew from their colo­nies, opening up new possi­bi­li­ties. India, for example, won its inde­pen­dence in 1947, and in China, the civil war ended in 1949 with the victory of Mao Tse-tung’s revo­lu­tio­nary People’s Army over Chiang Kai-shek’s troops.

In Germany, the main allied powers of Great Britain, the Soviet Union, the United States, and France crea­ted four occup­a­tion zones when the war ended, following the agree­ments of the anti-Hitler coali­tion. These zones divi­ded Germany – as well the capi­tal, Berlin, which was loca­ted in the Soviet occup­a­tion zone – into areas subor­di­nate to the respec­tive victo­rious powers. The heads of state of the victo­rious USSR, the United States, and Great Britain met in Pots­dam in July 1945 to discuss how to proceed with the defea­ted Germany and deba­ted the future of the coun­try. Their decisi­ons, backed by France, were aimed at weed­ing out German fascism by its econo­mic and ideo­lo­gi­cal roots, preser­ving Germany as a unified whole, and estab­li­shing it as a neutral zone. The basic poli­ti­cal princi­ples that guided the allies are refer­red to as the ‘Four Ds’ of the Pots­dam Agreement:


  • Denazi­fi­ca­tion measu­res sought to remove all Nazis from rele­vant posi­ti­ons and punish war criminals.
  • Demi­li­ta­ri­sa­tion sought to comple­tely disarm and destroy the German arms industry.
  • Decen­tra­li­sa­tion sought to crush the concen­tra­tion of econo­mic power among mono­po­listic businesses.
  • Demo­cra­ti­sa­tion sought to rest­ruc­ture public life.

The Soviet Union knew that it had to ensure that there would never be anot­her war waged against them by the Germans, but preven­ting future German aggres­sion was also in the inte­rests of the Western allies. Realisti­cally asses­sing its coali­tion part­ners, the Soviet Union was not yet aiming for its occup­a­tion zone to be recon­struc­ted accord­ing to socia­list princi­ples. Its goal was to create a demi­li­ta­ri­sed, civil-demo­cra­tic repu­blic that lived in peace with its neigh­bours and was not invol­ved in any confe­de­ra­tion. This was inten­ded to create a non-aligned, neutral state as a buffer zone to Western Europe.

While the Soviet occup­a­tion zone began imple­men­ting the Four Ds, the Western zones only parti­ally kept the agree­ment. The joint decisi­ons that had previously been agreed upon became a nuisance, espe­cially when they inter­fe­red with issues of private, capi­ta­list owners­hip. Adhe­rence to the Pots­dam Agree­ment thus became a red line between the diffe­rent zones. In the East, large compa­nies were trans­fer­red to public owners­hip, and Nazi war crimi­nals were dispos­ses­sed of their property, convic­ted, remo­ved from all insti­tu­ti­ons, and exclu­ded from assuming important posi­ti­ons in society. In contrast, Western allies forbade expro­pria­tion initia­ti­ves, and the West depen­ded on the Nazis as seaso­ned ‘experts’ for which they were econo­mi­c­ally rewar­ded in the form of rele­vant employ­ment. Large busi­nes­ses that had previously helped the fascists take power were left untouched, as were posi­ti­ons of econo­mic power within German monopolies.


Though all of the occu­p­y­ing powers at the Pots­dam Confe­rence had made demands to disem­power mono­po­lies and large corpo­ra­ti­ons, these demands were only met in the Soviet Occup­a­tion Zone, where around 10,000 busi­nes­ses were expro­pria­ted without compen­sa­tion. These enter­pri­ses became the property of the people and formed a publicly owned produc­tion sector along­side the remai­ning private capi­ta­list enter­pri­ses that supplied about a quar­ter of the country’s total indus­trial production.


Mean­while, in the West, the poli­ti­cal and mili­tary agenda was to safe­guard the inte­rests of big busi­ness in the three Western occup­a­tion zones and to secure the global power of the United States on the Euro­pean conti­nent. Towards this end, the U.S. mili­tary concoc­ted a frigh­tening narra­tive of commu­nist world domi­na­tion. A war with the Soviet Union was as good as certain and a test of power was immi­nent. In March of 1946, British poli­ti­cian Wins­ton Chur­chill was already rede­fi­ning the new sphe­res of influ­ence and began to speak of the ‘iron curtain that [had] descen­ded across the conti­nent’, drawing a line ‘from Stet­tin in the Baltic to Trieste in the Adria­tic’. The Cold War between the Western powers and the Eastern Bloc had begun.


U.S. Presi­dent Truman termi­na­ted the war coali­tion with the Soviet Union one year later. The deeply rooted poli­ti­cal and econo­mic conflicts that ensued led to the disso­lu­tion of the anti-Hitler coali­tion and subse­quently to the estab­lish­ment of two German states: a capi­ta­list state on the one hand and, on the other, a state that prepa­red the ground for socia­lism by expro­pria­ting private capi­tal. In 1948, the Western Euro­pean states of France, Great Britain, Belgium, the Nether­lands, and Luxem­bourg foun­ded the Brussels Pact, which was then presen­ted as a mutual assi­s­tance pact against rene­wed German aggres­sion. In 1949, the North Atlan­tic Treaty Orga­niz­a­tion (NATO) came into being after ‘reques­ting’ mili­tary assi­s­tance from the U.S.; with this deve­lo­p­ment, the U.S. secu­red its ability to act in Europe against the alle­ged mili­tary threat from the Soviet Union.

In the West, the conser­va­tive middle-class poli­ti­cal parties pushed for the estab­lish­ment of an inde­pen­dent state in the inte­rests of the private sector and corpo­ra­ti­ons; such a state could only be capi­ta­list. In 1948, the Western Allies crea­ted a ‘trizone’ out of their occup­a­tion zones and divi­ded Germany with a currency reform. The intro­duc­tion of a new currency tied to the U.S. Dollar, the Deut­sche Mark (DM), estab­lis­hed an econo­mic area based on capi­ta­list princi­ples, from which the Soviet Occup­a­tion Zone was exclu­ded. The Trizone became a West German sepa­ra­tist state in May 1949 with the foun­ding of the Federal Repu­blic of Germany (FRG), also refer­red to as West Germany.


The West German economy reco­ve­red quickly from the after­math of the war through the massive accrual of capi­tal under the U.S. Marshall Plan (an invest­ment program for the recon­struc­tion of Europe). It was not long before West Germany had grown into the stron­gest econo­mic market on the conti­nent. With its rear­ma­ment and the estab­lish­ment of an army under the leaders­hip of hund­reds of former Nazi mili­tary members as well as its entrance into the NATO mili­tary alli­ance, West Germany became a Euro­pean outpost and protec­tor of U.S. hege­mony. From the moment it came into exis­tence, it was one of the most important centres of action in the Cold War against the socia­list states.

New Antifascist Democratic Beginnings in the Soviet Occupation Zone

After the Second World War ended, the Allied Control Coun­cil, made up of the comman­ders-in-chief of the armed forces of the four winning powers, took over gover­nance in Germany. Orders and direc­ti­ves were carried out at the discre­tion of the comman­der-in-chief of each respec­tive occup­a­tion zone. Each occu­p­y­ing force also had the right of veto, which allo­wed them to choose their own path.


The Soviet Union did not export the Soviet system to its zone of occup­a­tion when it libe­ra­ted Germany from fascism; rather, it placed the buil­ding of an anti-fascist demo­cra­tic state in the hands of German commu­nists. As early as June 1945, newly estab­lis­hed anti­fa­scist demo­cra­tic parties, unions, and mass orga­ni­sa­ti­ons began opera­ti­ons with permis­sion from the Soviet Mili­tary Admi­nis­tra­tion in Germany (SMAD). In 1943, a number of German commu­nists in Soviet exile had foun­ded the anti-Nazi ‘Natio­nal Commit­tee for a Free Germany’ with German priso­ners of war. With the end of the Second World War, several of the committee’s campaign groups retur­ned to Germany to help reor­ga­nise public life and build German admi­nis­tra­tive bodies in accordance with the decrees of the SMAD. Some of the committee’s members took on key roles in the Commu­nist Party of Germany (KPD).

