Capitalism vs' Socialism: Germany During the Cold War Compared to Post Unification

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• Capitalism vs. Socialism Germany During the Cold
  War Compared to Post Unification
• A Case Study about Cooperative / Collective
  Farming

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Laurel A. Panser, M.A., M.S. Rochester Community
Technical College, Rochester, MN Funding from
the Goethe-Institut Atlanta
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Capitalism versus Socialism

• On-going struggle
• Socialistic economic systems of
• Cuba under Fidel Castro
• Venezuela under President Hugo Chavez
• Bolivia under President Evo Morales

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Economic Systems Current Types

• Bazaar economy Traditional, labor intensive,
  less developed countries
• Free Market / Laissez Faire
• Command Economies
• Mixed Some or all of the above

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Economic Systems Historical Types

• Hunter-gather
• Feudalism (Europe, Japan)
• Slavery

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Capitalism

• Central features
• Markets
• Private property
• Profit Gross revenue production costs
• Various forms of capitalism
• Government involvement varies

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Capitalism

• Began 15th century in Northern Italy
• Success of mercantile class that gained economic
  and political power
• Entrepreneurship of mercantile class spurred
  spread of capitalism in Europe

• Colonial European powers spread capitalism
• US spread capitalism during the Cold War

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Free Market / Laissez Faire

• Goods and services
• Exchanged without government involvement or
  regulation (theoretically, not in practice)
• Free choice
• If you have money, we can do business.
• In health care, some people die because they lack
  resources.

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Free Market / Laissez Faire

• Laissez Faire Leave alone in French
• Adam Smith 18th century Scottish economist wrote
  Wealth of Nations
• Emphasize hard work, thrift, personal
  responsibility
• Exploitation occurred ? Regulation
• Germany early 21st century Much regulation

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Marxism

• Karl Marx proposed this with his colleague, Engle
• Socio-economic theory
• Envisioned freedom from oppression by the
  bourgeoisie (Owners of the means of production)
  of the proletariat (Individuals who had to sell
  their labor to survive)

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Marxism Implementation

• Implemented as communism and socialism
• Varying degrees of totalitarianism (control by a
  handful of people of the masses)

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Command Economy

• Central authority, usually government
• Sets rules of economic behavior
• Central planning
• Makes decisions
• Usually owns the means of production

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Mixed Economy US Health Care

• Free Market / Laissez Faire Was dominant
• Entitlement Programs 1965 Medicare Medicaid
• Prospective Payment 1983 Capitation
• Upper limit to payments through Medicare

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Federal Republic of Germany (FRG) Post WWII
Socialism

• Reminder FRG was West Germany pre-unification in
  1990
• Substantial social security and taxes
• Security through
• Unemployment benefits
• Retirement
• Nursing care
• Health care

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Federal Republic of Germany (FRG) Socialistic
Health Care

• Health care system in existence for gt 100 years
• Employees contribute ½ of monthly premium,
  employer pays rest
• Covers costs associated with physicians,
  dentists, check ups, hospitalization,
  prescriptions, dental prostheses, glasses

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German History

• 1871 Germany became a nation
• 1914-1918 World War I
• Germany

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German History

• 1919 Treaty of Versailles
• Germany blamed for WWI
• Germany lost land to neighbors colonies had to
  pay substantial reparations
• Unfair treatment used by Hitler in his rise to
  power

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German History

• Hitlers Munich Agreement with France and British
  Prime Minister Arthur Neville Chamberlain
• Germany received Czech region of the Sudetenland
• March 1939 Hitler annexed the rest of
  Czechoslovakia
• Germany annexed Austria too

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German History

• October 1939 Hitler invaded Poland
• Britain declared war on Germany, World War II
  ensued
• 1945 WWII ends first in Europe then in Asia
• Germany and its capital, Berlin, are divided

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1945 Cold War Begins

• USSR
• Russia dominates
• East Germany and East Berlin included
• Communism / Socialism
• Command economy
• Warsaw Pact military alliance
• COMECOM trading bloc

• US
• West Germany and West Berlin included
• Democracy
• Mixed economies with
• Free Market / Laissez Faire
• Socialism
• More socialism in West Germany West Berlin than
  US
• North Atlantic Treaty Organization (NATO)
  military alliance

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Cold War

• Absence of hot wars No direct confrontation
  between superpowers themselves
• Proxy wars instead Indirect battles for
  supremacy in Vietnam and Afghanistan, for example

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German Governments Post WWII Divided 1949-1990

• Federal Republic of Germany (FRG)
• West Germany
• West Berlin

• German Democratic Republic (GDR)
• East Germany
• East Berlin

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German Governments Post WWII Divided 1949-1990

• Federal Republic of Germany (FRG)
• West Germany
• West Berlin

• German Democratic Republic (GDR)
• East Germany
• East Berlin

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Cold War Military Alliances

• US Superpower
• North Atlantic Treaty Organization (NATO)
• Multiple states including West Germany
• Balance against Russia and Warsaw Pact

• USSR Superpower dominated by Russia
• Warsaw Pact
• Multiple states including East Germany
• Balance against US NATO

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Council for Mutual Economic Assistance (COMECOM)