In their Appeal to the German People for the Construc­tion of an Anti-Fascist-Demo­cra­tic Germany from 11 June 1945, the KPD called on the German people to lead the ‘fight against hunger, unem­ploy­ment, and homel­ess­ness’ and to change the previous owners­hip struc­tures to ‘protect the workers against unbrid­led entre­pre­neu­ria­lism and exces­sive explo­ita­tion’. By joining all demo­cra­tic forces, the KPD, toge­ther with the other newly formed parties, crea­ted an anti­fa­scist demo­cra­tic bloc. In 1946, the two workers’ parties, KPD and SPD (Social Demo­cra­tic Party of Germany), united to form the Socia­list Unity Party of Germany (SED), the leading poli­ti­cal party in the Soviet Occup­a­tion Zone, and later in the DDR. This resol­ved a deca­des-long schism within the working class, which had under­mi­ned its ability to fight against the exis­ting ruling order.

In 1945, land reform was laun­ched in the DDR and the feudal Junkers (landed nobi­lity with immense property holdings who had held signi­fi­cant power in the Prus­sian-German mili­tary) had their land expro­pria­ted without compen­sa­tion. Esta­tes of more than 100 hecta­res, as well as the proper­ties of all Nazis and war crimi­nals, were trans­fer­red to a state land trust. More than half a million agri­cul­tu­ral workers, resett­led indi­vi­du­als, and land­less farmers recei­ved a piece of property to call their own from this trust.


In autumn 1945, the German Central Admi­nis­tra­tion for Natio­nal Educa­tion was estab­lis­hed at the behest of the SMAD. Its task was to create anti­fa­scist, secu­lar, and socia­list educa­tion and school systems. A compre­hen­sive state school system was crea­ted that gran­ted the equal right of educa­tion to all child­ren for the first time ever. Teachers who had ties to the Nazis were fired from their posi­ti­ons and, in a very short time, around 40,000 young people who had not been tain­ted by the fascist system were trai­ned to become new teachers.

The Establishment of the DDR

The newly estab­lis­hed Federal Repu­blic of Germany decla­red itself the only succes­sor of the German Reich and the true repre­sen­ta­tive of all Germans. This inclu­ded the claim to areas east of the Oder and Neisse rivers in today’s Poland, which had been part of the German Reich. After the end of the war, these areas were placed under Polish admi­nis­tra­tion and the new border was then deci­ded in the Pots­dam Agree­ment. Howe­ver, the border was not reco­gnised by West Germany, which main­tai­ned its natio­na­list claims.

Mean­while, in East Germany, the admi­nis­tra­tive func­tions that were initi­ally carried out by the Soviet mili­tary autho­rity were trans­fer­red to the newly foun­ded German People’s Coun­cil. Shortly after the foun­da­tion of the FRG, the German People’s Coun­cil met in the Soviet Occup­a­tion Zone on 7 Octo­ber 1949 and foun­ded the German Demo­cra­tic Repu­blic (DDR). In its first state­ment, the new repu­blic expres­sed a commit­ment to peace, social progress, and friendship with the Soviet Union and all peace-loving states and movements.

The new state defi­ned itself as a state of workers and farmers and poli­ti­cal power was held by the working class and its leading party, the SED. The Natio­nal Front, a coali­tion of parties and mass orga­ni­sa­ti­ons, ensu­red that all social groups would have influ­ence on and parti­ci­pate in poli­ti­cal proces­ses. The DDR’s first consti­tu­tion ensh­ri­ned the achie­ve­ments of the anti­fa­scist demo­cra­tic revo­lu­tion. It decla­red that the working class and its allies should exer­cise state power; that mono­po­lies and large-scale land owners­hip should be abolis­hed; that a natio­nal people’s economy should be crea­ted; that all citi­zens should have the right to employ­ment and educa­tion; and that women should have equal rights. Promo­ting peace and inter­na­tio­nal friendship became the guiding principle of state policy. As expres­sed in the DDR’s natio­nal anthem writ­ten by the poet Johan­nes R. Becher:


Risen from the ruins

And facing the future,

The whole world longs for peace,

Extend your hand to the people of the world.


Crea­ting an effi­ci­ent and power­ful economy, howe­ver, posed an exis­ten­tial chal­lenge for the new state. An initial five-year plan projec­ted an incre­ase in the labour produc­ti­vity of state-owned enter­pri­ses, a doub­ling of indus­trial produc­tion, and an incre­ase in the amount of state-owned property. The remai­ning 17,500 private capi­ta­list enter­pri­ses were inclu­ded in the econo­mic deve­lo­p­ment plan via econo­mic, finan­cial, and tax poli­cies. This first five-year plan helped the DDR switch to long-term socia­list econo­mic plan­ning and laid the ground­work for the deve­lo­p­ment of a socia­list system, which it finally adop­ted in 1952.

In 1950, the DDR joined the Coun­cil for Mutual Econo­mic Assi­s­tance (RGW/COMECON), which had been foun­ded in Moscow the year before. The coun­cil was a coali­tion for econo­mic coope­ra­tion estab­lis­hed between the Soviet Union and the new people’s demo­cra­tic states of Poland, Hungary, Bulga­ria, Roma­nia, and Czecho­slo­va­kia, and it was later joined by other states, inclu­ding Cuba and Viet­nam. Its econo­mic condi­ti­ons were deter­mi­ned not by capi­ta­list market compe­ti­tion, but by socia­list coope­ra­tion. The goal of COMECON was to create a shared zone for the people’s demo­cra­cies and to coor­di­nate their natio­nal econo­mic plans. Their econo­mic, scien­ti­fic, tech­no­lo­gi­cal, and cultu­ral coope­ra­tion was sett­led in nume­rous bila­te­ral agree­ments. In the same year, the DDR reco­gnised the border between Germany and Poland along the Oder and Neisse rivers as a perma­nently valid ‘peace border’ as stipu­la­ted in the Pots­dam Agree­ment. In doing this, the coun­try took an important step towards recon­ci­lia­tion with their former enemies and – unlike West Germany – gave up all claims to the former eastern terri­to­ries of the Third Reich. 


By the mid 1950s, both German states were inte­gra­ted into the Eastern and Western Blocs respec­tively. This alli­ance system influ­en­ced each country’s economy, poli­tics, and mili­tary. In 1955, the DDR became a member of the Warsaw Treaty, the mili­tary alli­ance of Eastern Bloc states and a mutual assi­s­tance pact between socia­list states that was exclu­si­vely defen­sive in nature and held peace in Europe as its primary goal. During this arms race forced by the West, the DDR – as a border­land to Western Europe – was a highly sensi­tive area for the threat of a poten­tial war, sitting at the fore­front of the systemic confron­ta­tion between commu­nism and capitalism.

‘DDR citi­zens lived in a coun­try that kept peace and pursued peace­ful poli­cies. At the same time, they were citi­zens of a German state that waged war. … The fall of the Berlin Wall marked the end of the longest peace­ful period that Europe had ever expe­ri­en­ced. Just a few months later, conflict retur­ned to a conti­nent that had been free of the torments of war since 1945. The border between the two German states was gone, but … the triumph of bour­geois demo­cracy mostly just crea­ted new borders. Borders that did not previously exist between the Czechs and the Slovaks or between the peop­les of the former Yugo­s­la­via, not to mention the borders that today traverse the former Soviet Union. Many violent conflicts and tens of thousands of deaths resul­ted from these new bounda­ries. In 1990, the post-war period ended for the East Germans, and a new pre-war period began.’

A Good Economy – but for Whom?


Econo­mic success is gene­rally measu­red by reve­nue and profit. Although these metrics were important for the DDR, they were not at the heart of its econo­mic policy. The country’s produc­tion goal was to constantly improve the people’s living and working condi­ti­ons, not to help the rich and private landow­ners incre­ase their profits. The fact that the DDR cared about and spent billi­ons on social issues such as housing, holi­day leave, child­care, and health­care is simply unfa­thom­able in today’s neoli­be­ral, profit-orien­ted para­digm. The econo­mic history of the DDR shows us what it looks like when the needs of the people are given fiscal priority.

The Starting Point for the East German Economy after 1945

At the end of the war, more than a quar­ter of all homes in East German cities had been destroyed or rende­red unin­ha­bi­ta­ble by allied airstrikes. The use of infra­st­ruc­ture, and thus the supply of raw mate­ri­als and food, was drama­ti­cally limi­ted by the dest­ruc­tion of roads, rail­ways and brid­ges. In addi­tion, huge assets were taken to West Germany as company owners and senior employees of the former Nazi state fled to the Western zones in order to escape punish­ment or expropriation.


In viola­tion of the decisi­ons of the Pots­dam Confe­rence, the Western occup­a­tion zones soon stop­ped repa­ra­ti­ons payments to the Soviet Union, which, as the coun­try most dama­ged by the war, had to with­draw these resour­ces from its own occup­a­tion zone. Two thousand and four hund­red East German compa­nies were dismant­led, inclu­ding almost the entire motor vehi­cle indus­try and more than half of the electri­cal and iron indus­tries, as well as the heavy machinery and construc­tion indus­tries, and ever­ything was relo­ca­ted to the USSR. To supply the popu­la­tion in its own coun­try, the Soviet Union also took goods that had been produ­ced in the Soviet Occup­a­tion Zone that were suppo­sed to provide for the people of DDR. All in all, seventy percent of pre-war indus­trial capa­city was no longer avail­able, which meant that living stan­dards and produc­ti­vity in the East were only nearly half of what they were in the West.


In the first eight years after the war, almost a third of all East German produc­tion was preven­ted from contri­bu­ting to the country’s own economy as a result. Addi­tio­nally, inequa­li­ties in indus­trial capa­city that had been passed down from before the war only became grea­ter with the divi­sion of Germany. Machine produc­tion for mining as well as steel found­ries and mills were loca­ted in West Germany. In fact, the entire raw mate­ri­als indus­try, inclu­ding the coal and steel indus­try, was loca­ted there, leaving the Soviet Occup­a­tion Zone/DDR comple­tely cut off from all of these resour­ces. This situa­tion put plan­ners in the East German economy at a disad­van­tage, which they sought to compen­sate for by incre­a­sing productivity.


Without inter­rup­tion, great efforts and many priva­tions on the part of the popu­la­tion were necessary to build up the economy. The DDR rebuilt its own heavy indus­try from the ground up, and in record time. As a result, the produc­tion of daily neces­si­ties such as clot­hing and food items initi­ally took a back seat. It was not until 1958 that the coun­try could stop ratio­ning its food supply; these were among the hardships caused by the war.


Little by little, West Germany cut off the intra-German trade that was so important for the DDR. Even when indi­vi­dual compa­nies still mana­ged to conduct busi­ness with the DDR, West German autho­ri­ties levied a variety of sanc­tions against them, and loans were with­drawn or special taxes were char­ged. Howe­ver, most disrup­tion tactics focu­sed on sabo­ta­ging contrac­ted deli­very quotas and inter­rup­t­ing deli­ve­ries. These measu­res threw sand in the gears of intra-German trade, destroy­ing the DDR’s only possi­bi­lity for obtai­ning raw mate­ri­als and dura­ble equip­ment that their part­ners in Eastern Europe could not produce because of their own econo­mic hardship. Moreo­ver, West German compa­nies tradi­tio­nally manu­fac­tu­red products that were custom tailo­red to the needs of East Germany; only these compa­nies were able to produce to the same stan­dard of goods and offer duty-free deli­ve­ries of goods from nearby. There was no duty to pay because West Germany did not reco­gnise the DDR as a state and there­fore not as a foreign coun­try either. In this way, West Germany’s exclu­sive mandate policy func­tioned as a lever of econo­mic extortion.

With only seven­teen million inha­bi­tants, the DDR was a small coun­try that could only compete in science and tech­no­logy by part­ne­ring with experts inter­na­tio­nally. Howe­ver, the Cold War and embargo policy preven­ted them from parti­ci­pa­ting in specia­li­sed and coope­ra­tive projects around the world. This is precisely what happened when the Coor­di­na­ting Commit­tee for Multi­la­te­ral Export Controls (CoCom), led by the United States star­ting in 1949, blocked the export of Western tech­no­logy into the Eastern Bloc. This preven­ted the East from having a part in tech­no­lo­gi­cal advan­ces and from hiring inter­na­tio­nal labour in the fields of science, rese­arch, and deve­lo­p­ment. The DDR would require immense resour­ces as well as both scien­ti­fic and tech­no­lo­gi­cal deve­lo­p­ment in order to fill in the gaps that these embargo measu­res left in the country’s economy.


West Germany deve­lo­ped guide­li­nes in the mid-1950s through the Hall­stein Doctrine to econo­mi­c­ally isolate and further weaken the DDR. Every offi­cial reco­gni­tion and estab­lish­ment of diplo­ma­tic rela­ti­ons with the DDR was to be unders­tood as an ‘unfriendly act’. Any state that ques­tio­ned West Germany’s exclu­sive right to the sover­eign repre­sen­ta­tion of Germany was threa­tened with a variety of econo­mic and poli­ti­cal sanc­tions and the brea­king of diplo­ma­tic ties. The Hall­stein Doctrine became a huge impe­di­ment to trade: DDR pass­ports were not reco­gnised; diplo­ma­tic rela­ti­ons, embas­sies, and trade and payment agree­ments were forbid­den; and a restric­tive licen­sing policy was imposed.


West Germany’s unche­cked access to raw mate­ri­als and assets from the war, combi­ned with its refu­sal to make repa­ra­ti­ons payments, gave the coun­try a funda­ment­ally diffe­rent econo­mic star­ting point after the war. This struc­tu­ral advan­tage could be seen through the West’s decisive indus­trial loca­ti­ons, consi­der­ably lower repa­ra­tion payments, and unhin­de­red access to raw mate­ri­als. In addi­tion, the United States pumped capi­tal into the Federal Repu­blic, provi­ding for a quick resus­ci­ta­tion of the economy and better condi­ti­ons for the West German people. This inequa­lity also led many people to emigrate from the East to the West. Fifty percent of those who left were young and highly quali­fied. In the 1950s alone, a third of all acade­mics left the DDR. This was an enor­mous loss, as their educa­tion had been finan­ced by the state they were leaving and they were urgently needed to rebuild the coun­try. With the construc­tion of the Wall in 1961, the DDR leaders­hip sealed off the route via West Berlin into West Germany and stop­ped further emigration.

The DDR’s Economic Achievements

In the 1950s, the large gaps in the produc­tion chain caused by the war and repa­ra­ti­ons conti­nued to loom over the DDR’s economy. The econo­mic isola­tion of the DDR led to prag­ma­tic choices: if there was no iron coming from the West, then it had to be mined locally, no matter how poor the quality or how expen­sive it was to produce. If no coal or oil was avail­able, then they used the only thing left: brown coal. Brown coal, or lignite, was the only raw fuel that was avail­able in the East in signi­fi­cant quan­ti­ties. Though using it was not envi­ron­ment­ally friendly, there was no alter­na­tive due to exter­nal circum­s­tan­ces. The crea­tion of the DDR’s own iron, steel, and machine indus­tries as a basis for its indus­trial deve­lo­p­ment was the main focus of deve­lo­p­ment in the DDR’s early years. The first Five-Year Plan there­fore envi­sa­ged doub­ling indus­trial produc­tion between 1951 and 1955.