• Warsaw pact countries plus Vietnam, Cuba,
  Mongolia
• Parallel to iterations in Western Europe to what
  became the European Union (EU)
• Broke up 1990s

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Farmers Working Together Types of Arrangements

• Family farms Feed themselves, may involve
  exporting goods off the farm
• Cooperative / collective farms
• Agribusiness
• Other

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Agribusiness

• Commercial venture for profit
• Examples Archer Daniels Midland (ADM) Cargill
• Many steps in food production

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Cooperative / Collective Farms

• Found in socialist capitalist systems
• Multiple families work together
• Feed themselves export off of farm
• Socialism Government may own all or some of
  assets (buildings, tools, land )
• Capitalism Farmers own means of production

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Group Farming in Command Economies Cold War

• Various arrangements in USSR COMECON states
• Soviet Union Nationalized farms
• Seized land from nobles
• East Germany Farms family farms were not
  immediately reorganized
• Never completely nationalized

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Cooperative / Collective Farms East Germany At
Beginning

• Farm machinery was devaluation
• One vote/ farmer for future decision
• Ignored amount of land contributed
• Decision making sessions attended by Stasi secret
  police

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Cooperative / Collective Farms East Germany

• 1950s consolidate at village (municipality) level
• 1970s larger consolidations
• Individual farms never nationalized due to farmer
  resistance
• Most farmers actually happy to work together due
  hours worked on their own

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Case Report Collective Farm in Thuringia,
Germany

• July 2005 visit funded by Goethe-Institut Atlanta
• Three time periods
• Pre-WWII Family farm
• East Germany Command economy
• Unified Federal Republic of Germany
• Mixed economy

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Collective Farm in Thuringia

• Host holds a degree in agriculture economics
• He was born into a multi-generation farming
  family.
• Teaching farm

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Case Report Collective Farm in Thuringia,
Germany

• Pre-World War II Small family farms
• 8-10 hectares
• 6-7 cows/ farm
• Worked from 500 AM- 1000 PM
• No vacation, work 365 days/year
• Few tools, most work by hand

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Case Report Collective Farm in Thuringia

• Village life evolved during East German times
• Built culture houses for meetings convened to
  make decisions
• Farmers responsible for most things except road
  construction
• Forms squads for construction, cooperative
  included craftsmen

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Case Report Collective Farm in Thuringia

• Expanded to create
• Day care center
• Small power station to heat green houses
• Horticultural products (fruits, vegetables and
  flowers)
• Shops and a restaurant

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Cooperative / Collective Farms East Germany

• Advantages
• Many prices fixed
• No middle men
• Emphasis by the government on farm safety
• Fewer work hours
• Vacation time

• Disadvantages
• Many prices fixed
• Stasi Secret police stifled discussion
• Decreased creativity freedom

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Cooperative / Collective Farms East Germany
Disadvantages

• Inefficiency
• Machines that needed to be repaired continuously
  vs. reunified Germany
• E. Germany 16 machines Reunified Germany 2
  machines
• Farmer members with an insufficient work ethic,
  lack of incentives, low productivity

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Productivity

• Economic measurement used to quantify work
• Value of a product compared to the labor needed
  to create goods
• (Monetary value of product) (Labor)
• For this presentation Productivity number of
  workers needed

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Quality of Life (QOL)

• Many attributes may be considered to quantify
• Example Health care quantify with questionnaire
  items regarding ability of patients to feed and
  clothe themselves
• Work life impacts QOL

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Quality of Life and Work

• Indicators include
• Hours worked / day
• Hours worked / week
• Vacation days / year

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Quality of Life and Work on German Farm

• Pre-East Germany
• Work 17 hour/day, 365 day/year
• No vacation
• East Germany
• Shared work load
• Vacation

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ProductivityGerman Collective Farm

• East German case study farm 450 workers
• Unification ? Unemployment increase
• Same farm 2005 23 employees

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Germany Reunited in 1990
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German Reunification Cooperative / Collective
Farming

• Option to quit group farming with compensation
• Most farmers in vicinity of case study did not
  opt out
• More opt outs near former western border

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Agriculture Concepts

• Commercial Agriculture Produce goods for sale on
  a local or international market
• Winter wheat Planted in fall to promote
  germination with deep roots, harvest summer
• Spring wheat Plant spring, harvest fall, lower
  yields (output) than winter wheat

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Collective Farm in Thuringia 2005 Activities

• Mixed crop and livestock
• Winter wheat predominantly
• Also spring wheat, Gherkins, cucumbers, maize for
  animal fodder

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European union (EU)

• Trading bloc
• Multiple predecessor organizations beginning in
  1950s
• EU1993 created
• Supranational organization
• Promote economic well being of the countries in
  the block
• Member countries have expanded

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Case Report 1990 Reunification Difficulties on
Case Study Farm

• How to maintain good aspects of East German
  policies?
• Hard to adjust to advertising and market
  distribution of food systems
• Difficult for young people to get into
  agriculture
• Prices decreased

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Case Report Reunification Difficulties on Case
Study Farm

• European Union restrictions and regulations
  problematic
• 2004 harvest of century
• Earned less/ tone than France
• Even so, thriving business in reunified Germany