The enor­mous facto­ries that were built all over the repu­blic as a result brought young people into previously spar­sely sett­led regi­ons. New villa­ges and towns were built and became home to thousands of people. In forty years, the DDR funda­ment­ally chan­ged the face of the form­erly under­de­ve­lo­ped agri­cul­tu­ral region of East Germany. With the gradual stabi­li­sa­tion of the East German economy and the growth of produc­tion, the coun­try was able to attract an ever-incre­a­sing volume of invest­ment. In the years between 1950 and 1960 alone, this volume incre­a­sed more than three-fold.


The DDR also had the ambi­tious goal of over­co­m­ing the econo­mic and social diffe­ren­ces between the nort­hern and southern regi­ons and eradi­ca­ting the incon­sis­ten­cies between urban and rural indus­tria­li­sa­tion. The degree of indus­tria­li­sa­tion in the south was signi­fi­cantly higher than in the north. In order to recon­cile the dispa­rity between urban and rural areas, the DDR deve­lo­ped a new agri­cul­tu­ral system, which was charac­te­ri­sed by land reform and the collec­ti­vi­sa­tion of the means of agri­cul­tu­ral produc­tion. The coun­try soon began to deve­lop and expand its energy-produ­cing regi­ons in tradi­tio­nally agri­cul­tu­ral areas and built large-scale indus­trial plants which at the time were among the most modern in Europe. It also built new power plants, inclu­ding the largest lignite refi­ning plant in Europe in 1955.


Modern produc­tion centres incre­a­singly chan­ged the face of regi­ons that previously had barely been able to feed their impo­ve­ris­hed popu­la­ti­ons. On the Baltic coast, for example, the deve­lo­p­ment of the mari­time and port indus­tries acce­le­ra­ted and the fishing and ship­buil­ding indus­tries became the driving force in the region. Large fish proces­sing plants and suppliers for ship construc­tion and main­ten­ance were set up while impor­ted goods under­went indus­trial proces­sing. As port faci­li­ties steadily grew, these advan­ces boos­ted trade in the region and the nort­hern regi­ons were able to catch up with the rest of the country.


Even though the DDR star­ted out with unfa­voura­ble condi­ti­ons and many struc­tu­ral disad­van­ta­ges, the coun­try achie­ved an average econo­mic growth of 4.5 percent in its forty years of exis­tence. Despite this, it still gene­rally lagged behind West Germany. Back then, as today, the fail­ure of the plan­ned economy was cited by the West as the reason for this short­co­m­ing. This perpe­tua­tes the myth that there is no alter­na­tive to the market economy. The avail­able figu­res, howe­ver, force us to ques­tion this narra­tive; at no point in the forty years of the DDR’s exis­tence did econo­mic growth stagnate or decline, despite uneven star­ting conditions.


The coun­try also had a consi­derable capa­city for rese­arch and deve­lo­p­ment. For every 1,000 indus­trial workers, twenty-three were employed in these fields, putting the DDR on par with other Western indus­tria­li­sed coun­tries. Although more funds were avail­able for rese­arch in the West, DDR rese­arch still regis­tered 12,000 patents in 1988 – the seventh largest amount world­wide. As a result, the DDR was able to incre­ase its indus­trial produc­tion by a factor of 12.3 by 1989 and quin­tu­ple its gross domestic product to 207.9 billion euros in today’s terms, making it one of the fifteen leading indus­tria­li­sed coun­tries in the world at the time.


Half of the DDR’s natio­nal income was gene­ra­ted by foreign trade. In 1988, the DDR expor­ted and impor­ted two-thirds of its goods to and from the socia­list econo­mic zone and to a total of over seventy states, with West Germany as its largest western trading part­ner. Such a high volume of exports was a sign of consi­derable inte­gra­tion into the world of inter­na­tio­nal trade, making the DDR the sixte­enth largest produ­cer of exports globally and tenth largest in Europe. Through deter­mi­ned econo­mic plan­ning, it proved possi­ble to keep imports and exports in balance throughout the forty years of the country’s existence.


The East German Mark (Mark der DDR) was a domestic currency that was not conver­ti­ble in foreign trade or inter­na­tio­nal travel. In order to get freely conver­ti­ble currency, which the coun­try urgently needed for purcha­ses on the world markets, the DDR often sold its goods at exces­si­vely low prices below their actual value. This led to an arran­ge­ment in which West Germany would supply the DDR with large quan­ti­ties of chemi­cal and other raw mate­ri­als (coal, coking coal, crude oil) and then buy refi­ned products (motor gaso­line, heating oil, plastics) chea­ply. Inci­dent­ally, the envi­ron­men­tal impact of these refi­ning proces­ses was absor­bed by the DDR.


In order to improve the foreign exchange situa­tion, nume­rous state-owned compa­nies in the DDR were commis­sio­ned from the 1970s onward to manu­fac­ture products for Western compa­nies under the Permit­ted Produc­tion scheme, in part by using raw mate­ri­als supplied by the West. This allo­wed Western compa­nies to profit from the low wages in the DDR, though it is futile to compare wages in the East and West without taking into account factors such as the ‘second pay check’ provi­ded to DDR citi­zens in the form of subsi­di­sed prices for rent and basic food­s­tuffs as well as free social services.


The DDR used the money from its expor­ted products to pay for both the import of crucial raw mate­ri­als as well as for the construc­tion of modern faci­li­ties needed to build up its economy. It construc­ted these faci­li­ties with the help of capi­ta­list trading part­ners, though these foreign part­ners did not receive a finan­cial share in the construc­ted faci­li­ties, as is custo­mary with capi­tal exports. This preven­ted foreign capi­tal from gaining a foot­hold in the DDR.

The DDR’s Internationalism

Even as the DDR’s repu­ta­tion as a reli­able and fair econo­mic part­ner grew world­wide, it was still denied inter­na­tio­nal legal reco­gni­tion outside of the socia­list bloc coun­tries up until the early 1970s. The DDR’s support for libe­ra­tion move­ments against colo­nial powers – i.e. for natio­nal move­ments against post-colo­nial depen­dence and impe­ria­listic inter­ven­tion in former colo­nies – ensu­red growing sympa­thy in deve­lo­ping coun­tries where the DDR made a name for itself as a cham­pion in the fight against neo-colo­nia­lism and impe­ria­lism. Western foreign policy was compa­ra­tively anachro­nistic: colo­nies were held onto with an iron grip; apart­heid regimes were main­tai­ned; the fascist remains of Salazar’s Portu­gal and Franco’s Spain were suppor­ted into the 1970s; there were constant attempts to install dicta­tor­s­hips and puppet regimes in former colo­nies and depen­dent terri­to­ries; and constructs such as ‘South Viet­nam’ were enfor­ced through mass murder. Western States secu­red their temporary and bloody victo­ries in ways that had very little to do with demo­cracy, free­dom, and human rights – even accord­ing to their own standards.


In contrast, the DDR suppor­ted a number of libe­ra­tion move­ments. Among them were the Viet­na­mese People’s Army during the Viet­nam War; the Sandi­nista Natio­nal Libe­ra­tion Front (FSLN) in Nica­ra­gua; the Mozam­bi­que Libe­ra­tion Front (FRELIMO); the Zimbabwe Afri­can People’s Union; the Afri­can Inde­pen­dence Party of Guinea and Cape Verde (PAIGC); and the People’s Move­ment for the Libe­ra­tion of Angola (MPLA). While the West was slan­de­ring Nelson Mandela and the Afri­can Natio­nal Congress (ANC) as terro­rists and ‘racists’ and conduc­ting busi­ness with the apart­heid regime in South Africa – even provi­ding arms ship­ments – the DDR suppor­ted the ANC, provi­ded the free­dom figh­ters with mili­tary trai­ning, prin­ted their publi­ca­ti­ons, and cared for its woun­ded. After black students in the town­ship of Soweto laun­ched an upri­sing against the apart­heid regime on 16 June 1976, the DDR began to comme­mo­rate inter­na­tio­nal Soweto Day as a sign of soli­da­rity with South Africa and their struggle. In the former German colony of Nami­bia, the DDR suppor­ted the fight for inde­pen­dence and took in several hund­red child­ren so that they could grow up in safety and receive an educa­tion. When the DDR even­tually dissol­ved, these young people were depor­ted back to Nami­bia by unified Germany, leaving them to fend for themselves.


The DDR’s inter­na­tio­nal posi­tio­ning and commit­ment to soli­da­rity was not just a matter of foreign policy or the work of civil society groups – it was a widespread mass pheno­me­non throughout society that was deeply embed­ded in ever­y­day life. Friendship among nati­ons was reflec­ted in huge, artis­ti­cally desi­gned murals as well as in letters and stamps. Dona­ti­ons from citi­zens were collec­ted centrally through the DDR’s Soli­da­rity Commit­tee, which recei­ved a total of 3.7 billion East German Marks between 1961 and 1989. Fund­rai­sing was orga­nised prima­rily through the mass orga­ni­sa­ti­ons, such as the Free German Trade Union Fede­ra­tion of the DDR, in which workers contri­bu­ted through a variety of soli­da­rity actions. Purcha­sing soli­da­rity stamps and working above the target and dona­ting the extra wages to the soli­da­rity fund are two among many such examples.


The heroes of inde­pen­dence move­ments in the Global South were well-known to DDR citi­zens, even as the West conti­nued to portray them as crimi­nals and unedu­ca­ted beggars who would have no future without the help and guid­ance of the West. The names and fates of people like Patrice Lumumba, Kwame Nkru­mah, Ahmed Sékou Touré, Julius Nyerere, Agost­inho Neto, Samora Machel, and Nelson Mandela were known and cele­bra­ted in the DDR. Soli­da­rity was even exten­ded to those in the belly of the beast; when Angela Davis was tried as a terro­rist in the United States, a DDR corre­spon­dent presen­ted her with flowers for Women’s Day. In a much grea­ter display of soli­da­rity, students in the DDR led the One Million Roses for Angela Davis campaign, during which they deli­ve­red truck­loads of cards with hand-pain­ted roses to her in prison. The judge was impres­sed and every child in East Germany knew who Angela Davis was.


Though their stories are not as well-known, there was none­theless a huge number of DDR citi­zens – young people, students, scien­tists, and workers – who took part in soli­da­rity projects all over the world. Between 1964 and 1988, sixty friendship briga­des of the Free German Youth (the DDR youth mass orga­ni­sa­tion) were deployed to twenty-seven coun­tries in order to share their know­ledge, help with construc­tion, and create trai­ning oppor­tu­nities and condi­ti­ons for econo­mic self-suffi­ci­ency. A number of these projects still exist today, though some have taken on diffe­rent names, such as the Carlos Marx Hospi­tal in Mana­gua (Nica­ra­gua), the German-Viet­na­mese Friendship Hospi­tal (Hanoi, Viet­nam), and the Karl Marx Cement Factory (Cien­fue­gos, Cuba), to name but a few.


At the same time, many young people from all over the world came to the DDR to study. The first foreign students were eleven young Nige­ri­ans who had atten­ded the World Festi­val of Youth and Students in East Berlin in 1951. When the British colo­nial government refu­sed them re-entry to their home coun­try, they were offe­red admis­sion to the Univer­sity of Leip­zig. The prepa­ra­tory class in which they were taught the German language deve­lo­ped into the Herder Insti­tute, where foreign students took a one-year language course to prepare for their studies. More than 22,000 students from 134 coun­tries gradua­ted from the insti­tute, which also sent lectu­rers to foreign universities.


The special atten­tion given to Afri­can states and anti-colo­nial move­ments was reflec­ted in the incre­a­sing number of students. Over­all, more than 50,000 foreign students success­fully comple­ted their educa­tion at the univer­si­ties and colle­ges of the DDR. The studies were finan­ced by the DDR’s state budget. As a rule, there were no tuition fees, a large number of foreign students recei­ved scho­l­ar­s­hips, and accom­mo­da­tion was provi­ded for them in student halls of resi­dence. The DDR also welco­med child­ren, such as those from Nami­bia who were brought to safety from the dangers of the war of inde­pen­dence. The School of Friendship (Schule der Freund­schaft) was also plan­ned in the late 1970s to provide schoo­ling and voca­tio­nal trai­ning in the DDR for 899 child­ren and young people from Mozam­bi­que begin­ning in the 1980s.


In addi­tion to the students, many unskil­led workers – so called contract workers – came to the DDR from allied states seeking job trai­ning and work in produc­tion. The Agree­ment on Educa­tion and Employ­ment for Foreign Workers brought workers prima­rily from Mozam­bi­que, Viet­nam, and Angola as well as from Poland and Hungary. After the disso­lu­tion of the DDR, these contracts were termi­na­ted, which meant that most of these workers lost their resi­dence permit and did not receive pending wages or compen­sa­tion. Though West Germany had previously backed temporary work migra­tion, at the end of the 1980s Western Euro­pean head­lines decla­red that ‘the boat was full’ as right-wing parties enjoyed incre­a­sing success and – once the DDR was absor­bed – West Germany prepa­red to abolish the right to asylum.


Up until the very end, the DDR worked towards deepe­ning its commit­ment to inter­na­tio­na­lism. The number of foreign contract workers grew from 24,000 in 1981 to 94,000 in 1989. In the same year, China indi­ca­ted that it wanted to greatly incre­ase its number of contract workers in the future. This would have been very oppor­tune for the DDR, which – unlike in the West at that time – did not have a big enough labour force. China, along with the other socia­list states, like­wise stres­sed that it could only stand to bene­fit from a growing East German economy. This same year, all foreig­ners in the DDR recei­ved full muni­ci­pal voting rights and began to nomi­nate candi­da­tes them­sel­ves. This form of parti­ci­pa­tion is denied to non-citi­zens in present-day Germany.


Yet anot­her vivid example of inter­na­tio­nal coope­ra­tion between socia­list states was the rela­ti­ons­hip between the DDR and Viet­nam. In order to guaran­tee the supply of coffee, whose rising world market prices strai­ned the DDR’s limi­ted foreign exchange reser­ves, the DDR inves­ted heavily in coffee culti­va­tion in Viet­nam by supply­ing mate­rial, exch­an­ging with experts, and deve­lo­ping tech­ni­cal and social struc­tures, some of which still exist to this day. This coope­ra­tion crea­ted the foun­da­tion for Viet­nam to be the second-largest coffee produ­cer in the world today.


Unlike today’s trade rela­ti­ons between capi­ta­list states, the DDR did not simply buy into a coun­try; it coope­ra­ted with its trading part­ners. The maxim applied here was that the DDR did not set blan­ket guide­li­nes; rather, it deter­mi­ned what coope­ra­tion with its part­ner coun­tries would look like depen­ding on their respec­tive econo­mic needs. This was an inter­na­tio­nal econo­mic system that aimed at coope­ra­tion and the promo­tion of sover­eig­nty rather than compe­ti­tion and dependence.


This kind of soli­da­rity work provi­ded a stark contrast with the West’s deve­lo­p­ment aid, through which richer nati­ons lever­aged their resour­ces to main­tain their posi­tion of power and enforce the sales of their own indus­tries at the expense of the deve­lo­p­ment of others. Since the West’s suppo­sedly selfless acts are moti­va­ted by a hunger for profits rather than a commit­ment to soli­da­rity, this alle­ged altru­ism tends to be impe­ria­list in that it places condi­ti­ons for aid under capi­ta­list auspi­ces, from which corpo­ra­ti­ons stand to bene­fit. In contrast, the DDR, toge­ther with its socia­list allies, acted as equals and as needed. In the coun­tries where it provi­ded aid, it suppor­ted the estab­lish­ment of econo­mic self-reli­ance by helping to build local indus­tries and infra­st­ruc­ture accord­ing to the needs of the respec­tive coun­try, such as by trai­ning people.


This atti­tude and these actions of the DDR recei­ved inter­na­tio­nal poli­ti­cal reco­gni­tion. The first coun­try outside the Eastern Bloc to give diplo­ma­tic reco­gni­tion to the DDR was the United Repu­blic of Tanga­nyika and Zanzi­bar (later Tanza­nia) in 1964. The DDR subse­quently sent ships full of construc­tion mate­ri­als as well as engi­neers and construc­tion workers to the repu­blic. These workers set up two large, prefa­b­ri­ca­ted housing districts on the archi­pe­lago of Zanzi­bar that to this day provide highly sought-after housing for around 20,000 people. This trig­ge­red a breakthrough in inter­na­tio­nal reco­gni­tion throughout the Global South. In 1969, Sudan, Iraq, and Egypt estab­lis­hed diplo­ma­tic rela­ti­ons with the DDR, and in 1979, the Central Afri­can Repu­blic, Soma­lia, Alge­ria, Ceylon (now Sri Lanka), and Guinea follo­wed suit.


Under the pres­sure of this wave of reco­gni­tion, West Germany’s new coali­tion government of Social Demo­crats and the Libe­ral Party aban­do­ned the Hall­stein Doctrine in 1969 and tole­ra­ted the legal reco­gni­tion of the DDR. Howe­ver, it still main­tai­ned to the bitter end that every DDR citi­zen was fore­most a citi­zen of their coun­try. Between 1972 and 1974, when Western states began initia­ting diplo­ma­tic rela­ti­ons with what it refer­red to as the ‘second German state’, the DDR had already achie­ved what it had been figh­t­ing for throughout the last twenty years: inter­na­tio­nal recognition.


In June of 1973, both West Germany and the DDR were accep­ted into the United Nati­ons, where the DDR consist­ently campai­gned against nuclear weapons, advo­ca­ted for inter­na­tio­nal secu­rity and disar­ma­ment, and played a decisive role in the Conven­tion on the Elimi­na­tion of All Forms of Discri­mi­na­tion against Women, among other initiatives.

‘Produce More, Distribute Fairly, Live Better!’

The DDR’s socia­list plan was based on the Marxist view that a socially just society could only be crea­ted by using socia­li­sed means of produc­tion. Socia­list owners­hip had three possi­ble forms: public property owned by the whole society (People’s Property), coope­ra­tive joint owners­hip by worker collec­ti­ves, and property owned by social orga­ni­sa­ti­ons. The consti­tu­tion stipu­la­ted that the opera­tion of private busi­ness enter­pri­ses, which conti­nued to exist to a lesser extent, must ‘satisfy social needs and serve to incre­ase the welfare of the people’. Further­more, ‘private busi­ness part­ners­hips to estab­lish econo­mic power’ were not permit­ted. These consti­tu­tio­nal princi­ples were rigo­rously enfor­ced and, by 1989, public owners­hip in indus­try and skil­led trades had risen to 98 percent.

The DDR’s approach to econo­mic manage­ment was also closely tied to the issue of owners­hip. In the socia­list plan­ned economy, econo­mic and social proces­ses were centrally gover­ned by the state and the leading party. Busi­nes­ses were given concrete sche­du­led tasks regar­ding the amount, struc­ture, and distri­bu­tion of their products and were also allo­ca­ted the funds needed for invest­ment, the labour force, and mate­ri­als. Natio­nal econo­mic goals were mostly sche­du­led in prospec­tive plans over a period of five years, and the necessary deve­lo­p­ment of econo­mic capa­city was plan­ned as well. In keeping with the principle of demo­cra­tic centra­lism, the autho­ri­ties’ econo­mic plans were first given to the combine enter­pri­ses (Kombi­nate) and farms and then decisi­ons were taken based on their feedback.

The plan­ning autho­ri­ties deter­mi­ned the prices of all goods and services so that uniform prices were set for all consu­mer goods throughout the DDR. Like­wise, the trai­ning of skil­led workers and univer­sity cadres was also centrally plan­ned and carried out in accordance with econo­mic requi­re­ments and desi­gna­ted deploy­ment areas. The DDR was based on the principle that perma­nent full employ­ment was both the best social policy and a human right. An indis­pensable part of socia­list society in the DDR was there­fore the right and duty to work, a value that was ensh­ri­ned in the consti­tu­tion: ‘Every citi­zen of the German Demo­cra­tic Repu­blic has the right to work. They have the right to a job and the right to choose it freely accord­ing to the needs of society and their perso­nal qualifications’.


The decla­red objec­tive, which was further speci­fied in nume­rous legal provi­si­ons and econo­mic policy concepts, was to orga­nise work in such a way that ever­yone parti­ci­pa­ted in the work accord­ing to their abili­ties and recei­ved their indi­vi­dual share of the natio­nal product accord­ing to their perfor­mance. This socia­list perfor­mance principle ensu­red that indi­vi­du­als’ contri­bu­ti­ons to society deter­mi­ned the degree of social reco­gni­tion they recei­ved for their work. In this way, the DDR saw itself as a meri­to­cracy which applied the principle ‘from each accord­ing to their abili­ties, to each accord­ing to their contri­bu­tion’ – an adap­tion of Karl Marx’ ‘from each accord­ing to ability; to each accord­ing to need’ first outlined in his 1874 Critique of the Gotha Programme. An important instru­ment of labour was the Socia­list Compe­ti­tion, the first of which was laun­ched in 1947 in a number of state-owned enter­pri­ses in the Soviet Occup­a­tion Zone under the slogan ‘Produce more, distri­bute fairly, live better!’. In it, members of a workers’ collec­tive commit­ted them­sel­ves to incre­a­sing produc­ti­vity in order to fulfil the plan parti­cu­larly quickly or above target.


The rights and duties of working people – such as joint decision making in busi­nes­ses, invol­ve­ment in shaping working condi­ti­ons, and respect for the dignity of the working class – were laid down in a Labour Code, likely the only one of its kind in the world.


Collec­tive company agree­ments were signed annu­ally between manage­ment and labour collec­ti­ves, which served both to meet the speci­fi­ca­ti­ons of the plan and to improve the working and living condi­ti­ons of the workers. Ninety-eight percent of workers were members of the Free German Trade Union Fede­ra­tion. Concrete arran­ge­ments were agreed upon between the company trade union leaders­hip and company manage­ment in order to ensure the health and social welfare of workers; to shape working condi­ti­ons; to deve­lop intel­lec­tual, cultu­ral, and spor­ting acti­vi­ties; to promote trai­ning; and to conti­nue educa­tion. Parti­cu­lar atten­tion was also paid to shaping working condi­ti­ons; deve­lo­ping intel­lec­tual, cultu­ral, and spor­ting acti­vi­ties; promo­ting trai­ning; and conti­nuing educa­tion, parti­cu­larly for women. After discus­sing the plans at company union meetings, they were imple­men­ted and then reviewed at gene­ral meetings twice a year by the union’s accoun­ta­bi­lity team and company manage­ment. These collec­tive company agree­ments guaran­teed that workers were invol­ved in the manage­ment and plan­ning of the company.


Citi­zens of the DDR lived with a high level of social secu­rity. Ever­yone was guaran­teed a source of work and a place to live. The state provi­ded billi­ons of marks in subsi­dies for rent and basic food­s­tuffs, while low rents and stable prices for consu­mer goods, electri­city, water, and tran­sit ensu­red a comfor­ta­ble daily life. In the begin­ning of the 1970s, a housing construc­tion programme was laun­ched in a major effort to solve the social problem of insuf­fi­ci­ent housing. While up till then the maxim had been ‘To each an apart­ment’, the goal now became ‘To each their own apart­ment’. Howe­ver, the focus on buil­ding complex new housing units, as well as the crea­tion of social infra­st­ruc­ture with schools, kinder­gar­tens, sports faci­li­ties, poly­cli­nics, stores, restau­rants, and cine­mas, mini­mi­sed the capa­ci­ties for the necessary reno­va­tion of old inner-city neigh­bour­hoods. Even so, over a million homes were rebuilt and two million new homes were construc­ted. In the DDR’s final twenty years, half of its citi­zens were able to relo­cate to a new home.


Educa­tion and health­care were free, and a wide range of educa­tio­nal, cultu­ral, and leisure acti­vi­ties were acces­si­ble to ever­yone. The DDR also led the world in terms of women in the work­force: in 1989, ninety-two percent of all women were employed and almost fifty percent of all univer­sity students were women. It was possi­ble for working mothers to have a career and a family through special socio-poli­ti­cal measu­res such as the mater­nity year, house­hold day (a paid holi­day for tending to house­kee­ping chores), special study program­mes for women, state assi­s­tance for new mothers, compre­hen­sive child­care, and educa­tion services for child­ren. The DDR was also a child-friendly state. Kinder­gar­ten, day-care centres, school meals, summer camps, and sports acti­vi­ties were afford­a­ble for ever­yone or provi­ded free of charge.

These social bene­fits took up a large part of the country’s econo­mic, labour, and invest­ment capa­city, but this also meant that society was no longer divi­ded accord­ing to how much property one owned and the gap between rich and poor was mini­mi­sed. The DDR was an equal society, a commu­nity based on soli­da­rity. In the words of the East German writer Daniela Dahn, it was a society in which ‘toge­ther­ness matte­red more than posses­si­ons’. There was no neigh­bour­hood for the rich. Instead, ever­yone exis­ted on the same play­ing field. There were no elite schools, just free educa­tion for ever­yone and support for gifted child­ren. There was a rich cultu­ral life acces­si­ble to ever­yone. Nobody was left behind. Homel­ess­ness and unem­ploy­ment were virtually non-exis­tent. It is precisely these aspects of socia­lism in the DDR that will be further exami­ned in subse­quent issues in this series, Studies on the DDR.

Socia­list Ideals, Sobe­r­ing Condi­ti­ons, Open Questions


‘The worst socia­lism is better than the best capi­ta­lism’, wrote Peter Hacks, a poet who migra­ted from West Germany to the DDR. ‘Socia­lism, that society that was topp­led because it was virtuous (a fault on the world market). That society whose economy respects values other than the accu­mu­la­tion of capi­tal: the rights of its citi­zens to life, happi­ness, and health; art and science; utility and the reduc­tion of waste.’ For when socia­lism is invol­ved, it is not econo­mic growth, but ‘the growth of its people that is the actual goal of the economy’.

Contradictions in the Practice of a Planned Economy

‘If you want to set up a new and better social system, you should learn this lesson: It only works if the majo­rity of the people bene­fit from it. We lear­ned that good working and social condi­ti­ons are quickly taken for gran­ted. People succumb to the seduc­tion of owners­hip and consump­tion if they think that anot­her system can offer them some­thing better. … The DDR’s social system had as its decla­red goal the ever-growing mate­rial and cultu­ral satis­fac­tion of its people. This goal was suppo­sed to be achie­ved through shar­ply rising produc­ti­vity. If it could have surpas­sed capi­ta­lism in produc­tion, then socia­lism would have been the victor. … The people were encou­ra­ged to accom­plish this task in the 90s. But it was an unrea­listic and misgui­ded goal. Unrea­listic because a leading capi­ta­list coun­try that exploits people and nature, such as West Germany, cannot be surpas­sed in produc­ti­vity and effi­ci­ency. Misgui­ded because, in a socia­list society, mass consump­tion should not be life’s main purpose. This insight eluded socia­list leaders­hip in Europe, and there­fore they could not impart it to their people. The people reco­gnised that this was a false promise and were no longer willing to tole­rate the illu­sion. They wanted to be taken seriously and took to the streets under the slogan “We are the people”’.

The unli­mi­ted world of the goods of the West and its pop culture produ­ced ever new needs, espe­cially among the youth of the DDR, which were consi­de­red ‘unso­cia­list’ because of their asso­cia­tion with capi­ta­lism. Econo­mic plans could not keep pace with the aspi­ra­ti­ons of many citi­zens for Western consump­tion levels, which led to frus­tra­ti­ons. These were inten­si­fied when, star­ting in 1974, DDR citi­zens who had conver­ti­ble currency – for example, as gifts from rela­ti­ves in West Germany or even through income from their own inter­na­tio­nal acti­vi­ties – were able to buy Western impor­ted goods in special stores called Inter­shops. On the part of the poli­ti­cal leaders­hip, the expec­ta­tion that social policy achie­ve­ments of the state would directly incre­ase the working people’s willing­ness to perform, and thus incre­ase labour produc­ti­vity, was not borne out. Expen­dit­ure on subsi­dies ate away at econo­mic output without stimu­la­ting produc­tion to the same extent while compe­ti­tion with its Western neigh­bours repeatedly promp­ted the DDR to take social measu­res which it could not afford.

‘Compe­ti­tion between social systems was no longer about life goals – it became about consump­tion stan­dards. But if the battle with a world of supe­rior cultu­ral offe­rings was to be won at all – and one can ask whether this was ever really possi­ble – then at least it would not have been based on their own consu­mer goods produc­tion, but on an alter­na­tive value system that focu­ses on the deve­lo­p­ment of human­kind as a whole and its culture’.

With the aim of giving more daily visi­bi­lity to the connec­tion between indi­vi­du­als’ work perfor­mance and their respec­tive econo­mic and social stan­ding, a process of econo­mic moder­ni­sa­tion began in the 1960s. A new econo­mic system of manage­ment and plan­ning was desi­gned, which, through profits and bonu­ses, made compa­nies more perfor­mance-orien­ted and at the same time more respon­si­ble. This concept, howe­ver, did not find reso­nance in any of the DDR’s fellow socia­list coun­tries. There was still a lack of coor­di­na­tion in scien­ti­fic and tech­no­lo­gi­cal deve­lo­p­ment among the COMECON members.


The principle of ‘unity between econo­mic and social policy’ formu­la­ted in the begin­ning of the 1970s took for gran­ted that enough would be produ­ced and that it would be produ­ced effi­ci­ently. Howe­ver, worse­ning foreign econo­mic circum­s­tan­ces strai­ned the natio­nal economy, parti­cu­larly in regards to rising energy costs. Between 1970 and 1990, the price of oil rose thir­teen-fold and the cost of mining brown coal doubled.


Despite this, the government stuck to its promi­ses to provide social bene­fits and did not ques­tion the excep­tio­nally high subsi­dies it paid for consu­mer prices and rents. The result was that urgently needed moder­ni­sa­ti­ons never happened, such as in the raw mate­rial and chemi­cal indus­tries. A natio­nal econo­mic and social policy for the bene­fit of the popu­la­tion can only exist if there is a high propor­tion of socially owned property. In the DDR, this propor­tion was so high that it hinde­red initia­ti­ves in skil­led trades, small busi­nes­ses, and retail trades. One of the problems with the economy was that plans and balance sheets were always tight and often exag­ge­ra­ted, leaving very little margin of error for unex­pec­ted developments.

DDR citi­zens looked at the ‘rich’ West and began to compare it to their own stan­dards of living. But many were loath to evaluate the purcha­sing power of their money accord­ing to the cost of the goods needed for daily life. In the DDR, a 5,000-Mark price tag on a new colour TV may have been a source of frus­tra­tion, but the fact that two kg of bread cost only one Mark was taken for gran­ted. Basic food­s­tuffs and goods for daily use were subsi­di­sed, while the prices for non-essen­tial products were inten­ded to cover costs and gene­rate a profit. This connec­tion was not obvious to large sectors of the DDR’s popu­la­tion. Further­more, there was no offi­cial exchange rate between the East German Mark and the West German Mark. The DDR Mark was an exclu­si­vely domestic currency, but a compa­ri­son of rela­tive prices of the same ever­y­day goods in the East and West conclu­ded that the purcha­sing power of the Mark in the DDR in 1990 was actually eight percent higher than the purcha­sing power of the Deut­sche Mark (DM) in West Germany.

The Economic Pillage of the DDR

The first socia­list German state was expo­sed to preju­dice and attempts at dele­gi­ti­mi­sa­tion both during and after its exis­tence. Today, Germany’s poli­tics of remem­brance paint a picture of a ‘tota­li­ta­rian dicta­tor­s­hip’ with its ‘feeble economy’. The country’s remar­kable econo­mic perfor­mance and social indi­ca­tors are denied and the widespread narra­tive of the take­over of a bankrupt state persists.


Howe­ver, the DDR was not as ‘run-down’ as is clai­med. There were some old and inef­fi­ci­ent facto­ries, but there were also highly produc­tive ones. Half of all indus­trial equip­ment was less than ten years old and more than a quar­ter was not even five years old – remar­kable figu­res when compa­red with those of other coun­tries. There were many modern enter­pri­ses with machinery that had been partly impor­ted from the West and partly produ­ced by the DDR’s mecha­ni­cal engi­nee­ring indus­try or by special combine enter­pri­ses. These enter­pri­ses could have remai­ned in opera­tion, but when the DDR dissol­ved, the Trust Agency, which was put in charge of the DDR’s economy, rapidly priva­tised the DDR’s enter­pri­ses and elimi­na­ted East German competitors.


In order to coun­ter the persis­tent myth that the DDR was bankrupt, it is worth looking at debts in West and East Germany: In 1989, the DDR’s debts to non-socia­list states amoun­ted to some twenty billion DM. After German unifi­ca­tion, so-called ‘old debts’, which consis­ted of housing construc­tion loans and inter­nal state budget debts, were inclu­ded in the calcu­la­ti­ons of the DDR’s domestic debt. This brought the DDR’s total domestic debt to eighty-six billion DM. Further­more, in the DDR’s plan­ned economy, compa­nies had to pay their reve­nues to the state. The state trans­fer­red invest­ment funds from these reve­nues back to the agri­cul­tu­ral and indus­trial enter­pri­ses. These trans­fers, as inde­pen­dent econo­mic units, were inter­nal accoun­ting proce­du­res which were not booked as ‘debts’ in the over­all system; they balan­ced each other out and there­fore should not be coun­ted as part of the debt balance. Other socia­list states owed the DDR nine billion DM. In summary, the total domestic debt can there­fore be esti­ma­ted at around seventy-seven billion DM.

A compa­ri­son with West Germany’s total domestic debt of around 475 billion DM shows that each West German contri­bu­ted almost two and a half times as much debt to reuni­fied Germany per capita as their ‘poor’ brothers and sisters from the East. In 1989, the DDR’s debt amoun­ted to about nine­teen percent of its GDP, while in West Germany debt was forty-two percent of the GDP.


In light of these figu­res, it is comple­tely unfoun­ded to talk about the bankruptcy or insol­vency of the DDR in 1989. The DDR paid both its foreign debt (loans from foreign banks) and its domestic debts (such as wages, subsi­dies, and pensi­ons) right up until the end.

In 1990, the West German Trust Agency apprai­sed the econo­mic value of the DDR at around 600 billion DM. Howe­ver, this calcu­la­tion does not include public property such as water and power plants, mine­ral depo­sits, or land, all of which account for a substan­tial amount of fixed assets. In addi­tion, the Trust Agency took over almost 4 million hecta­res of forest and agri­cul­tu­ral land, which was apprai­sed at 440 billion DM, as well as exten­sive resi­den­tial property, wealth belon­ging to poli­ti­cal parties, and mass orga­ni­sa­ti­ons and other assets. An addi­tio­nal 240 billion DM of state admi­nis­tra­tive and finan­cial assets can be added on top of the DDR’s total assets in the form of buil­dings, plots of land, and foreign assets, the latter being worth one billion DM. Putting toge­ther all these figu­res, some of which are only esti­ma­tes, it is clear that the East held assets with a total mate­rial value of some 1.4 tril­lion DM. That was the true econo­mic value of the DDR.


Selling off the economy unleas­hed a wave of dest­ruc­tion on the country’s indus­trial sector that had not been seen since the Second World War. This led to a tremen­dous incre­ase in wealth for West German corpo­ra­ti­ons and form­erly expro­pria­ted landow­ners. Unem­ploy­ment and struc­tu­ral discri­mi­na­tion caused almost four million (mostly young) people to leave East Germany. The birth rate fell drasti­cally and the dismant­ling of the economy and of society in gene­ral left previously prospe­rous regi­ons in ruins. Schools, offices, cultu­ral insti­tu­ti­ons, and public utili­ties were closed down in villa­ges throughout East Germany. The infra­st­ruc­ture dete­rio­ra­ted. West German poli­ti­ci­ans had promi­sed ‘flou­ris­hing land­s­capes’, but what grew instead were deindus­tria­li­sed regi­ons and poverty.


Many citi­zens soon became disil­lu­sio­ned. Quite a few of them had taken to the streets in 1989 for a ‘better socia­lism’ with demands for more demo­cracy and the self-confi­dent slogan ‘we are the people.’ The idea that some of the social secu­ri­ties of socia­list society could be carried over into capi­ta­list Germany proved to be an illu­sion, of course; instead, they soon found them­sel­ves econo­mi­c­ally cut off and often in preca­rious living condi­ti­ons. Their life achie­ve­ments were discredi­ted and rende­red invisible.


This growing dissa­tis­fac­tion was explo­i­ted by right-wing circles in the old Federal Repu­blic. Right-wing struc­tures had always exis­ted there, often fought only half-hear­tedly. The ‘vision’ of a re-emer­ging Grea­ter Germany based on right-wing ideas now found its advo­ca­tes in much broa­der circles of society in the course of German unifi­ca­tion, while the media and poli­tics put all their efforts into conti­nuously discredi­t­ing left-wing ideas after the alle­ged fail­ure of the socia­list project.


The wealth looted from the East also paved the way for Germany to become the hege­mo­nic power of a Europe that to this day conti­nues to treat workers from Eastern Europe like second-class citi­zens, syste­ma­ti­cally put Africa at an econo­mic disad­van­tage, and liter­ally drown people at its exter­nal borders. It is important to fight against this impe­ria­lism but also to reco­gnise where it comes from and what alter­na­ti­ves might be possi­ble. The history of econo­mic deve­lo­p­ment in the DDR, for example, shows what is possi­ble under socia­lism – even under adverse conditions.


The econo­mic effi­ci­ency of the DDR and its achie­ve­ments in the field of social policy briefly descri­bed here will be elabo­ra­ted on in future studies with concrete examp­les of what policy and daily life looked like. These histo­ri­cal achie­ve­ments can inspire new ideas on how to create a just world as we address today’s pres­sing chal­len­ges. In this way, expe­ri­en­ces from the DDR can be put to prac­ti­cal use from their histo­ri­cal context in order to better face the irre­con­cil­able contra­dic­tion of living a digni­fied life in a capi­ta­list society.


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